According to The NPD Group, a consumer and retail information company, 2006 offered the music industry positive and negative news. The recording industry registered solid growth of digital music sales from services like iTunes, but they continue to fight against serious challenges from music piracy in the form of peer-to-peer (P2P) file sharing.
"Legal a la carte downloads were the fastest growing digital music category in 2006, and it is likely that the annual number of legal users will surpass P2P users in 2007," said Russ Crupnick, VP and entertainment industry analyst for The NPD Group. "Unfortunately for the music labels, the volume of music files purchased legally is swamped by the sheer volume of files being traded illegally, whether on P2P or burned CDs sourced from borrowed files."
By the end of 2006, there were 47 million "digital music households" in The U.S.-i.e., households with a member who downloaded, ripped, burned, played, or uploaded digital music. Among those households, 15 million actively downloaded at least one music file from a P2P site in 2006 -- an 8% increase over 2005, but still a slower growth rate than was noted in prior years. While P2P user growth rates slowed, the average P2P user downloaded many more files in 2006 (5 billion files) than the previous year, which represents a 47% increase in P2P downloading compared to 2005 (3.4 billion files).
Among P2P file sharing sites, Limewire moved to a commanding 62% share of downloads. The average Limewire user downloaded 309 music files in 2006, an increase of 49% from the previous year. Torrent services, like BitTorrent, have also gained in popularity and reflect an increasing number of files downloaded per user, though some sites have recently begun offering material for sale, as well.
While in 2005 NPD noted a two to one difference between the P2P and pay-to-download populations, in 2006 there were nearly 13 million households using paid digital music download services - nearly three times more than NPD reported in 2004. Overall, the number of music files that were purchased
In 2006 exceeded 500 million, which is a 56% increase from the previous year.
Among PC users, iTunes maintains a 70% share of households using a legal service and the share of song tracks downloaded; however, the average number of files purchased by the average iTunes user fell 11% since 2005. Songs purchased per buyer from Napster and Wal-Mart also declined, while Yahoo's digital music download sales rates held steady.
