Overall consumer music acquisition increased by 6 percent in 2007, but average annual per-capita music spending fell by 10 percent, the NPD Group says.

A sharp increase in legal digital download revenues could not offset declines in CD sales, which resulted in a net 10 percent decline in music spending (from $44 to $40 per capita among Internet users). As a result the overall portion of music acquisition that consumers actually paid for fell to 42 percent in 2007 from 48 percent in 2006

NPD estimates that one million consumers dropped out of the CD buyer market in 2007, a flight led by younger consumers. In fact, 48 percent of U.S. teens did not purchase a single CD in 2007, compared to 38 percent in 2006.

The percent of the Internet population in the U.S. who engaged in peer-to-peer (P2P) file sharing reached a plateau of 19 percent last year; however the number of files each user downloaded increased, and P2P music sharing continued to grow aggressively among teens.

Legal music downloads now account for 10 percent of the music acquired in the US. Reflecting the growth in that sector of the market, Apple?s iTunes Music Store became the second-largest music retailer in the U.S. after Wal-Mart, based on the amount of music sold during 2007 (based on a 12-track CD equivalency for music track downloads).

Twenty-nine million consumers acquired digital music legally, via pay-to-download sites last year, which is an increase of 5 million over the previous year. Sales growth was largely driven by consumers age 36 to 50 ? a segment that was aggressively acquiring digital music-players in 2007.

"The continued growth in legal download sites is encouraging, yet the industry struggles to improve the value of each digital customer," said Russ Crupnick, entertainment industry analyst for The NPD Group. "With so many baby boomers and gen-Xers entering the market, there are certainly opportunities to sell more digital albums, promote older catalog titles, or create bundles that will raise revenues. In the near term that?s going to be the best means available to narrow the gap on dwindling CD revenues."

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