Online music sales plummeted 39 percent in the third quarter of this year compared to last year, pushed by increased file sharing and CD burning, new research reveals.
The decline in online sales of CDs and other physical recorded media could pose a serious threat to the music industry, which appears to be losing its battle against the proliferation of free music available online. Furthermore, the research due to be released Monday by comScore Media Metrix shows that not only are online music sales dropping, they are declining at an accelerated rate.
Year-over-year 2002 online music sales fell 12 percent in the first quarter and 28 percent in the second quarter before diving 39 percent in the third quarter.
Furthermore, the researcher said that sales for the first three quarters of the year fell 25 percent over last year, from US$730 million in 2001 to $545 million this year.
The decline corresponds to the rocketing growth of peer-to-peer (P-to-P) file sharing services such as Kazaa and Morpheus, said comScore, based in Reston, Virginia. Both services had less than a million monthly U.S. home users in June of 2001, but by March of 2002 Kazaa had swelled to 5.8 million users and Morpheus boasted 7.2 million.
Furthermore, Kazaa continued to balloon, with more than 10 million U.S. home users in September of 2002, according to comScore.
The growing popularity of file sharing services has not gone unnoticed by the music industry, which has tried to throw lawsuits, legislation and consumer education in their way. Despite these efforts, the services have retained their grip, proving that irresistible lure of something for nothing.
The Recording Industry Association of America Inc. (RIAA), the group that represents the major labels, said last August that CD shipments for the first half of 2002 had dropped 7 percent over the year-ago period.
The figures provided by the RIAA were based on data from PricewaterhouseCoopers LLP, which did not break out online and offline sales figures.
Upon releasing its figures in August, RIAA President Cary Sherman said that, "cumulatively, this data should refute any notion that illegal file sharing helps the music industry."
It makes sense then that the steepest sales declines would be online, among Net savvy users. According to research provided by the RIAA, 35 percent of young Internet-connected music buyers said that the first thing they do after hearing music they like by an unfamiliar artist is to download the song for free.