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Business News (more headlines) 06-18-2003

Why Are Music Sales Falling? Downloading

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While there are a variety of reasons contributing to the downturn in music sales, the twin problems of downloading and burning are clearly the most potent ones, according to a recent national survey of 12 to 44 year olds conducted by Edison Media Research for the trade publication Radio & Records. The data suggest that, in particular, the heaviest downloaders have the most negative influence on sales.

"Our study should put to rest the notion argued by some surveys that say downloading actually helps sell records," says Jayne Charneski, Vice President of Edison Media Research. "While some people do indeed say that they have learned about music and gone on to buy CDs because of downloading, the gains are more than negated by lost sales due to people downloading music or burning (making digital copies of CDs)."

Some of the interesting behavioral trends to emerge from this study include:

* Among the heaviest downloaders, those who have downloaded more than 100 music files (about 16% of 12-44s), reported purchases of CDs has dropped an incredible 61% from last year's study (28.9 CDs, on average per person, purchased last year compared with 11.3 CDs purchased this year).

"Today's heavy downloader tends to be the same person the record industry has relied on in the past to be the heavy purchaser. These days, many in this group are increasingly downloading from file-sharing sites and burning music instead of buying music," says Charneski.

* 71% of heavy downloaders say that "Instead of buying a CD they have burnt someone else's copy of a CD," and 48% of them say "They no longer have to buy CDs because they could download music for free over the Internet."

* More teens than ever are burning instead of buying -- 61% of 12-17-year-olds have burned someone else's copy of a CD instead of buying their own copy, a 13% increase in one year.

Not all of the results bode poorly for the record industry, however. Some of interesting attitudinal trends to emerge from this study include:

* 14% of those who download told us they won't download music for free because they feel artists and record labels should be compensated. This is a tremendous increase from 2002 when only 5% of downloaders felt this way.

* The number of Americans who believe downloading music files for free from the Internet is "morally wrong" has increased 28% in one year. As of May 2003, some 50% of Americans between the ages of 12 and 44 believe downloading music for free from the Internet is morally wrong, up from just 39% in 2002.

"I think we are seeing some evidence that the anti-piracy campaigns waged by the RIAA and the record labels are starting to change the hearts and minds of consumers when it comes to file-sharing services. There is a growing group of consumers who want to pay for their downloads," explains Charneski. "Meanwhile, Apple's I-Tunes came along and raised the bar in the online music store space. I-Tunes is easy to use and Apple's name gives paying for downloads an element of cool. All this is great news for the record industry."

Other findings include:

* 12 to 24s buy into the media's "bling bling" portrayal of the music industry. Half believe that all recording artists and record label employees are rich, live in big houses, and drive expensive cars!

* 12 to 17s: the Hip-Hop Generation. When asked on an unaided basis to name their favorite musical artists of all time, three Hip-Hop artists occupied the top slots -- #1 Tupac, #2 Eminem, #3 50 Cent.

* Led Zeppelin's "Stairway to Heaven" ranks as the top favorite song among 12 to 44s. Garth Brook's "The Dance" holds the #2 spot.

* Videogames sell music -- 8% of 12 to 17s and 10% of 18 to 24s said hearing a song featured in a videogame was influential in purchasing the last music CD they bought for themselves.

* Consumers in the demos the record industry traditionally relies on for the bulk of new music sales (12 to 24s) still believe the industry is producing quality product and the vast majority (74%) are as passionate about music these days as they used to be.

* 36% of persons 18+ believe there is more programming variety on local radio stations today compared to 5 years ago. Another 46% believe there is the same amount of variety on local radio today compared to 5 years ago.

* 33% of downloaders said they would disable their file sharing software if they received a pop-up message warning they are at risk for legal penalties for downloading music from file-sharing services.

These findings highlight a comprehensive survey about music purchasing and behavior conducted by Edison for R&R Convention 2003, being held this week at the Beverly Hilton Hotel. The survey's results will be presented Thursday, June 19, at 11:00 a.m. in a session titled "The National Record Buyers Study III."

This national survey interviewed 1003 persons age 12+. It was conducted by telephone from a national sample (continental U.S.) between May 8 and May 18, 2003. For a sample of this size, the sample error is + 3%.

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