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iTunes Dominates Music Sales, While Pandora's Footprint Soars [STUDY]

ITunes_682_701218aMarket research company The NPD Group has released findings indicating that iTunes continues to dominate the digital music market, as well as all music purchases in the United States. In the second quarter of 2012, iTunes claimed 64% of the entire digital music market and 29% of all music sold at retail (including both digital and physical formats). NPD also reports that the market for digital ownership of music continues to grow despite increased user adoption of streaming and on-demand music services.

Coming in at a distant second to iTunes was Amazon MP3, which saw a 16% share of the digital market. Other contenders like Google Play, eMusic, and Zune Music Pass each only had a 5% share or lower. Consumer awareness for Google Play is beginning to grow, but fails to compare to that of Amazon and iTunes. One out of five Internet users was aware of Google’s music service in quarter two of 2012, which is said to be an improvement aided by integrations within the Android Market and Google’s e-bookstore.

"[As] the market evolves from the desktop to the pocket, Apple remains well positioned as the market leader," said Russ Crupnick, senior VP of industry analysis for The NPD Group. "Growing consumer awareness of Google Play was aided by the expanding footprint of the Android mobile platform and represents the first step toward customer adoption. With continued Apple strength and strong entries by other emerging players, Zune Music Pass, Rhapsody, and other legacy services have seen awareness fall."

The NPD Group expects the digital music market to grow by 10% (on a unit basis) in 2012.

When it comes to overall music retail (including both physical and digital), Apple led all music retailers in the second quarter of 2012 with a 29% market share.* It is here, however, where Amazon closes the gap on Apple – coming in second place with a 19% share of the overall music retail market. Walmart came in third with an 11% market share.

*When comparing digital downloads to CD albums, NPD relies on ‘equivalency’, in which single albums are equivalent to 10 digital-music tracks.

According to NPD, online radio and on-demand music services continue to be the fastest growing music consumption methods in the United States. Nearly 50% of all Internet users were aware of Pandora’s free radio service in the second quarter to 2012, while one third were aware of Pandora One (the company’s paid subscription service). Of these respondents, half actually used the service during second quarter.

Clear Channel owned iHeartRadio followed behind Pandora with 25% awareness, while Spotify’s consumer awareness reached a new high of 19% – a number that has doubled since the company’s U.S. launch in 2011. In contrast to Pandora, only a quarter of respondents who were aware of iHeartRadio or Spotify actually used these services during the second quarter.

NPD also found that 64% of people who made purchases with iTunes are online radio listeners, which would help explain Apple’s rumored interest in a steaming radio service. After all, consumers are beginning to experience higher adoption levels when it comes to streaming from their mobile devices compared to downloading to their laptops and desktops. It would only behoove Apple as a company to provide their customers with an integrated experience by adding streaming capability.

The information from NPD’s research is based on surveys of NPD’s proprietary online consumer panel. Digital music numbers reflect paid, permanent digital downloads only, and survey data was weighted to represent U.S. population of Internet users (age 13 and older) and tested for statistical significance at 95 percent confidence level.

Hisham Dahud is a Senior Analyst for Additionally, he is the head of Business Development for Fame House and an independent musician. Follow him on Twitter: @HishamDahud