DIGITAL MUSIC CONSUMERS CHOOSE FEWER SONGS; DEEPER CATALOG

Digital music spurs consumer shift in focus away from full CDs toward popular single tracks

PORT WASHINGTON, NEW YORK, December 8, 2003 – While the overwhelming majority of recorded music is sold today in album form, new information from The NPD Group suggests that as digital music evolves the industry will return to the days when singles were highly popular. According to The NPD Group, most digital music consumers prefer to download just one or two songs, rather than downloading all tracks from a particular CD. In addition the vast majority of digital song tracks downloaded by consumers between August and October 2003 were "catalog" tracks that were released more than 18 months ago. These findings also have implications for how the industry attacks piracy and CD copying issues.

When downloading single tracks from the Web in the months of August to October 2003, consumers chose to download only one track from an album 85 percent of the time. Ninety-four percent of the time consumers downloaded two or fewer tracks from an album; they downloaded five or more songs just two percent of the time and downloaded the entire album less than one percent of the time. Among active digital downloaders, 18 percent of songs downloaded were new releases (i.e., released after February 2002), while 82 percent were songs from deeper in the catalog. Note: Sales of physical product (i.e., CDs) in the same period were about even between catalog and front line releases.

"From a copy-management perspective, it makes as much sense to protect popular catalog songs as it does to protect an entire front-line CD," said Russ Crupnick, vice president of The NPD Group. "It’s important to protect an artist’s most popular songs, no matter when they might have been released- because fans will likely cherry pick their favorites rather than downloading individual albums."

Said Crupnick, "the way people are choosing to download music provides lessons for sales of both physical and digital music. It’s also a strong endorsement for physical singles. In the world of paid services consumers may prefer buying singles, so record companies must locate a balance between effectively promoting new releases while not losing sight of the revenue-generating power of popular songs from the catalog -- and import or concert tracks, as well. It makes sense to offer a discount when consumers buy four or five songs from the same artist, regardless of what album they originate from. It may not be all about the best selling songs, either. Less-popular tracks offered as free downloads might even be effectively leveraged to market paid downloads of more popular songs and drive sales of full CDs."

Methodology Note: NPD MusicWatch Digital information is collected continuously from the PCs of 40,000 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.

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