Party is over for US music downloads

By Tim Bradshaw 9/26/10  FinancialTimes

Rapid growth in digital music downloads has ground to a halt in the US, suggesting the MP3 market is reaching saturation point.

According to figures from Nielsen, the research group, 630m tracks were downloaded in the first half of 2010 in the US, flat on the same period last year.

Downloads were increasing at 13 per cent a year in 2009 and 28 per cent in 2008.

Record labels had been banking on revenue growth from digital platforms to counterbalance falling CD sales. But even as downloads plateau, other forms of digital distribution, such as streaming, are failing to gain mass appeal while unlawful filesharing is largely undiminished.

Jean Littolff, managing director of Nielsen Music, said many consumers had restocked their music collection after moving from CDs to MP3 players, leaving little extra impetus to music sales other than the latest releases.

“It’s been quite sudden. It’s certainly not the fact that we have lost digital stores or that consumers have fewer places to buy music,” he said.

“It’s more that we’ve reached saturation point.”

Continuing pressure on consumer spending might also have played a role, he said.

“Music is a nice-to-have rather than a necessity,” Mr Littolff said.

“Once people have their iPod filled up with songs, they’re not going to start buying lots and lots more.”

Labels have been allowed to increase prices on Apple’s iTunes store, which leads the US market in digital downloads.

This could mean they have been able to increase revenues even though the number of downloads was flat.

But music groups are increasingly having to look to concerts, licensing and merchandise for a greater proportion of revenues.

In Europe, downloads rose 7 per cent in the UK, 13 per cent in France and 19 per cent in Germany in the first half of the year.

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