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"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."
——Russ Crupnick, The NPD Group
LEGAL DOWNLOAD USERS TRIPLE, STILL BUY CDS
New Research Says Digital Sales Are Up, Illegal P2P Down
Maybe this music business thing has a future after all.

According to research by The NPD Group, legal digital music usage more than tripled among CD-buying consumers in 2004, with an increasing number of CD buyers also purchasing from legal digital music download services, such as iTunes and Buy.com, among others.

Findings show that legal digital music services also appear to attract consumers who purchase more CDs than the average consumer, and fewer of them are using illegal P2P services.

Hey, that's what they say.

Just under 5% of CD buyers reported using a legal service to purchase music during the first quarter of 2004, nearly three times the 1.7% level NPD reported for  the same period in 2003.

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 from 64% last year to 42% in 2004.

Also, 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.

NPD Music President Russ Crupnick said: "Paid services like iTunes and Rhapsody appear to be attracting core music buyers, which can create a firm foundation for legal digital music purchases. 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."

Now that's music to the record industry's ears.

CD buyers who also used an online music subscription service, such as Rhapsody, in the past 12 months purchased an average of 11 CDs last year; those who had paid for a music download from legal download site, like iTunes, purchased 10 CDs; those who used a P2P file-sharing site purchased eight CDs; and those who did not download or stream music from the Web bought six CDs.

"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," added Crupnick. "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. And if you believe that, I have a bridge in Brooklyn to sell you."

Data for the study was derived from the NPD MusicWatch, which provides weekly tracking of music purchases from a panel of consumers, including demographics, shopping habits, retailers, purchase motivators and pricing, based on more than 100,000 transactions annually. The NPD MusicWatch Peer-to-Peer Study, a survey covering use of digital music services that was conducted in February 2004 among a sample of 5000 individuals, was also used in the research.

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