CONSUMERS DELETE LARGE NUMBERS OF DIGITAL MUSIC FILES FROM PC HARD DRIVES, THE NPD GROUP REPORTS

RIAA lawsuits appear to be a "win" for the record industry, but winning back the hearts of consumers is another matter

PORT WASHINGTON, NEW YORK, November 5, 2003 – More than a million households deleted all the digital music files they had saved on their PCs in August, according to new information released today by The NPD Group. NPD credits the ongoing RIAA anti-piracy campaign and related media attention as having had a measurable effect on the actions of many consumers in regard to the illegal sharing of digital music. In a related survey of consumer perception, however, NPD found that consumers’ overall opinion of the recording industry is suffering as a result of the record industry association’s well-publicized legal tactics.

In August 1.4 million households deleted all the digital music files saved on their PC hard drives. Prior to August, deletions were at much lower levels. For example in May of 2003, when NPD first began to track music file deletions, 606,000 households deleted all digital music files from their PCs. Eighty percent of the consumers who deleted files had fewer than 50 files saved; just 10 percent had more than 200 files.

"So far the RIAA’s litigation has focused on users with the largest numbers of files to be shared, but it appears that the lawsuits are also having an effect on those with fewer files, indicating that the message that file sharing is illegal is getting through to mainstream consumers," said Russ Crupnick, vice president of The NPD Group. "There are many reasons why consumers would delete files -- from hardware changes to burning their music inventory to CD -- but this massive jump in deletions is clearly a reaction to the new environment for pirated music."

Another illustration of how the RIAA’s lawsuits are having their desired effect on consumer music file-sharing activity is exemplified by a continued decrease in file-sharing overall. According to The NPD Group, the number of households acquiring digital music via peer-to-peer (P2P) file-sharing services declined by 11 percent from August to September. During that same time period, the total number of music files downloaded decreased 9 percent.

"While some in the music industry expected a large jump in digital file acquisition as the summer ended when students returned to school, the latest consumer information from NPD belies this expectation," Crupnick said. "It’s apparent that the music industry’s strategy continues to work in the ongoing battle against illegal music file sharing; however, those same tactics also appear to negatively affect the perceptions of the recording industry among consumers."

A MusicLab survey fielded by NPD in September noted that consumers’ overall impressions of the recording industry were negatively affected by threats of litigation. Two-thirds of consumers who had recently shared files on P2P networks reported that the lawsuits caused them to have a "much more" or "somewhat more" negative opinion of record companies in general. Just over 40 percent of consumers who had not downloaded music in the previous four weeks felt similarly.

Perceptions of recent file sharers diverged from their non-sharing counterparts when the question of fairness was posed. When asked if "stopping people from freely sharing copyrighted music files through a file-sharing network is the honest and fair thing to do," just 23 percent of recent file sharers agreed, versus 42 percent of those who had not downloaded music in the previous four weeks.

"The music industry’s success in reducing file-sharing activity has been impressive, but now the real work of winning back the hearts and minds of consumers must begin," Crupnick said. "To capitalize on this success, the industry must re-double efforts to educate the file-sharing public about how illegal file sharing affects not just the industry’s bottom line, but also the artists themselves and the ability of the industry to continue to offer a wide range of new music to consumers. New legal ways to purchase digital music on the Web can work hand-in-glove with these education efforts and help to improve the public’s perception of the music industry."

Methodology Note: NPD MusicWatch Digital information is collected continuously from the PCs of 40,000 volunteer online panelists, balanced to represent the online population of PC users. NPD’s MusicLab survey was fielded in September of 2003 to a representative sample of 5,000 respondents aged 13 and older.

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.

For more information:

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