Apple Accounts for 25% of All Music Sales

When Apple’s iTunes overtook Walmart to become the largest music retailer in the country — online or off — it was big news.

Few if any observers would have expected to see that changing of the guard undone, but the latest sales figures highlight just how dominant Apple (NASDAQ: AAPL) has become.

Apple now accounts for 25 percent of all music sales in the United States, according to a market snapshot of the first half of 2009 released today by NPD Group.

Walmart (NYSE: WMT) is still No. 2 in total music sales, with 14 percent of the market. That figure includes both CDs sold in its stores and Web site, as well as digital downloads.

Looking only at digital downloads, Apple’s hegemony comes into sharper relief. The Cupertino, Calif.-based firm accounted for 69 percent of all digital sales in the first half of the year.

Amazon MP3 checked in at a distant second place with 8 percent of the market.

“The growth of legal digital music downloads, and Apple’s success in holding that market, has increased iTunes’s overall strength in the retail music category,” NPD analyst Russ Crupnick said in a statement.

However, Crupnick added that large retailers such as Walmart and Best Buy will continue to be major players in the music market, noting that CDs remain the preferred format for U.S. consumers purchasing music.

In the first half of the year, CDs accounted for 65 percent of legal music purchases, still well ahead of downloads, which comprised the remaining 35 percent of sales, according to NPD.

At the same time, the industry is experiencing a secular shift that has witnessed the physical product steadily cede market share to its digital counterpart.

“Many people are surprised that the CD is still the dominant music delivery format, given the attention to digital music and the shrinking retail footprint for physical products,” Crupnick said. “But with digital music sales growing at 15 to 20 percent, and CDs falling by an equal proportion, digital music sales will nearly equal CD sales by the end of 2010.”

In 2007, digital downloads accounted for just 20 percent of all music sales. By the next year, their share had grown to 30 percent.

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