June 30, 2006 8:40 AM PDT

What's on your iPod?

We are buying the gadgets, but not the music.

While interest in MP3 players and multimedia downloads is rising, more music is being ripped from CDs than downloaded, according to a study released Thursday by Ipsos Insight.

MP3 player makeup

Twenty percent of Americans over the age of 12 own at least one portable MP3 player. Among teens exclusively, ownership reaches 54 percent, according to the study.

That last figure is something the online media industry should be quite pleased to hear, according to Ipsos analyst Matt Kleinschmit. Multimedia downloads such as TV shows, music videos and movies are most popular among the under-25 crowd, he said.

But about 44 percent of all music downloaders use their existing CD collections as their primary source of MP3 player content, and 6 percent rip from the collections of others. Only 25 percent use fee-based music downloads, and even fewer use subscription services, the study reported.

"As the music industry starts to look at this, they are realizing that the idea of the CD as the only product is an antiquated one," Kleinschmit said. "A product could be a ring tone, bundled with a song, bundled with a music video--taking a step outside of the CD, and moving into an era where people who are younger have a completely different mind-set."

Many predicted that when fee-based downloads took off, they would be driven by young people. That was not the case; consumers under 25 continued using free file-sharing networks for music downloads, Kleinschmit explained.

Much to the record labels' surprise, the 25-to-34 and 35-to-54 age groups were the initial drivers of music download services, he said. Apple Computer's iTunes store, which sells individual songs as well as full albums, last year outsold retail stores Tower Records and Borders Music.

While people are becoming more used to the idea of not owning a label-produced CD, Kleinschmit explained, they are still tied to the idea of owning their music. Among those who have paid for online music, 67 percent used a download-to-own site. "Only 17 percent of music downloaders have at one point used subscription-based download sites," Kleinschmit said.

The report also found that 6 percent of Americans own more than one MP3 player. Kleinschmit believes that shift signals a change in user understanding and the specific application of MP3 devices in general.

This year's data, which was collected between Jan. 13 and May 2, marks a significant increase in ownership of iPod-like devices. Ipsos' 2005 report showed that 15 percent of Americans owned MP3 players; only 8 percent had one in 2002. A 2005 Pew study placed American MP3 ownership among adults at 11 percent.

Despite a recent slip in the market, most recently from analyst-predicted iPod delays, Apple remains the market dominator when it comes to MP3 players. From January through April, Apple held a 77.2 percent share of the MP3 player market, according to U.S. unit sales data from market research firm The NPD Group.

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CDs are the best source...
Non-copy-protected music CDs offer the best audio quality, and they aren't locked into a proprietary-DRM scheme.
Posted by john55440 (1020 comments )
Reply Link Flag
...and they aren't tied to a specific player.
That's my favourite part of the equation aside from the superior quality.
Posted by herkamur (115 comments )
Link Flag
The music industry is creating more & more CD's with some sort of copy protection software encoding & this is not going to go away anytime soon.

DRMs are just another extension of the CD Copy Protection Encoding.

The days of buying a CD & taping or burning dupes for all your friends are quickly vanishing & nothing is going to stop that from happening legally.

This is NOT an iPod/iTunes/ITMS issue, it is a music industry issue for all MP3 devices & CD players...
Posted by Llib Setag (951 comments )
Link Flag
Nice Typos.
Its great to see CNET really trying to take the effort of clearing
typos from their articles.

I guess this was just written five minutes ago...lol
Posted by ServedUp (413 comments )
Reply Link Flag
the industry is clueless
Paid digital downloads offers the labels the chance to make some money off those thousands of albums that either haven't sold well, are out of print, or perhaps never even made it to a CD release. They could release that huge back catalog of recordings and ONLY offer them online and make more money off of them than they ever made from the initial release. But they better hurry before their potential customers just do it themselves for free.
Posted by DaClyde (96 comments )
Reply Link Flag
Consider the consumer and quality
I started out filling my iPod with my 300+ CDs. Then I started buying music through iTunes. After a while I started buying CDs again and importing them myself. Why?

a) the quality issue. AAC is good but CDs are still better and they're not even state of the art anymore. I can re-rip when better devices and higher storage capacity come to market. There is no way to take an MP3 or AAC and add quality back in.

b) permanence. Though CDs can certainly be ruined and will likely suffer with age. Those that are unplayed once imported will live a long time. That iTunes doesn't make it possible to re-download what you've previously purchased makes it incomplete as a way to purchase music.

Slightly off-topic rant on DRM and anti-piracy that is incompatible with the real customer's needs:

Related to this last point, some of the ideas the industry has around DRM and play only on the device you payed to play on could cause me to stop buying content altogether. Prices are already higher than they should be and a good portion of the value of buying a CD (or DVD, etc.) is the freedom I have to use it where I want to, on the device I want to at the moment and to freely back it up in case something happens. Yes, that allows piracy. That is unfortunate. If the anti-piracy efforts are incompatible with the things I value about the medium I'm buying on, then I will contribute zero revenue to the industry.

Hint to industry: put the legitimate customer first and build your anti-piracy around their needs or risk becoming irrelevant and being replaced by alternative choices in the market.

Anecdote: Sony has fantastic large screen TVs. Their rootkit debacle recently resulted in my new 56" TV purchase going to Samsung. The new TV cost more than 50% of what I've spent on records, tapes, CDs and DVDs in my entire 43 years on the planet.
Posted by slewisma (11 comments )
Reply Link Flag
Different strokes for different folks....
for a great fraction of the people in typical listening
environments on typical equipment, MP3 is more than adequate
quality. CD's will probably last much longer than any MP3 player.
DRM is mostly just a mechanism to get studios to release music
- no real protection of the music files is achieved. Most music I
want is not available on CD or in iTunes - Limewire is the key
alternative. Piracy? Not when no other source exists. My 61"
Samsung cost only a small fraction of what my 540 DVD's, 510
Laser Disks, 250 VHS tapes, 200 CD's, and perhaps over 1500
vinyl disks (most now at GoodWill). Add in the numerous audio
and video (mono, stereo, and real & synthetic quad) system
components, plus DirecTV for five receivers (3 HD capable) and
two DVR's, and the Samsung is a very small fraction of the cost.
But then, I've been around for 72 years.
Posted by Earl Benser (4310 comments )
Link Flag
The reason buyers skew old...
Is because they have the credit cards to buy online. Why is the fact that 25+ has embraced pay-for downloads will teens and tweens use free download sites a surprise?

Sometimes I'm baffled by how much money the music industry actually does make, given how generally dense they are.
Posted by poploser (2 comments )
Reply Link Flag
Sort of...
Well, you can buy cards from Target and everywhere else for use with iTunes. I used a credit card once to buy an episode of The Office just to try out the iPod when I first got it, but ever since then I just buy the prepaid cards and use them to buy music so that I don't have to have any more of my credit card data floating around.

Of course, I'm betting that MP3 players in the hands of the younger set are going to trend towards the less expensive ones. While lots of kids do get iPods, I bet lots of kids have other brands as well. And if there's no good and easy music solution for them that allows them to buy music without a lot of effort or mom and dad's credit card, then yeah, that's going to hurt their chances to sell to the younger crowd as well.
Posted by TV James (680 comments )
Link Flag
DRM is the main reason why CD's still popular
DRM is the culprit. It's an evil thing that infests into music files and purposely engages limits to the users.

Ripping CD's you receive none of the evil DRM features. You are free to rip and use different players. You can listen to it in the car, on your mp3 player while you're jogging or on your home stereo system.

DRM = evil = the recording industry
Posted by bobby_brady (765 comments )
Reply Link Flag
I actually don't believe that's true.
While I agree that DRM is evil, if I were to ask people like my wife or brother or parents why they still preferred CDs, I bet none of them are going to mention DRM because they're not as close to technology as you or I.

They are going to mention the things you did, like the ability to listen to in the car. But not with DRM in mind, just simplicity. The car and the house already has a plethorea of CD/DVD players while MP3 players are still not a "must have" yet. I only have one because it was a gift from my former employer. Otherwise, I wouldn't have been able to afford the only MP3 player I would have considered purchasing - a video ipod. Not bragging , just saying that ones worth purchasing are still cost prohibitive.
Posted by TV James (680 comments )
Link Flag
Own Multiple MP3 Players ??
Why is having multiple MP3 players even worthy of comment.

Many people bought a 128KB to 512KB player and now they've upgraded. Some didn't give them away (or sell them on eBay). Hence 6%.
Posted by regulator1956 (577 comments )
Reply Link Flag
What are you talking about?
Also since when have you been able to buy a 128 or 512KB MP3 player. You couldn't fit half a song on to such a device.
Posted by Lex Man (33 comments )
Link Flag

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