The NPD Group: The Hunt for Digital Music Files

Two thirds of households with Internet access have digital music files, but 8 percent of users hold nearly 60 percent of all digital files in inventory

PORT WASHINGTON, NEW YORK, September 10, 2003 - According to The NPD Group, 64 percent of households with Web access have at least one digital music file on their computers. Of the total population saving digital files on their hard drives, 56 percent have more than 50 files while a comparatively small number of Web users (8 percent) possess more than 1,000 digital files.

"NPD's most recent information shows that a majority of people have a very basic experience with digital music; however, there clearly are a small percentage of users who have taken advantage of file sharing services to compile massive libraries." said Russ Crupnick, vice president of The NPD Group. "The RIAA's focus on those sharing the most files makes sense, because this group provides the most egregious example of one of the music industry's most pressing business issues - copyright infringement."

Peer to Peer File Sharing

Preliminary data findings from MusicWatch Digital from The NPD Group also show that two-thirds of all digital music file acquisition can be attributed to file sharing. The remainder is mainly attributed to ripping tracks directly from CDs. Among the most popular P2P services, according to NPD, was Kazaa (21 percent usage) and WinMX (5 percent usage).

In addition, high-speed broadband Internet access appears to be a key facilitator to digital file acquisition. A little over half of all music files in inventory are held by households with high-speed broadband Internet connections.

A Choice for the Digital Generation

According to Crupnick, "There's a silver lining in the file-sharing cloud. There are now tens of millions of consumers who are primed for digital music; the challenge is finding the right combination of features and pricing to effectively monetize this behavior. Half the file sharers are college aged or younger, which represents an opportunity for the recording industry to keep pace with younger consumers."

Methodology Note: NPD MusicWatch Digital information is collected continuously from the PCs of 40,000 NPD online panelists, balanced to represent the online population of PC users.

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. MusicWatch and MusicWatch Digital are the flagship information services from NPD Music that reports on what consumers buy, as well as where -- and why. These two complementary services provide 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. NPD Music 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.

CHART: Distribution of Digital Music File Inventory Size Per Household

Number of Files per Household

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