iTunes advances to number two

iTunesThe NPD Group released a new report yesterday detailing the changes in music consumption among U.S. music buyers during 2007 (report)

The report claims an overall increase in music acquisition of 6% for the year, while stating a decline in “average annual per-capita music spending” of 10%. That statement must be carefully read. All it really says, is that more music found it’s way into the hands of consumers during 2007, but on average each consumer spent less to acquire that music. Yes, that’s bad news for labels. Based on this report, the labels saw a 10% decline in revenue.

The report indicates that iTunes has become the second largest music retailer in the states. Only Wal-Mart sells more music. The problem seems to be that consumers are opting for purchasing single tracks rather than albums as a whole. This hurts pop/major labels who have invested heavily in the album/CD culture, whereby the consumer was required to purchase music in which they may have had no interest (other tracks on the CD), in order to acquire music they desired (the one or two tracks they really wanted). The ability to purchase individual tracks for download has resulted in increased freedom for the consumer, and spread their music spending cash around a little more.

This situation has also resulted in less money being spent on music per capita. Spending is down from $44 to $40 per capita for users of the internet. The assumption might be that the internet savvy user is simply acquiring his music illegally rather than purchasing it. The NPD data suggests though that the percentage of users doing so did not increase statistically in 2007, holding steady at 19%. The report does say that those users downloaded more music illegally during 2007 than they did in 2006.

The report also indicates that online music sales are now being driven by consumer between the ages of 36 and 50. This segment of the market having just acquired MP3 players in recent months.