Study: iTunes #1 Music Download Service; Online Buyers Down

Apple Computeris online iTunes Music Store (iTMS) remains the leader in paid digital music downloads with 70% of the legally downloaded music market, but the number of paying customers for the sector overall has decreased since April, research firm The NPD Group said Wednesday.

From December 2003 to July 2004, iTMS remained the dominant destination, with nearly 70% of music files downloads. Napster was a far second with 11%. MusicMatch, RealNetworks Inc. and Wal-Mart Stores Inc. each had a 6% share.

But as Apple maintains its dominance over music downloads, NPD said there has been no noticeable decline in the use of peer-to-peer (P2P) sites. Over the past 12 months, households using a P2P site ranged from 4.7 million to 6.4 million. Many P2P illegally share music files that are copyrighted.

The Port Washington, New York-based market information company said that the number of people visiting online stores in the U.S. fell over the summer from a peak of 1.3 million in April to one million in May, June and July. NPD said the downturn coincides with the end of promotions and free trial incentives.

"Our research suggests that at this stage of the business itis not so much about building share as it is about creating demand for paid downloads universally," said Russ Crupnick, vice president of NPD. "Weive seen that promotion works, but its had a short-term effect so far, which is typical for traditional consumer goods. The trick is in phasing promotions, so that there is a cumulative positive effect on the target market."