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Napster or Not, Downloading & Sharing of Music Files Continues

A study by market-research firm Odyssey shows that 31% of online users over the age of 16 – or over 40 million U.S. consumers – report they have downloaded or transferred music online in the past six months, and they do so an average of 11 times per week. These findings were part of Odyssey’s Breadbox, a semiannual study of U.S. consumers focused on attitudes toward, and usage of, e-commerce and other retail channels.

Affecting The Industry

While the music industry tries to restrict file sharing among online users, consumers continue to transfer and download online music. Later this week, the recording industry’s trade group International Federation of the Phonographic Industry is expected to announce that the music unit sales dropped 10% in value to $33 billion last year, the single worst drop in record-business history. This news follows a recent announcement from the Recording Industry Association of America reporting music unit shipments in the U.S. also dropped nearly 10% in 2001 from the previous year. Although many factors likely contributed to this downturn, the broad appeal of digital music appears to be playing a major role. “The industry has taken so long to respond that an entirely new set of expectations has been created. Now record labels will have to climb walls that they are allowing to be built,” said Nick Donatiello, President & CEO of Odyssey.

Downloading Digital Music Not Exclusively Dictated By Age

Of particular concern to the industry should be the fact that sharing digital music files appears to have become a mainstream activity, concentrated among those consumers that are also the heaviest buyers of music overall. As one might expect, younger consumers are more likely to download or transfer digital music with 53% of online users under 30 years of age having transferred or downloaded music recently. However, such behavior is not relegated exclusively to teens and young adults. In fact, 20% of all online users over 30 years old and 14% of those over the age of 45 have also downloaded or transferred music in the past six months. With older consumers already getting comfortable with digital music, it would appear that the platform’s appeal is not something that this large base of young consumers is likely to outgrow over time.

Music Industry Off-Key

As these new consumption behaviors develop, the music industry has responded with litigation and digital music services that are only marginally aligned with consumer interest. “Today’s digital music services were meant to solve the industry’s problems, not meet consumers’ needs. They would have been better off waiting to get their house in order than opening their doors and sending a message that they are not in touch with why people use digital music,” said Sean Baenen, Odyssey’s managing director. Breadbox data would suggest digital music speaks to consumers’ desire to own, control, and customize their own music. This underlines the difficulties that many of the new online music services such as MusicNet and Pressplay will face in trying to sell restrictive services that do not currently address the features most important to the consumers who are most likely to use them, such as custom mix creation and burning of music files onto a CD.

Digital Music Behavior Bigger Than Napster

The industry’s drive to litigate while launching its own limited services seems particularly out of touch when consumer behavior is looked at as a whole. Among the increasing proportion of U.S. households with recordable CD-ROM drives (23%, versus 16% in January ’01), more and more are using these drives to copy songs from a CD or another source onto their hard drives (50%), or to record their own music CDs by copying music onto blank CDs (54%). With this in mind, record companies might find ways to embrace file downloading by offering services that allow consumers to create their own play lists and burn them onto the format most suitable to their lifestyle. Odyssey’s data shows that 60% of all U.S. households have some interest in subscribing to such a service, meaning it could be a good business if it was constructed to meet – rather than alter – consumer need. “Changes in music behaviors are not solely relegated to the online medium. Just as cassette tapes offered the ability to reproduce and separate tracks, digital technology is giving consumers more choice and more control of their music consumption across the board,” said Baenen. “We’re seeing a sea change and from the consumer perspective it looks as if the industry is still out shopping for boats.”

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