CD Sales Sink, Digital Downloads Rise

The NPD Group, a leader in market research for the entertainment industry, has reported that there were nearly 17 million fewer CD buyers in 2008 compared to the previous year. The reported decline in CD buyers cuts across all demographic groups, but was particularly focused on teens and consumers over 50 years of age. According to NPD’s annual Digital Music Study, the growing digital base and the rapid growth and popularity of social networks were key contributing factors in the decline. Not surprisingly, the decline in CD sales was accompanied by a sharp rise in Internet use, with the number of Internet users paying for digital music increasing by over 8 million in 2008.

“Rising incidence of paid downloads is a positive development for the industry, but not all lost CD buyers are turning to digital music,” said Russ Crupnick, Entertainment Industry Analyst for The NPD Group.

NPD’s report also revealed that, with digital downloads up by 29 percent, those downloads now account for 33 percent of all music tracks purchased in the US. The study also found that there were 13 million fewer music buyers in the US last year compared to the previous year, and noted a 7 percent decline in total digital music downloads in 2008. Consumers reported being frustrated with the price of CDs and satisfied with the collection of titles they already own.

On the positive side, NPD cited evidence that, overall, music listening is increasing. The study found that usage of Pandora, a leading online radio station, for example, now totals 18 percent of Internet users, and that nearly half of US teens are engaging with music on social networks.

“Just as music piracy and the advent of digital music ended the primacy of the CD, we are beginning to see new forms of listening challenge the practice of paying for music,” said Crupnick. The music industry now has to redouble efforts to intercept and engage these listeners so they can create revenue through upselling music, videos, concert tickets, and related merchandise.”