The NPD Group: Amazon Ties Walmart as Second-Ranked U.S. Music Retailer, Behind Industry-Leader iTunes

Digital music continued to gain on CDs in the first quarter, as iTunes increased its lead in overall U.S. music sales.

PORT WASHINGTON, NEW YORK - According to The NPD Group, a leading market research company, Apple’s iTunes store continued to lead all music retailers, with 28 percent of all music purchased by U.S. consumers — gain of 4 percentage points since Q1 2009. Amazon gained three percentage points to tie Walmart for second position at 12 percent. Based on NPD’s latest music industry research, sales of digital tracks and albums accounted for 40 percent of overall music market share in the first quarter (Q1) of 2010, which is a 5 percentage point gain since Q1 2009. NPD’s data is based on a combined music-retailer ranking that reflects the combined sales of CDs and digital music downloads (i.e., 12 digital music track downloads are equivalent to one CD).

“Amazon’s growth reflects a stronger position in both the CD and digital formats,” said Russ Crupnick, vice president of industry analysis for the NPD group. “This dual-pronged approach of selling both digital music and CDs helps attract the most valuable and committed music buyer who prefers access to both formats.”

When reviewing sales of digital music separately from CDs, NPD’s MusicWatch data revealed that iTunes’s share of the digital-music download retail market has remained essentially flat since Q1 2009 -- growing just one percentage point to reach 70 percent of the digital music market last quarter. At the same time, AmazonMP3 grew by 4 percentage-points to reach 12 percent, while Amazon’s share of the CD market grew by 2 percentage points to reach 11 percent.

In NPD’s review of CD retailers, Walmart led U.S. CD purchases in Q1 2010 with 17 percent share of retail market. Best Buy followed Walmart with 14 percent, Amazon’s 11 percent share positioned them in third place.

“Unfortunately the decline in U.S. CD sales means that selection and merchandising of the physical CDs is suffering, which is one of the primary reasons consumers say they purchased CDs less frequently,” said Crupnick. “Online shopping offers consumers who still want CDs more variety than they would get in a brick-and-mortar store; plus, recommendations, and other interactive features that raise the overall value proposition for music buyers. ”

Data note: The information in this press release is from NPD’s consumer tracking of U.S. consumers, age 13 and older, who reported their purchases of physical product (CDs), digital music, and wireless over-the-air (OTA) transactions -- excluding ringtones. NPD’s combined music retailer ranking reflects combined sales of CDs and digital music downloads, where 12 digital music tracks are equivalent to one CD.