Number of Paying Downloaders Nearly Triples in 2003

New York, NY -- As the music industry continues efforts to integrate the growing popularity of digital music downloading with traditional retail distribution, 2003 witnessed a veritable explosion of fee-based digital music service introductions and a nearly three-fold increase in paid downloading due to experimentation among American downloaders, according to global market research organization Ipsos-Insight. New findings from TEMPO, Ipsos-Insight's quarterly tracker of American digital music behaviors, reveal that in December 2003 as many as 22% of American downloaders aged 12 and older had paid a fee to download digital music off of the Internet. This translates into an estimated 10 million experienced fee-based downloaders within the current U.S. population (according to 2000 U.S. Census figures).

Further, this number represents a nearly three-fold increase in fee-based digital music experimentation within the past year. In winter 2002, less than one out of 10 (8%) U.S. downloaders had paid a fee for digital music. U.S. Downloaders Experiment with Fee-based Digital Music in Growing Numbers

"In the past year, high-profile litigation by the RIAA towards high-volume individual file-sharers coupled with the launch of several new consumer-friendly fee-based online music services has prompted many downloaders to experiment with paid downloading for the first time," said Matt Kleinschmit, Director for Ipsos-Insight's Technology & Communications practice, and author of the Tempo tracking research study. "This is the clearest sign yet that American music enthusiasts are becoming increasingly dependent on digitally formatted and distributed music, and as a result, are sampling many of the recently launched fee-based online music services to find a legal means of online music acquisition. The next order of business for fee-based online music services is to both continue to lure new consumers to their respective services, as well as retain users who may be visiting for experimentation purposes only." A complementary in-depth examination of downloader behaviours revealed that these levels of online digital music experimentation are primarily fuelled by American downloaders aged 25 to 54 (25% among 25 to 34 year olds; 26% among 35 to 54 year olds). Further, despite a continuing gender gap in overall downloading behaviours, male and female American downloaders are roughly equally as likely to have paid to download digital music off of the Internet (21% and 18%, respectively).

Majority of Paid Downloaders are Burning Music to CD-Rs

The recent in-depth TEMPO research also found that more than three-fifths (62%) of American downloaders who have paid to download digital music are burning the files onto recordable compact discs. Further, these downloaders are burning an average of two separate copies of the digital music they have purchased online.

In addition, TEMPO research also revealed that more than half (56%) of Americans who have paid to download digital music added the files to a custom playlist, while one-quarter (26%) transferred the music to a portable MP3 player.

"These actual usage data underscore the consumer demand for at least moderate usage flexibility and portability in fee-based music downloads," said Kleinschmit. "However, while these downloaders do appear to require the ability to burn files and transfer music to portable devices at their leisure, it is interesting that few of these consumers are doing so in excess. Given the relatively adolescent stage of consumer experimentation with these services, it will be important to closely monitor fee-based digital music file usage activity in order to anticipate the impact of any modified usage limitations on user satisfaction and retention."

Methodology

Data on music downloading behaviors was gathered from TEMPO: Keeping Pace with Digital Music Behavior, a quarterly shared-cost research study by Ipsos-Insight examining the ongoing influence and effects of digital music around the world.

Data for this release were collected between December 12 and 15, 2003, via a nationally representative U.S. sample of 1,112 respondents aged 12 and over. With a total sample size of 1,112, one can say with 95% certainty that the results are accurate to within +/- 2.94% points. Data for the in-depth examination were collected between December 22, 2003 and January 7, 2004 via a representative U.S. sample of 700 downloaders aged 12 and over. With a total sample size of 700 downloaders, one can say with 95% certainty that the results are accurate to within +/- 3.70% points. To learn more about the methodology of TEMPO, please visit www.ipsos-insight.com/tempo.cfm

For more information, please contact: Matt Kleinschmit Director, Ipsos-Insight Technology & Communications 612.573.8500 www.ipsos-insight.com

Ipsos-Insight Ipsos-Insight, the flagship marketing research division of Ipsos in the U.S., specializes in research for companies in the following industries: agrifood; cable, media and entertainment; consumer packaged goods; energy and utilities; financial services; health; lottery and gaming; retail; and technology & communications. Ipsos-Insight provides custom and tracking research services to domestic clients, as well as U.S.-based multinationals. It offers concept and product testing, package testing, attitude and usage studies, omnibuses, tracking systems, brand equity, volume forecasting, marketing models, advanced analytics and global research. Ipsos-Insight is an Ipsos company, a leading global survey-based market research group. To learn more, please visit www.ipsos-insight.com.

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