Monday January 9, 2006

LOS ANGELES (Billboard) - There was so much legitimate downloading in the final week of 2005 that it recalled the impossible tallies research firms used in the late 1990s to dazzle venture capitalists and scare the daylights out of major-label executives.

In the seven-day stretch between Christmas and the new year, millions of consumers armed with new MP3 players (primarily iPods) and stacks of gift cards gobbled up almost 20 million tracks from iTunes and other download retailers, Nielsen SoundScan reports.

In the process, consumers shattered the tracking firm's one-week record for download sales.

A look inside the numbers shows just how unprecedented a week it was for the download business:

- Before the week ending January 1, 2006, the record for the most downloads sold in seven days was 9.5 million tracks -- set just one week earlier.

- Sales of 20 million songs were almost three times the amount of digital tracks sold in the same seven-day span a year ago.

- Fifteen songs on the current Hot Digital Songs chart surpassed the one-week record for sales of a single track.

- Rap group D4L's "Laffy Taffy" took the top spot with 175,000 tracks sold, more than doubling the mark of 80,500 downloads Kanye West's "Gold Digger" set the week of September 17.

- Each of the top 11 titles on the Hot Digital Songs chart sold more than 100,000 downloads.

For the year, the digital track sales tally reached 352 million -- a 147% increase over 2004's total of 142.6 million.

In comparison to the volume of music that is downloaded through peer-to-peer networks, those numbers may not seem like much. P2P monitoring service Big Champagne estimates that at least 250 million tracks are downloaded worldwide each week from file-swapping services.

But a dramatic rise in the tide of authorized download sales in recent weeks suggests that changes may be afoot in the consumer's relationship to digital music.

The important question for the music business is whether 20 million downloads represents the new baseline for digital track sales. A year ago, a 33% pop in download sales in the week following Christmas permanently raised the bar on weekly download volume by 2 million tracks.

Technology and distribution executives at the major labels are not holding their breath that download sales will now run at a rate of almost triple the 7 million tracks that were being sold on average in December. They say big sales of gift cards are likely creating the current volume of such significant downloads.

Yet gift cards were available in 2004, too. If the market can retain volume gain as it did last year, the numbers are tantalizing. Last year, sales fell by about 20% in the weeks following New Year's; such a drop this year would yield a weekly volume baseline close to 16 million tracks. That would put the download market on pace for sales of 750 million to 1 billion tracks in 2006.

Likely to drive the download business is the fact that the number of iPods and other MP3 players in distribution have exploded in the last year. The Computer Electronics Assn. estimates that MP3 player revenue increased 200% to more than $3 billion in 2005.

Apple claims to have sold more than 30 million iPods to date, but will likely have shipped a total close to that number in 2005 alone.

Research firm NPD Group estimates MP3 player revenue at leading retailers topped $500 million on sales of more than 3.3 million units for the five weeks between Thanksgiving and Christmas--a 65% jump in dollar volume from the 2004 holidays. Sales of MP3 accessories were big too, topping $160 million during the five-week period.

NPD figures exclude direct sales of iPods through Apple Computer and online sales.

And for the first time, sales of MP3 players are surpassing sales of personal CD players and CD shelf systems, NPD reports.

"We have definitely moved," says Stephen Baker, VP of analyst services for NPD, "from MP3 players being a computer-oriented product to a consumer-directed product."

Reuters/Billboard