The recording industry may never get the free file-sharing genie back in the bottle for good, but new data shows legal downloading services may finally be gaining ground on such rogue peer-to-peer competitors as LimeWire and Kazaa.
New numbers from market-research firm NPD Group Inc. have Apple's iTunes leaping into a tie for second on the list of most popular music-downloading sources, thanks to more than 1.7 million U.S. households using it to download at least one track in March. The upsurge tied iTunes with P2P service LimeWire, with both trailing the most popular service, WinMX, which was used by more than 2.1 million to download at least one tune.
The next three slots were filled by P2Ps Kazaa, BearShare and Ares Galaxy, with Napster coming in at #7 and Real Player's Rhapsody store filling the #9 slot. The rankings did not include numbers from Napster and Rhapsody's "all you can eat" subscriptions, for which users pay a flat monthly fee to download unlimited songs.
NPD gathered the numbers by monitoring 10,000 users, according to spokesperson Isaac Josephson.
While it's hard to say if the uptick is a result of aggressive promotion or the Recording Industry Association of America's thousands of lawsuits, Josephson said it's good news for the industry.
"Once the legal services started to take a foothold over the last year, the numbers have spiked partially due to promotion and effective marketing," Josephson said. "Regardless of convenience, with these services, you know what you're going to get and how long it will take."
NPD's survey numbers only measured music-related P2P usage, not taking into account the downloading of software, movies or TV shows.
The study found that teens continue to use peer-to-peer services the most, while older users have taken to legal download sites. The average age for someone buying music online was 33 years old, with 4 percent of Internet-wired homes using legal online music stores.
"The NPD study shows that the legitimate music services are gaining more traction each month," RIAA CEO Mitch Bainwol said. "A vibrant, competitive marketplace for digital music is a good thing for both fans and investment in new art."
Record labels shouldn't bust out the champagne just yet, though. Josephson also said the study doesn't suggest that legal à la carte downloading services are anywhere near as popular as P2P services, just that a few individual legal services are finally ranking high.
In fact, a June 1 article on Forbes.com cited NPD figures showing that, while U.S. consumers purchased 25.9 million songs in March — a 52 percent increase over the same period last year — they also illegally downloaded 242 million songs, which is 25 percent more than they did during the same period a year before.
Eric Garland, CEO of online market research at media-measurement firm BigChampagne, said while pay services are growing exponentially by nature of their newness, they still have a long way to go.
"Of course the paid services are gaining ground, because 18 months ago they started from nothing," Garland said. "But you're talking about the difference between application-based things like iTunes and network-based phenomena like eDonkey. We've found that those communities, in aggregate, dwarf all à la carte download services, individually or collectively."
Garland said paid music services still represent a relatively small percentage compared to free downloading, and probably will for quite awhile.
"Most people, if they're buying music, are still buying CDs, with legal online downloads representing only 3 to 4 percent of sales," he said. "Most people are not getting their music from iTunes, but it's early yet. This is still the minor leagues."
For complete digital music coverage, check out the Digital Music Reports.