Finding Money In the Music

Music accounted for a significant portion of the $3.1 billion that was spent in the “books, music, and video/DVD” category during the 2002 holiday shopping season, and Jupiter Research (a unit of this site’s corporate parent) found that 49 percent of teenagers and 38 percent of adults had purchased music online during 2002. Despite this large base of paying customers, an estimated 50.3 million Americans download music from an online file-sharing service, according to Ipsos-Reid

The downloaded files are not contained to the hard drive, suggests the 2003 Ipsos TEMPO music study, as 59 percent of American file-sharers over the age of 12 currently own a PC-based compact disc recorder, and 42 percent of the file-sharing respondents report copying a pre-recorded music CD rather than purchasing it.

Not surprisingly, 52 percent of 12-to-17 year olds report downloading music or MP3 files from a file-sharing network, marking a gradual increase from the April 2002 study, when 41 percent of the same age group reported that they had taken part in this activity.

American males are significantly more likely than their female counterparts to have engaged in online file-sharing nationwide, as 26 percent of U.S. men over the age of 12 report having done this activity, compared to only 12 percent of American women.

The challenge for the music industry is whether this huge population of file-sharers can be persuaded to pay for the music they are now downloading for free. Ipsos-Reid noted an increase over the number of downloaders that have paid for music from June 2002 (27 percent) to September 2002 (31 percent).

Cumulative Ipsos-Reid research revealed that 12-to-17 year old downloaders are most amenable to paying for music. “What’s particularly interesting is that teenagers have also indicated a greater willingness to pay for online music, more so than older downloaders,” said Matt Kleinschmit, a director with Ipsos and the TEMPO research program.

The key to fee-based Internet audio may lie in unique content or programming. A joint study from Arbitron Inc. and Edison Media Research found that approximately 12 million Americans would be willing to pay a small fee to listen to something online that could not be heard elsewhere.

The research measured a dramatic surge in the number of Americans who regularly listened to Internet radio. In January 2000, 5 percent of those surveyed reportedly listened to Internet radio in the past month. That figure doubled in January 2001, swelled slightly to 12 percent in January 2002, and grew to 17 percent in January 2003.

The most recent percentage is doubled when Americans were queried about casual Internet radio usage – 34 percent of respondents reported that they had listened to Internet radio during their online tenure. Similarly, the TEMPO report also found that 27 percent of the 1,112 respondents indicated that they listened to Internet radio and 21 percent listened to streamed music clips or audio files.

The Arbitron/Edison Media Research data – culled from January 2003 interviews with 2,005 randomly selected Arbitron Fall 2002 radio survey diary keepers – also found a rise in Internet audio’s customer satisfaction. More than one-third (35 percent) of Internet audio listeners reported that they “love it” or “like it” in January 2003, compared to 26 percent in July 2001.

“Internet broadcasting is rapidly becoming a mass medium with an estimated 103 million people or 44 percent of the total population having ever used Internet audio or video,” said Bill Rose, vice president and general manager, Arbitron Internet Broadcast Services.

The Arbitron/Edison Media Research report estimated that the entire current Internet audio audience could be worth $54 million in annual advertising revenue if all the listeners were tuned to a single Internet radio network.

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