Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
20% of consumers are aware of the iTunes music offering and 14% of Listen.com’s Rhapsody and Pressplay.com, says a survey from The NPD Group. But less than 1% have downloaded music from either Rhapsody or Pressplay and 6% from iTunes.
Consumers know about web sites where they can legally download music, but getting them to use such sites--and pay for digital music--is another matter, says a new report from The NPD Group Inc. In a survey of 13,000 consumers 13 and older, 20% were aware of the 2-month-old iTunes music offering from Apple Computers. Only 14% were aware of Listen.com’s Rhapsody offering and Pressplay.com, a joint venture of Sony Music Entertainment and Universal Music Group, both of which have been in existence since 2001.
Even more telling, less than 1% had downloaded music from either Rhapsody or Pressplay, NPD reports, and future intent to do so was at the same level. “There is strong consumer awareness for paid music download sites, but convincing consumers to actually use them appears to be a more difficult proposition,” NPD says.
The obstacles are not insurmountable, NPD says, noting that 46% of all Apple Macintosh users were aware of iTunes and 6% had downloaded music from the site.
“Obviously Apple iTunes has struck a chord among consumers–-especially Mac users,” said Russ Crupnick, vice president of The NPD Group. “Half of this audience is aware of the Apple Store, which is borne out by the fact that iTunes`s usage is higher only two months after launch than that of other music sites that have been around for over a year. It remains to be seen whether existing fee-based sites can leverage their offerings to meet or exceed the success enjoyed by iTunes as well as whether they can begin to pull users from free file sharing services like Kazaa and Morpheus.”
NPD says other sites might learn some lessons from iTunes, including:
--Rethinking the subscription model: Apple’s higher conversion rate might speak to consumer preference for a fee-per-song/album model vs. a subscription.
--Ability to purchase full albums at a discount: “The choice of downloading single tracks or full albums provides greater breadth of offering and ease-of-use,” NPD says.
--Built-in portability: “NPD research shows that music buyers increasingly demand file portability, and that’s something early music buying services didn’t address very well,” Crupnick said.
NPD acknowledges that iTunes benefits from less competition among providers of digital music and file-sharing for the Macintosh operating system, which helped ensure successful entry and higher user penetration at the outset. “Even taking this fact into account,” Crupnick said, “the usage rates for some Windows-based sites are so low as to put them at a serious disadvantage, especially as well-funded entries into the paid download market enter the fray.”
The basics of good selling ultimately will win, NPD says. “Consumers will come to expect ease of use, increased song catalogs, better download quality and a strong price-value proposition; those will be the basic entry points for digital distribution. Good fundamentals won’t do it alone,” Crupnick said. “The winners in this space will need to build solid brands and engender the kind of excitement, loyalty and equity that Napster and Kazaa built in the peer-to-peer file sharing world, and marketing and PR buzz similar to that currently enjoyed by iTunes.”
The NPD Group provides sales and marketing information for a range of industries.