Younger Generation Lends Boost to Digital Music

IDC says digital music downloads are going to become a multibillion-dollar business, thanks to their popularity with users under age 20, but until then, there is evidence that downloaded music is putting a dent in music sales.

A survey by International Data Corp. (IDC) found that use of of music downloads is by far the heaviest among individuals under age 20. More than 77 percent of respondents under age 20 said someone in their household has downloaded songs off the Internet. No other age group exceeded 52 percent use of downloads. Additionally, among consumers who have downloaded songs, more than 47 percent of those under 20 said they or someone owns a portable digital music player. This is nearly three times the use of the next highest group and indicates approximately one-third of Internet users under 20 own these music devices or live with someone who does.

“Online music is very much a youth phenomenon, which will increase in importance over time,” said Malcom Maclachlan, senior analyst with IDC’s Consumer eCommerce: Media research program. “Not only are young people the backbone of music sales, they also have several other upsides: They are heavy users and early adopters of technology, they influence the behavior of those slightly younger than they are, and as a group, they keep making more money as they grow older. The habits they form now will have a huge effect on sales of music and other entertainment 5 to 10 years from now.”

Reasons cited for downloading music are convenience, availability of hard-to-find works, and free music. Among those who don’t download music, lack of portability, distrust of the download process, slow connections, and format uncertainty were the key reasons.

“The interest in downloading music is definitely mixed. There is a certain amount of skepticism as well as a reluctance among users to pay for music downloads,” Maclachlan said. “The spread of free downloads is preparing consumers for a paid market. Once consumers know music downloads work, they will be more likely to spend money on the music they otherwise might buy in CD format.”

Maybe, maybe not. More than 66 percent of 5,200 online music shoppers surveyed by Greenfield Online have not paid for (and would not expect to pay for) digital music downloads.

A study by VNU Entertainment Marketing Solutions for Reciprocal,™ Inc. found that online music file sharing is the likely cause for a steady two-year decline of college market album sales.

The VNU/Reciprocal study concluded that while overall retail sales steadily increased between January 1997 and March 2000, album sales in more than 9,000 SoundScan reporting retail stores within a 5-mile radius of more than 3,000 colleges declined by 4 percent over the last two years. Stores near the 67 schools that had banned file-sharing software Napster by late February showed a greater sales decline of 7 percent over the past two years.

Many college students, of course, have high-speed Internet connections, and anecdotal evidence suggests a link between students with fast connections, the illegal trading of unlicensed music, and its effect on record sales.

“It is now clear that the controversial practices of companies that provide directories and an easy interface to libraries of unlicensed music are in fact detrimental to the growth of the music business and those artists whom they claim to support,” said Larry Miller, President, Reciprocal Music. “Record sales are up despite the widespread use of MP3, not because of it. These figures should put to rest the ongoing debate about the effects of online file sharing.”

From Q1 1997 through Q1 1999, the report shows that overall sales grew at 8 percent and 4 percent annually, with a marked 7 percent increase between Q1 1999 and Q1 2000. Overall college market sales increased 12 percent from Q1 1997 to Q1 1998, but then showed a steady decline through Q1 2000. While Q1 2000 national sales are are 120 percent of the Q1 1997 national totals, sales for selected college stores (presumably high music file sharing usage) are at only 98 percent of the Q1 1997 total.

It is also possible that students are using their Internet connections at school to order music from online retailers, rather than downloading music or buying it from offline stores.

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