U.S. Music Downloaders Prefer A Pay-Per-Download Transaction Over Current Subscription-Based Offerings

Minneapolis, MN-- While the music industry deals with further declines in global sales, and as it works on making paid-for online music appealing to downloaders accustomed to getting it for free, new findings from international research firm Ipsos-Reid suggest that a "pay-per-download" model is more appealing to downloaders than are current subscription-based offerings.

One-Quarter of U.S. Downloaders Would Pay for Fee-Based Online Music

Ipsos-Reid's TEMPO research presented a representative sample of U.S. music downloaders with a simulated music market environment consisting of various options for obtaining music. These options included a traditional retail channel, an online peer-to-peer (P2P) file-sharing network, recently launched online subscription-based services, and a hypothetical pay-per-download service.

In this market scenario, over one-quarter (27%) of current downloaders indicated a preference for obtaining music through a fee-based online offering (19% preferring pay-per-download; 8% preferring a subscription service).

Interestingly, when no pay-per-download acquisition option was offered in the market scenario, the proportion of downloaders who would pay for online music dropped to 12%. This demonstrates the appeal of a pay-per-download option among those most accustomed to online music distribution, the study suggested. "With all of the recent media attention surrounding the market viability of recently launched fee-based online music services, these findings indicate that many downloaders will indeed pay for online music, but prefer a transactional payment structure over one that is subscription-based," said Matt Kleinschmit, senior research manager for Ipsos-Reid and the TEMPO research program. "Perhaps a pay-per-download service best represents the ownership and portability they are accustomed to in current peer-to-peer offerings, and a subscription-based service is too radical of a paradigm shift in the way these individuals think about acquiring music."

Switch the Market Environment: What If Peer-to-Peer Weren't Available?

With peer-to-peer options removed from the simulated market environment, findings suggest that Downloaders would shift their music acquisition behaviors back not only to traditional retail channels, but also to online fee-based services, especially if a pay-per-download option were available. In fact, 38% of current Downloaders would choose to obtain music through a pay-per-download service in such a market scenario, compared to only 14% through subscription-based online offerings such as the services currently available.

"This clearly demonstrates that while fee-based online music services (and pay-per-download models in particular) can certainly lure some downloaders into paying in the current market context, these services could truly flourish if the presence of peer-to-peer websites were eliminated or greatly diminished in the market," continued Kleinschmit. "And a low-cost pay-per-download service that offers a robust music catalog and file ownership will be well positioned for this market scenario."

Ipsos-Reid's Polls Find File-Sharing Is Widespread

Research published earlier this year by Ipsos-Reid showed that an estimated one-fifth (19%) of the American population aged 12 and over have downloaded music or MP3 files from an online file-sharing service (such as Morpheus, Napster, or Audio Galaxy). This translates to over 40 million file-sharers within the current U.S. population (according to 2000 U.S. Census figures).

This number is nearly equal to the proportion of Americans who indicated they had downloaded a music or MP3 file from any website in December of 2001 (23% of Americans aged 12 and over), according to new data from the company's quarterly study, TEMPO: Keeping Pace with Online Music Distribution.

Not surprisingly, young Americans are leading the file-sharing phenomenon, as approximately two-fifths of 12-24-year-olds have downloaded music or MP3 files from an online file-sharing service (41% of 12-17 year-olds, and 45% in the 18-24 age group). And contrary to the widely held belief that file-sharing is an activity primarily undertaken by cash-strapped high-school and college students, post-collegiate adults also report sampling this often technologically cumbersome activity. Twenty-six percent of those between the ages of 25-34 and 14% of those aged 35-to-54 reported having downloaded music or MP3 files from an online file-sharing service.

In addition, American males are significantly more likely than their female counterparts to have engaged in online file-sharing nationwide, as one-quarter (25%) of U.S. men over the age of 12 reported having engaged in this activity, compared to only 14% of American women.

Related data can be found at Ipsos-Reid's Digital Music page.

Methodology

Data on music downloading behaviors was gathered from TEMPO 2002: Keeping Pace with Online Music Distribution, a quarterly Ipsos-Reid shared-cost research study examining the ongoing influence and effects of digital music around the world.

Data for this release was collected between July 19 and August 2, 2002, via a representative U.S. sample of 690 downloaders aged 12 and over. With a total sample size of 690 one can say with 95% certainty that the results are accurate to within +/- 3.73. Visit our website to learn more about the methodology of TEMPO 2002.

In addition, past contextual data was pulled from TEMPO data collected between April 25 and May 1, 2002, via a nationally representative U.S. sample of 1,113 respondents aged 12 and over. With a total sample size of 1,113, one can say with 95% certainty that the results are accurate to within +/- 2.94.

For more information, please contact: Matt Kleinschmit Senior Research Manager 612.573.8500