May 20, 2004, 12:00 AM

Online music sales are not cannibalizing CD sales, a new survey reports

The NPD Group reports an increasing number of CD buyers are also purchasing from legal digital music download services, such as iTunes, Buy.com and others.

Kurt Peters

Executive Editor

The NPD Group reports an increasing number of CD buyers are also purchasing from legal digital music download services, such as iTunes, Buy.com and others. Legal digital music services also appear to attract consumers who tend to purchase more CDs than the average consumer.

Just under 5% of CD buyers reported using a legal service to purchase music during the first quarter of 2004, which is nearly three times the level during the same period in 2003 (1.7%). Among music buyers who purchased both physical CDs and a song download from a legal service, the likelihood that they also downloaded a song illegally fell dramatically, from 64% last year to 42% in 2004.

Interestingly, consumers who downloaded from a legal service or became paid members of subscription services showed only a slight reduction in the number of CDs that they purchased at retail. The average consumer who paid for digital music as well as CDs purchased less than one fewer CD in 2003 compared to 2002.

"Paid services like iTunes and Rhapsody appear to be attracting core music buyers, which can create a firm foundation for legal digital music purchases," said Russ Crupnick, president of NPD Music. "To date, NPD data shows that there has been a small reduction in sales of CDs; however, that decline might be offset by the overall value of the digital customer and the downturn in illegal file sharing."

"Our research shows that it`s the people who are really into music that are beginning to adopt paid digital services as an additional way of acquiring and enjoying music, and so far these services are living side by side with traditional CDs," Crupnick said. "As the industry matures and digital music becomes even more mainstream, it remains to be seen just how much paid digital music will affect the market for CDs."

NPD says it derived data from NPD MusicWatch, which provides weekly tracking of music purchases from a panel of consumers and NPD MusicWatch Peer-to-Peer Study, a survey covering use of digital music services that was conduced in February 2004 among a sample of 5,000 individuals.

 

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