Computer-Music Connection Stronger Than Ever

More than 40 percent of home Internet users in the United States have downloaded MP3 files onto their home computers, according to a study by Parks Associates, and they are storing an average of 305 music files.

Not surprisingly, younger consumers in particular are storing a vast amount of music on their home PCs. In a survey of 711 consumers in U.S. households with Internet access, Parks Associates found that 81 percent of respondents ages 18 to 24 have downloaded MP3 files onto home computers, storing on average approximately 350 clips, songs and files. Although a lower percentage of consumers ages 25 to 34 has downloaded MP3 files onto home computers, they are currently storing, on average, twice as many files (more than 700).

“Prior to this study, we assumed that a fair number of home Internet users of all ages were taking advantage of music-swapping services and CD-ripping software,” said Kurt Scherf, vice president of research for Parks Associates. “What we didn’t realize was the staggering amount of music files stored on home computers. The home computer – at least in certain segments – is quickly evolving into an important hub for entertainment content inside the home.”

These findings could be music to the ears of the home networking industry, which is seeking to establish itself beyond simple PC connectivity.

“We have said for some time that entertainment applications that take advantage of the storage and streaming of multimedia content can bring home networking to a large segment of the U.S. population,” Scherf said. “From these results, we might infer that networking applications that target the connectivity of home computers to other platforms in the house – such as stereos and televisions – might be of interest to a large segment of the U.S. home Internet population.”

The recording industry blamed the dreadful year it had in 2001 on the proliferation of illegal downloads rather than the weak economy. Research sponsored by the Recording Industry Association of America found that free online music was taking away from music sales in general. But research by Ipsos-Reid found that downloaders do not stop buying prerecorded compact discs when they discover downloading. According to the study, 81 percent of downloaders report their CD purchases have stayed the same or even increased since they initially began downloading music from the Internet (see Subscriptions Not Music to Consumers’ Ears).

The online subscription serviced backed my major record labels must also find a role in the digital music world. A report by Informa Media found that Internet music subscriptions will bring in $2.4 billion in 2007. But in the near term, subscriptions will not provide a quick fix for the wider malaise of the industry. By the end of 2002, Informa’s report found the market will be worth only $71.5 million, a tiny fraction of the total $34 billion record sales.

Subscriptions will start to take off in 2003 or 2004, when many of the user restrictions of the early major-backed services will have been lifted. By the end of 2004, the value of subscriptions will have increased to $473 million.

“The industry hasn’t yet settled upon the perfect business model. Certainly the major-backed platforms leave a lot to be desired and don’t provide consumers with enough scope or control. But the fact that the majors have joined the party does provide some optimism”, said Simon Dyson, co-author of the Informa Media report.

By 2007, North America will account for 46 percent of music subscription revenue, followed by Europe with 33 percent. Recorded music sales in 2007 are forecast at $41 billion worldwide, up from $34.4 billion in 2001, according to the report. Total online sales will increase to $9.7 billion. Of this, Internet CD sales will account for 69 percent, music subscriptions will account for 25 percent and one-time downloads for 6 percent.

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