iTunes Grabs No. 2 Spot in Overall Music Sales

iTunes is now the second-largest overall music retailer — online or offline — in the United States, behind only Wal-Mart, according to research the NPD Group released yesterday.

After Wal-Mart and iTunes, the top music retailers in 2007 were Best Buy, Target and Amazon, in descending order.

As popular as iTunes has become, NPD reported that legal music downloads accounted for just 10 percent of all music acquired in 2007. In addition, 29 million consumers used legal pay-per-download sites last year, up from 24 million the previous year.

[cob:Related_Articles]In the fourth quarter of 2006, Wal-Mart held the top spot, followed by Best Buy, Target, iTunes and Amazon.

To regain some influence over the pricing and availability of digital music, the record labels have been handicapping the market, hoping to cast their lot in with a company that could become a legitimate competitor.

Each of the four major labels has licensed its catalogs to Amazon without digital rights management (DRM) restrictions; only EMI has struck a similar agreement with Apple.

Meanwhile, the big four have also reportedly been in talks with MySpace to develop some type of music venture, either an ad-supported streaming service or a paid download store such as Amazon MP3.

In addition, NPD found that the number of users sharing files over peer-to-peer networks leveled off at around 19 million, though the volume of songs downloaded over those networks has increased, particularly among teens.

Consumers ages 36 to 50 made up the fastest-growing segment of digital music consumers buying from legitimate sites, NPD found.

“The continued growth in legal download sites in encouraging, yet the industry struggles to improve the value of each digital customer,” NPD analyst Russ Crupnick said in a statement.

“With so many baby boomers and gen-Xers entering the market, there are certainly opportunities to sell more digital albums, promote older catalog titles or create bundles that will raise revenues,” he added. “In the near term, that’s going to be the best means available to narrow the gap on dwindling CD revenues.”

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