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Music-Consumption Habits Continue To Shift: NPD

Consumers bought fewer CDs in 2008, purchased more music from authorized download sites and increased their usage of social-networking sites and Internet music services to enjoy music, The NPD Group found in surveying online consumers ages 13 and older.

“The trends we’re seeing in our consumer tracking studies are evidence of the continued transformation of the music industry,” said Russ Crupnick, NPD’s entertainment industry analyst. “Just as music piracy and the advent of digital music ended the primacy of the CD, we are beginning to see new forms of listening challenge the practice of paying for music. The music industry now has to redouble efforts to intercept and engage these listeners, so they can create revenue through up-selling music, videos, concert tickets and related merchandise.”

In an annual consumer survey, NPD found the number of Internet users paying for digital music increased to 36 million in 2008 from 28 million in 2007. Purchases of online music downloads increased by 29 percent during that time to account for 33 percent of all music tracks purchased in the United States.

In addition, almost 17 million fewer people bought CDs in 2008 compared to the prior year. The decline was across all demographic groups, but was highest among teens and consumers 50 years and older.

Although the number of paid downloads is up, music purchasing overall — including CD sales — is down, NPD found. NPD found that 13 million fewer people bought music in the U.S. in 2008 compared with 2007, thanks largely to a 19 percent drop in CD sales. Only 58 percent of Internet users reported purchasing CDs or digital music downloads last year compared to 65 percent in 2007.

Reduced entertainment spending due to the recession was the primary reason cited by consumers for not purchasing CDs, but consumers also noted the price of CDs and satisfaction with their existing music libraries for spending less. Reasons for preferring downloads included the ability to buy only the songs they want and the ability to download immediately and listen.

Consumers are increasingly turning to Internet music services and social-networking sites to listen to music, NPD also found. Awareness and usage of online service Pandora doubled year over year to 18 percent of Internet users, NPD said. A third of the people were aware of Pandora said they used the service. Likewise, the percentage of consumers claiming to listen to music on social networks rose from 15 percent in the fourth quarter of 2007 to 19 percent in the fourth quarter of 2008. Almost half of U.S. teenagers are listening to music on social networks, up from 37 percent a year ago. Among college-age Internet users, the percentage increased to 41 percent in 2008 from 30 percent in 2007.

NPD surveyed more than 4,000 Internet users age 13 and older for the annual study. Pandora usage trends came from a quarterly survey.