Move over, Best Buy. Watch out, Wal-Mart. Apple’s iTunes Store is now the number-two music retailer in the U.S., behind only Wal-Mart, based on the latest data from the NPD Group MusicWatch survey, which tallied the amount of music sold during 2007. Apple sold more than four billion songs, with 20 million sold on Christmas day.
According to NPD, the amount of music consumers acquired in the U.S. increased six percent in 2007. A sharp increase in legal digital download revenues could not offset declines in CD sales, however, which resulted in a net 10 percent decline in music spending (from $44 to $40 per capita among Internet users). That means only 42 percent of music acquired was actually paid for in 2007, down from 48 percent in 2006.
“The continued growth in legal download sites is encouraging, yet the industry struggles to improve the value of each digital customer,” said Russ Crupnick, entertainment industry analyst for The NPD Group. “With so many baby boomers and gen-Xers entering the market, there are certainly opportunities to sell more digital albums, promote older catalog titles, or create bundles that will raise revenues.”
CD Revenues Continue Down
In the near term, Crupnick continued, digital music sales will be the best means to narrow the gap on dwindling CD revenues. NPD estimates that 1 million buyers dropped out of the CD market in 2007, led by younger consumers. In fact, 48 percent of U.S. teens did not purchase a single CD in 2007, compared to 38 percent in 2006.
At the same time, peer-to-peer file sharing rose to 19 percent of U.S. Internet users last year. However, the number of files each user downloaded increased, and P2P music sharing continued to grow aggressively among teens.
The result is that legal music downloads now account for 10 percent of the…