NPD: Recession, Digital Diminish CD Purchasers By 17%17 Mar, 2009 By: Erik Gruenwedel
The number of Internet users paying for digital music increased by slightly more than 8 million in 2008 to 36 million users, while purchasers of music CDs showed a 17% decline, according to a new report from The NPD Group.
The decade-long sales decline of music CDs continues to wreak havoc on major record labels and brick-and-mortar retailers, including Trans World Entertainment’s f.y.e. chain and Hastings Entertainment. Retailers Musicland and Tower Records long ago shuttered as a result.
Based on a survey of 4,000 consumers, NPD found there were 13 million fewer music buyers in the United States in 2008, compared to 2007. A 19% drop in CD sales led the decline in music purchases. Only 58% of Internet users reported purchasing CDs or digital music downloads last year, versus 65% in 2007.
A primary reason for not purchasing CDs was the pullback on entertainment spending because of the recession. Consumers also were concerned about the price of CDs, and expressed satisfaction with the collection titles they already own.
Not surprisingly, consumers cited individual song selection as the primary reason for preferring digital music compared to CDs.
“Rising incidence of paid downloads is a positive development for the industry, but
not all lost CD buyers are turning to digital music,” said Russ Crupnick, entertainment industry analyst for The NPD Group.
For those who are, usage of online radio station Pandora doubled year-over-year to 18% of Internet users. Similarly, the percentage of consumers claiming to listen to music on social networks climbed from 15% in the fourth quarter of 2007 to 19% in Q4 2008. Nearly half of U.S. teens are engaging with music on social networks, which is an increase from 37% a year ago; among college-age Internet users, the percentage increased from 30% in 2007 to 41% in 2008.
“The trends we’re seeing in our consumer tracking studies are evidence of the
continued transformation of the music industry,” Crupnick said. “The music industry now has to redouble efforts to intercept and engage these listeners, so they can create revenue through upselling music, videos, concert tickets and related merchandise.”