The recording industry registered solid growth of digital music sales from services such as iTunes, but they continue to fight against serious challenges from music piracy in the form of peer-to-peer file sharing, The NPD Group reports.
By the end of 2006, there were 47 million “digital music households” in the U.S. -- households with a member who downloaded, ripped, burned, played, or uploaded digital music. Among those households, 15 million actively downloaded at least one music file from a P2P site in 2006 – an 8% increase over 2005, but still a slower growth rate than was noted in prior years, according to NPD. While P2P user growth rates slowed, the average P2P user downloaded many more files in 2006 (5 billion files) than the previous year, which represents a 47% increase in P2P downloading compared to 2005 (3.4 billion files).
“Legal a la carte downloads were the fastest growing digital music category in 2006, and it is likely that the annual number of legal users will surpass P2P users in 2007,” says Russ Crupnick, NPD vice president and entertainment industry analyst. “Unfortunately for music labels, the volume of music files purchased legally is swamped by the sheer volume of files being traded illegally, whether on P2P or burned CDs sourced from borrowed files.”
While in 2005 NPD noted a two-to-one difference between the P2P and pay-to-download populations, in 2006 there were nearly 13 million households using a paid digital music download services – nearly three times more than NPD reported in 2004. Overall the number of music files that were purchased in 2006 exceeded 500 million, which is a 56% increase from the previous year. “Paid usage is gaining on P2P; however P2P users tend to download many more files per user, than do those consumers who pay for music downloads,” says Crupnick.
Among PC users, iTunes maintains a 70% share of households using a legal service and the share of song tracks downloaded; however, the average number of files purchased by the average iTunes user fell 11% since 2005. Songs purchased per buyer from Napster and Wal-Mart also declined, while Yahoo’s digital music download sales rates held steady.
“Even though there is significant growth in legal music downloading, much remains to be done by the music industry to protect the bottom line,” says Crupnick. “More anti-piracy initiatives need to be crafted, if there’s any hope of reducing the amount of P2P file sharing and other piracy. Most of all, music studios should continue to nurture and support those who pay to download music, in order to reinforce repeat usage and continue to build on take rates.”
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