October 19, 2004

Infomercials

An NPD Group survey concludes that the gap between paid music downloads and files acquired through peer-to-peer networks remains very large. Apple still dominates the US market, accounting for 70% of revenues in the paid music downloading industry.

Napster comes in a distant second with 11%, followed by MusicMatch, RealNetwork and Wal-Mart, all with 6%. Wal-Mart is one of the newer entrants into the business, but they already have captured a decent chunk of market share thanks to their $0.88 downloads ($0.10 less than the others) and WalMart's well known brand name.

Among these services, iTunes was the first out of the gate to sell single song downloads, and has profited from that early start, as well as an easy interface and the popularity of its sister product, the iPod digital music player.

Digital music players, many of which are tied to certain services, are a major factor in the success of a paid music downloading service. Of course, these digital music players can also be used to play MP3s that are acquired, almost always illegally, through peer-to-peer (P2P) networks.

Forrester Research predicts that the number of MP3 players households will increase from 7.6 million in 2004 to 30.0 million by 2009.

Despite the success iTunes, and the paid music service industry in general, has enjoyed, the number of music downloads it generates pales in comparison to P2P services.

In fact, the number of households with a member who uses a paid music service to download music peaked in April 2004 at 1.307 billion, falling to 932 million by July 2004. Meanwhile, P2P use has fluctuated month-to-month but slowly risen to a higher level than a year before, a level consistently higher than paid services.

Source: eMarketer