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"Without a doubt, file sharing has had huge negative impact on music industry sales. "But our research shows that even if digital file sharing were to disappear tomorrow, the record labels and retailers would still need to overcome important underlying causes of recent market declines."
——Russ Crupnick, VP of The NPD Group

DIGITAL DOWNLOADING
AIN’T THE ONLY PROBLEM

Report Says Music Industry Must Look Past File-Sharing to Get to Bigger Problems
Recent consumer-tracking surveys suggest that the music industry and retailers must look beyond music file sharing to find other important causes of ongoing music sales declines—especially among mature music buyers.

According to data from The NPD Group, consumers across all demographics are purchasing less music now than in the past two years. Total full-length CD sales were down 13% Q4 2002 compared to Q4 2001. Already this year, Q1 unit sales trended downward by 9%.

More than half of lost music sales can be attributed to file sharing; however, 60% of music consumers with access to the Web have not downloaded any music for free, and sales to those customers are off by as much as 7%.

"Without a doubt, file sharing has had huge negative impact on music industry sales," said Russ Crupnick, VP of The NPD Group. "But our research shows that even if digital file sharing were to disappear tomorrow, the record labels and retailers would still need to overcome important underlying causes of recent market declines."


While there are many root causes for lost sales, one important view is uncovered by looking deeper into the demographic segments of music buyers. NPD research shows steeper sales declines among consumers aged 36 and over, than among younger demographic groups. Nearly half of these adult consumers report they are purchasing less music, because there's less music they're interested in buying. Plus, fewer than 10% of this age group report purchasing less music because of downloading.

"It's important to note that this group of mature consumers represents 45% of all CD sales," Crupnick said, "and near-term population growth trends should stand as a warning to the industry to reach out to older buyers, because the core teen and college market population is not expected to grow over the next five years."

The primary data source for the preceding findings is the NPD MusicWatch panel, and online tracking study that surveys music buyers on an ongoing basis throughout the year. For calendar 2002, the NPD MusicWatch panel contains over 100,000 consumer music transactions.

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