Music is popular. In fact it's so popular, entire avenues of the Internet have been rewired to accommodate its demand. Napster, Scour, AudioGalaxy, LimeWire, BitTorrent and iTunes have all achieved stellar levels of success, thanks to their ability to connect people to the music they love.

Unfortunately for the music industry, this love hasn't been extended to the optical disk. As the digital revolution continues to storm through the consumer market, the CD's relevance is eroding. The digital track has supplanted the CD as the most cost effective, reliable, and most importantly, portable method of listening to music. The CD player is also falling rapidly into obsolescence, unable to match the capacity and portability of an MP3 player.

As fewer individuals partake in the CD, the music industry has taken solace in the fact digital sales have made up for some of the loss in revenue. However, the number of digital sales has not closed the gap completely, and by all accounts, the music industry's losses continue to mount.

The news wasn't much better from the NPD Group, who this morning published their latest study on the music industry. The NPD Group found that although there was an impressive 6% jump in digital music purchases, it wasn't nearly enough to offset the impact of declining CD sales. Startlingly, the transition to digital music has resulted in a 10% drop in music sales in 2007. Translated into money terms, each consumer's average music spending fell from $44 in 2006 to $40 in 2007. Additionally, the NPD Group found that 1 million individuals withdrew from the CD market in 2007. In other words, 48% of US teens didn’t purchase a CD in 2007, while only 38% didn’t purchase a CD in 2006.

The cause of the decline in CD sales is quite obvious – digital sales. Interestingly enough, not only is unauthorized sharing leading to a shift away from the CD market, but authorized stores such as iTunes are encouraging this decline as well. Digital tracks are considerably cheaper than a CD, which gives credence to the music industry’s effort to introduce variable pricing. Consumers aren’t really biting, and the disparity between a $5 digital album and a $15 CD album will likely continue to drive the music industry’s revenue down.

There’s another interesting tidbit of information in the NPD report which found that P2P sharing remains steady at 19% - however “…the number of files each user downloaded increased, and P2P music sharing continued to grow aggressively among teens.” Typically, the NPD group doesn’t take into account the sharing that transpires on the BitTorrent network, which would have a dramatic influence on the 19% level found by the study. Digital music store sales are popular, there’s no doubt about it. We hear about promotions for iTunes and Napster all the time, and see gift cards in our grocery stores. But there’s a bit problem out there; digital tracks simply aren’t popular enough to offset the decline of the CD. What will it take to reverse this curse? It’ll take a miracle.

This story is filed in these Slyck News categories
File-Sharing/P2P Related :: Studies/Research

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