Today’s Youth Will Be Instrumental in Generating Revenues from Music Downloads, IDC Says

FRAMINGHAM, MA – May 30, 2000 – Merchants selling music downloads still need to work out a few verses before they can sing about huge profits. Nevertheless, according to a recent IDC report, it's just a matter of time before music downloads become a multibillion-dollar business. It seems this concept is striking the right chord with today's generation under 20.

In a recent survey, IDC found use of music downloads is by far the heaviest among individuals under 20 years old: More than 77% of respondents under 20 said someone in their household has downloaded songs off the Internet. No other age group exceeded 52% use of downloads. Additionally, among consumers who have downloaded songs, more than 47% of those under 20 said they or someone in their house owns a portable digital music player. This is nearly three times the use of the next highest group and indicates approximately one-third of Internet users under 20 own these music devices or live with someone who does.

"Online music is very much a youth phenomenon, which will increase in importance over time," said Malcom Maclachlan, senior analyst with IDC's Consumer eCommerce: Media research program. "Not only are young people the backbone of music sales, they also have several other upsides: They are heavy users and early adopters of technology, they influence the behavior of those slightly younger than they are, and as a group, they keep making more money as they grow older. The habits they form now will have a huge effect on sales of music and other entertainment 5 to 10 years from now."

Reasons cited for downloading music are convenience, availability of hard-to-find works, and free music. Among those who don't download music, lack of portability, distrust of the download process, slow connections, and format uncertainty were the key reasons.

"The interest in downloading music is definitely mixed. There is a certain amount of skepticism as well as a reluctance among users to pay for music downloads," Maclachlan said. "The spread of free downloads is preparing consumers for a paid market. Once consumers know music downloads work, they will be more likely to spend money on the music they otherwise might buy in CD format."

Currently, the biggest uncertainty in downloading music is format. Competitors include MP3, Microsoft's Windows Media Audio, Advanced Audio Codec, and Lucent's ePAC. "The mere existence of such a dizzying array is enough to warn off many consumers, who don't want to be put in the same position as Betamax buyers in the early 1980s," Maclachlan said. MP3 is currently the most popular format, but it offers limited protection against piracy, and Microsoft's Windows Media Audio could give it a good run for its money.

IDC recommends companies trying to sell music downloads be flexible and offer choices. "They should sell both CDs and downloads, and they should sell their downloads in a wide range of formats," Maclachlan said. "Choice is good, as long as it doesn't overwhelm the customer."

Music Downloads and Consumer Perception: Hype, Skepticism, and the Generation Gap (IDC #B22217) analyzes the market for downloading music from the Internet. The report examines how many consumers are downloading music, whether they are paying for it or would be willing to pay for it, the types of software formats and players they are using, and their interest in owning portable digital music devices. The report also looks at what users like and dislike about music downloads and the role age plays in downloading music. The report is based on a survey of almost 3,000 U.S. Web users. To order the report, contact Demetra Georgakopoulos at 1-800-343-4952 extension 4496 or at dgeorgakopolous@idc.com.

About IDC

IDC delivers dependable, high-impact insights and advice on the future of ebusiness, the Internet, and technology to help organizations make sound business decisions. IDC forecasts worldwide markets and trends and analyzes business strategies, technologies, and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC provides global research with local content through more than 500 analysts in 43 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at http://www.idc.com.

IDC is a division of IDG, the world's leading IT media, research and exposition company.

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