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Music Sales Drop 2% Q3 Despite Digital Growth

Overall demand for music among U.S. internet users fell 2% in Q3 of 2008 according to a new NPD survey which included purchased CDs and downloads, P2P sites, and borrowing music to rip. It’s not clear if the numbers are just a blip or within some margin or error, but they certainly can’t be spun as good news for a beleagured music industry. Growth in track sales and the number of new downloaders did, however, offer a ray of hope along with music discovery via video games.

The proportion of U.S. Internet users, age 13 and older, purchasing a CD in the prior month fell from 25%   in Q3 ’07 to 22% this year and the overall volume of CDs purchased declined by 19% compared to last year. Teen   CD purchases dropped 34% (so much for the Hannah Montana effect) and among adults age 26 to 35   sales were down 36%. CD purchases by adults 36 and older declined ony 10%.

Paid digital downloads experienced growth…

in the number of buyers and the volume of tracks sold in Q3. 15% of internet users purchased music online which is an increase of 2% over last year or 2.8 million additional music-download customers. Legal music download volumes increased by 29% in Q3 with positive numbers seen for all age groups except the 50-and-older segment, which represents a small portion of buyers.

The number of Internet users sharing music on peer-to-peer sites held steady at 14% in Q3 2008; but the volume of music shared rose by 23%, as P2P users reported downloading more files. Teens purchased 34% more paid digital downloads compared with year-ago, however growth in P2P file downloading among 13- to 17-year-olds was up 46%. NPD noted that the practice of sharing files for the purpose of burning to a CD fell 25% among teens, which suggests an increased preference for having the files in a digital-only format.

Video gaming also appears to have positive effects for the music industry. 22% of music buyers (CDs, digital or mobile) overall – and 35% of consumers under the age of 35 – reported playing a music-based video game, such as Rock Band or Guitar Hero, in the prior three months. Many of these music gamers reported that the gaming experience had a positive outcome, such as creating music discovery or triggering a digital-music or CD purchase.

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