Report: Many File-Swappers Buying Legit Music

Nearly 31 million U.S. Internet users aged 18 and older have downloaded music in the past month -- but nearly three-quarters of those people also have purchased music either online or in music stores in the past three months, according to Nielsen//NetRatings.

That finding supports a long-held argument by supporters of file-swapping that even free music downloads lead to sales for the recording industry, which has been vigorously fighting file swapping in courtrooms and with new technological approaches.

Dueling Theories

The report also may undermine claims by the recording industry that music piracy caused a 10 percent drop in legitimate sales in 2001.

"Recording industry executives are devoted to findings a successful business model for selling music online," said Greg Bloom, senior Internet analyst at Nielsen//NetRatings, though he noted that "the de facto standard may be a few years away."

Online music sales got a huge boost recently when Apple Computer (Nasdaq: AAPL) launched its own service, known as the iTunes Music Store. Apple reportedly sold 1 million downloads during the first week on its pay-as-you-go plan, with many of the files sold containing complete albums rather than individual songs.

Searching for an Answer

The music industry has been searching for an answer to free file-swapping sites like the now-defunct Napster and its successors Kazaa and Morpheus for nearly three years, with little better than mixed results.

But 2003 has brought major changes so far. In addition to the successful Apple launch, a group of brick-and-mortar music stores joined forces in January to form an online consortium known as Echo, and subscription-based sites like PressPlay and Rhapsody remain active.

Yankee Group analyst Michael Goodman said one thing that has changed is the recording industry's willingness to embrace the online music world sooner rather than later, or at least to consider various options.

"The labels that wouldn't consider licensing music to online sites are more willing to think about going in that direction," Goodman told the E-Commerce Times. "But they're still going to want to make sure they don't hurt themselves in the long run."

Rap Sheet

Bloom noted that if the music industry wants to figure out the best way to approach online music sales, it needs to understand what consumers are seeking online. NetRatings found that rap music ranked as the most popular genre among users who download music. File-sharers were 111 percent more likely to buy rap than the average Web user. Dance and club music ranked second, followed by alternative rock, R&B and traditional rock.

"Understanding the genres of music that sell well online and offline will be crucial to generating revenue along the way," Bloom said.

Download USA

NetRatings also found that Web users in Los Angeles are most likely to download music, followed by New York, Dallas, Boston and Houston.

Those results are not surprising, Bloom said, because the same locales are often cited as "the most wired cities in the nation."