Has the iTunes Store failed to kill the CD?
Despite all the attention the media has lavished on the iTunes Store, CDs still dominate music purchases by a huge margin, according to a study released Monday by the Pew Internet and American Life Project.
The survey, conducted by phone last August, focused on how the Internet influences consumer purchases of music, cell phones and houses.
The Pew report says 82 percent of music buyers still prefer the old-fashioned CD. An eyebrow-raising 62 percent said they purchased all their music on CD, with 20 percent more saying most of their purchases were CDs. Only 12 percent said all (5 percent) or most (7 percent) of their purchases were via digital download.
How can this be? Just last month research firm NPD declared Apple the Number One U.S. retailer in January with 19 percent of the market. (Wal-Mart was second with 15 percent and Best Buy third with 13 percent.) Furthermore, the NPD report said digital downloads made up nearly a third of music purchases in January.
We keep reading news stories about plummeting CD sales and rising downloads. It doesn’t seem to add up, but I think there’s an explanation.
First let me say I believe Pew’s data is solid. In fact, it almost perfectly mirrors the RIAA’s 2007 consumer profile statistics. That data shows CDs comprising 82.6 percent of sales, compared with 11.2 percent for digital downloads.
The RIAA also supplies annual data, which helps put the digital numbers in perspective. In 2006, digital downloads comprised just 6.7 percent of music sales. That means digital download sales jumped 67 percent in one year. As recently as 2004 digital downloads made up less than 1 percent of sales.
I suspect part of the reason the Pew survey seems at odds with recent trends is that it was conducted six months before the NPD report. Remember, it was only in June 2007 that Apple ascended to Number Three among music retailers (again, according to NPD data).
Back then Wal-Mart led with 15.8 percent of the market, followed by Best Buy with 13.8 percent. Apple had just 10 percent. That means from June to January Apple nearly doubled its market share.
I imagine the Pew researchers would likely get significantly different results were they to conduct a music-buying survey this month.
While CD sales may continue to outpace digital downloads for some time, the digital revolution cannot be denied. Eventually digital downloads will surpass CD sales, just as CD sales overtook vinyl LP sales in the 1980s.
Research organization In-Stat said last month that digital sales will account for 40 percent of all music sold worldwide by 2012, up from 10 percent in 2007.
Yet another NPD report issued in February estimated that 1 million consumers abandoned the CD in 2007. From the press release: “In fact, 48 percent of U.S. teens did not purchase a single CD in 2007, compared to 38 percent in 2006.”
Even the Pew survey hints at the digital future of music retailing. A chart that breaks down purchasing habits by age group shows younger consumers moving rapidly away from CDs in favor of digital downloads.
In the 18-to-36 age group, 27 percent said they bought digital downloads at least half the time. Only 13 percent of those in the 36-to-50 age group said the same; for the over 51 crowd, the number fell to 6 percent.
Since the iTunes Store holds about 70 percent of the worldwide legal download market, Apple stands to reap great rewards from the inexorable move of music consumers -- led by the youngest among us -- away from CDs to digital downloads.
Comments
I will continue CD purchases until they stop making them. Used CDs are the same price as digital downloads - sometimes cheaper. Plus with a CD I get better quality, future proof files (can be ripped to any format), NO DRM, built-in back up (wait until all those digital downloaders have a hard drive crash!!) and I get the satisfaction that the files will NOT just stop working at the whim of a corporation (Google and Microsoft both halted files from playing). No thanks, I'll stick with CDs.
Posted by: Steve K. | May 20, 2008 11:45 AM
Keep in mind, too, that Apple's position as the largest single retailer doesn't meant that downloads are more popular than CDs.
CDs are available for sale at any number of different retailers (Best Buy, Wal-Mart, Amazon, and thousands of individual retail stores), which fragments market share. Meanwhile, Apple commands an *overwhelming* majority in the download market, which boosts its position significantly.
Posted by: Dan Moren | May 20, 2008 12:16 PM
Don't forget, Amazon entered downloads market big time. And which music (in terms of quality) do you find @ WalMart or Best Buy?). Brick and mortar CD stores are closing down, and one can barely find a place to buy a CD. Also, when ordering from internet retailers, it is cheaper (no postage, lower price) and more practical (immediate enjoyment) to download, than to wait for the shipment of the CD. I can understand that CDs have somewhat better sound quality, but LPs were even better...
Posted by: Ron John | May 31, 2008 10:45 PM
CD sales are dead. Just read the story in the April 3, 2008 issue of The Rolling Stone.
The reason the results don't reflect reality is this: This Pew study was conducted by phone and most teens and young adults only have cell phones these days. Cell phone numbers aren't part of the database listings called by Pew or most phone-based research firms, so they missed interviewing the vast majority of the music consuming public. According to The Rolling Stone story, the consumer research firm NPD Group found that 48% of teenagers didn't buy a single CD in the past year. ALL of their music came in the form of online downloads. If that's not the deathknell for CD's, I don't know what is.
Posted by: Rockkid | June 16, 2008 8:24 PM
"CD sales are dead"
Oh please. I can't stand this theory that says "The young people are the ONLY ones buying music." What arrogance. Regardless of who was on what calling list, the fact remains that a *significant* segment of society continue buying CDs. (ArkivMusic CD sales were up 30% last year.) How anyone can talk about "death knells" when vinyl is experiencing a resurgence is beyond me.
Let's stop this either/or rhetoric. The vast majority of people still use CDs for archival purposes even if they use MP3s for portability. CD sales figures will never be what they were for the simple reason that people are finished re-buying their LP/cassette collections. Just because the revenue isn't in the stratosphere doesn't mean that anything is "dead."
Posted by: everycritic | July 11, 2008 3:50 PM