Live@DMF: NPD, ‘We Need to Energize All Segments’

Live coverage from the Digital Music Forum in New York.

  • Presentation by Russ Crupnick, VP & Senior Industry Analyst, The NPD Group.
  • (US Data)

Top Takeaways, Questions, Challenges.

  • How to service all segments of the music community (various demos, engagement levels among fans)?
  • How to energize the market for paid digital downloads?
  • How to monetize all the touchpoints – this doesn’t need to be a lot (per channel)?
  • Creating better linkages between access and payment.

Assessing the damage.

    • 2009 v 2007
  • 24 mm less buyers
  • fewer CD buyers – less (-) 33 mm
  • % change in buyers: (-) 21%
  • % change $ spend/buyer: +2%
  • ‘Fundamental collision’ between consumers, ‘uber’ v. ‘under’ fans

Traditional buyers…

  • Gen X and late boomers are 1/3 of industry rev (CD and paid digital)
  • Plus, they respond to very traditional marketing tools: AM/FM radio, personal recommendations, browsing in an actual store
  • Very likely to buy a familiar artist.

Activist buyers…

  • 13-35
  • only 9% of the people
  • 23% of the revenue
  • Variety of formats: CDs, paid digital, P2P, external hard drive transfers
  • ‘Not everyone grows up to be an activist’ in later life

The Stats…

  • Number of paid downloaders down (35.2 mm 2008 to 34.6 mm in 2009).
  • A lot of the loss coming from older consumers, who are saying, ‘I’d like to try this download thing, but give me a reason.’  Better pricing and packaging needed.
  • Significant drop in files downloaded via P2P sharing (% internet population downloading at least one song).
  • Why the decline?

– quality issues, spyware, viruses, competition from Myspace, Pandora, others.
– other reasons rooted in technology, ‘we may be going from P2P to other ways of sharing,’ which includes transfers from external hard drives.

And the spread in 2009?

  • 78 million bought CDs
  • 35 mm bough DDL (digital downloads)
  • 72 mm listened on a video site
  • 54 mm listened to online radio

The math on conversions…

  • Example: $20 from each video music listener equals $1.5 billion “with a B”

But discovery and cannibalization, or ‘substitution effects, are considerable.

  • free online radio leads to a 41 percent increase of purchases of paid DDL.
  • BUT, free on-demand music leads to 13 percent less purchases of paid DDL
  • The bad news – ‘more listening sometimes means more listening,’ so there’s ‘a lot of work on the monetization side’ needed.