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The NPD Group: Continued CD Sales Declines in 2008, but Music Listening and Digital Downloads Increase

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More engagement with music on social networks, and growing digital base in 2008

Port Washington, NY, March 17, 2009 – According to The NPD Group, the leader in market research for the entertainment industry, the number of Internet users paying for digital music increased by just over 8 million in 2008 to 36 million Internet users. Purchases of online digital music downloads increased by 29 percent since last year; they now account for 33 percent of all music tracks purchased in the U.S. NPD’s Digital Music Study, an annual tracking study covering the music industry, also revealed that there were nearly 17 million fewer CD buyers in 2008 compared to the prior year.

The decline in CD buyers cuts across all demographic groups, but was particularly focused on teens and consumers age 50 and older. “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.

NPD also reported that there were 13 million fewer music buyers in the U.S. last year, compared to the prior year. The decline in music purchasing was led by a 19 percent drop in CD sales. Only 58 percent of Internet users reported purchasing CDs or digital music downloads last year, versus 65 percent in 2007.

Consumers’ primary reason for not purchasing CDs was that they were spending less on entertainment overall, because of the recession. Consumers were also concerned about the price of CDs, and expressed satisfaction with the collection of titles they already own. Among the reasons consumers cited for preferring digital music over CDs was that they could choose only the songs they wanted to purchase, and could immediately download and listen to their purchases.

According to NPD, there is evidence that music listening is increasing. For example awareness and usage of Pandora, a leading online radio station, doubled year over year to 18 percent of Internet users; one-third of those who were aware of Pandora report using the service. Similarly, the percentage of consumers claiming to listen to music on social networks climbed from 15 percent in the fourth quarter (Q4) of 2007 to 19 percent in Q4 2008. Nearly half of U.S. teens are engaging with music on social networks, which is an increase from 37 percent a year ago; among college-age Internet users, the percentage increased from 30 percent in 2007 to 41 percent in 2008.

“The trends we’re seeing in our consumer tracking studies are evidence of the continued transformation of the music industry,” said Crupnick. “Just as music piracy and the advent of digital music ended the primacy of the CD, we are beginning to see new forms of listening challenge the practice of paying for music. 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.”

Data note: Information in this press release was derived from the annual NPD Digital Music Study surveys of U.S. consumers. Data was based on a sample of more than 4,000 consumers, and results were balanced to reflect the U.S. Internet population (age 13 and older). Pandora trends source from NPD’s Quarterly Digital Music Monitor.

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Press Contact

Lee Graham
212-333-4983

@npdentertainment

The NPD Group, Inc.
900 West Shore Road
Port Washington, NY 11050

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