MORE CAN BE DONE TO STEM THE TIDE OF CD SALES DECLINES, SAYS NPD CONSUMER SURVEY

Music consumers responding positively to "extra features," but still purchasing fewer CDs

PORT WASHINGTON, NEW YORK, July 15, 2003 - According to the results of a recent survey of more than 6,000 music consumers conducted by The NPD Group, more than one-third of consumers claimed to have purchased fewer CDs this year versus last year. But it's not all bad news for the recording industry: Consumers report that enhanced CD features, in conjunction with better marketing of those features, would make them more likely to buy music commercially.

According to Russ Crupnick, VP of The NPD Group: "While zero-tolerance for file-sharing has received a lion's share of media coverage, other methods to combat dwindling sales are being regularly rolled out by record labels—though consumers are responding better to some tactics than to others."

Major reasons cited by consumers for purchasing fewer CDs include a perception that CDs are priced higher than they should be (43 percent), as well as fiscal belt-tightening due to economic uncertainty (43 percent). Among younger consumers, downloading and burning music tracks were an additional primary reason cited for purchasing declines. Forty-one percent of consumers aged 13 to 25 reported that their use of file-sharing services caused them to purchase less music.

According to The NPD Group's survey, the following extra features were most often used successfully by record labels to combat falling sales:

• Bonus Tracks were the extra feature that was recognized most by consumers (cited by 55 percent of survey respondents).
• Stickers were the most effective way to draw attention toward CD extra features (68 percent).
• Extra features were perceived to have a more positive impact on current/favorite artist sales (54 percent) than they would on new artist sales (37 percent).
• Bonus tracks (54 percent), discount/rebate offers (48 percent) and video content (42 percent) were relatively more appealing to consumers than informational features, such as interview discs and Web links (29 percent).

"With music sales continuing to decline, it's important to note that there are several marketing strategies that are getting consumers' attention," Crupnick said. "It's incumbent upon record labels and music retailers, however, to really listen to the concerns of music buyers, in order to provide them with the kind of music product they're willing to pay for."

Methodology Note: The preceding statistics are based on an NPD MusicLab survey of more than 6,000 consumers conducted in March 2003.

About NPD Music
NPD Music, a division of The NPD Group, provides reliable in-depth perspective on the most important issues facing today's music industry. NPD MusicWatch is the flagship information service from NPD Music that reports on what consumers buy, as well as where -- and why. MusicWatch provides a detailed look at today's music consumers, covering such critical issues as consumers' habits related to downloading music and burning CDs, key influences on music purchases and customer viewpoints on specific retailers. MusicWatch provides the consumer information needed to understand today's music marketplace and discover where music consumers are today - and where they'll be tomorrow.

About The NPD Group, Inc.
Since 1967 The NPD Group has provided reliable and comprehensive sales and marketing information for a wide range of industries. NPD provides critical knowledge on what is selling, where, to whom and why to help our clients make more successful, fact-based business decisions. Today more than 1,300 manufacturers and retailers rely on NPD to help them better understand their customers, product categories, distribution channels and competition in order to help guide their business and positively impact sales and revenues. Information from The NPD Group is available for the following major vertical sectors: apparel, appliances, automotive, beauty, cellular, consumer electronics, food and beverage, foodservice, footwear, home improvement, housewares, imaging, information technology, music, software, travel, toys and video games.

Contact:
Lee Graham
For The NPD Group, Inc.
212-333-4983
leegraham@leegraham.biz