Consumer Research Uncovers A Wealth Of Valuable Data
Online Population By Age Jupiter forecasts that 156.7 million individuals will be online in 2003, representing 55.7percent of the U.S. population. At the end of 1998, online penetration stood at 30.95 of U.S. individuals. In 1998, the largest online age category was adults (age 19-50), which at 45 million made up 54 percent of the 83.4 million Americans online. In 2003, adults will comprise approximately 47 percent of the online population with 73.9 million. Online Research Affects Offline Purchasing While young people might not actually be able to purchase music online, their online research is influencing offline purchases. Users who browse on the Internet were asked if online research affects their music purchases in the real world. More than 80 percent of teen respondents said yes, leading other age categories by a sizeable margin. Online retailers with a brick and mortar presence, as well as record labels, should recognize that online efforts to lure the younger buyer could have a substantial impact on offline sales. Willingness To Pay Online users who visit music sites were asked if they would pay for different services. Thirty-eight percent of users indicated they would be willing to pay to create a custom CD compilation, while using 23 percent would pay to download music to a hard drive or writable CD-ROM drive. Online Music Usage Goes Down With Income Online users in wealthier households are less likely to visit music sites. Only 36 percent of users with an annual household income above $125,000 visited music sites, compares with 47 percent of users with income of less than $35,000. Downloading Audience Still Testing Of those users downloading music today, the demographic skews toward younger consumers with free time and access to high bandwidth, such as T1 lines at universities. A recent Jupiter study found that nearly 33 percent of online consumers often listen to audio content on their PCs, and 29 percent would download music if they could play it on their stereos. Downloading a full-length CD, even in compressed form, will pose a formidable challenge for the average home user with a dial-up connection. Given that the main advantage offered by digital distribution is convenience and immediate fulfillment, lack of broadband access will significantly limit the attractiveness of digital distribution. Jupiter expects that broadband penetration of online households will reach only 18.7 percent in 2002. Online Sales And Downloading Projections Jupiter says by 2003, online sales of traditional recording media will account for 14 percent of the total U.S. retail music market. It is expected that sales of digitally distributed music will remain small in the near term ñ only $147 million in 2003. Jupiter feels these figures belie the record labelsí efforts in developing digital distribution initiatives. Experiments with free digital distribution will allow labels to test download technology, gather registration data from users, and promote new artists without major risk to traditional sales channels. Within the next five year, Jupiter expects music labels to offer music libraries ñ catalog and new releases ñ for downloading. Consumers To Adopt Playback Devices Jupiter estimates that less than 25 percent of U.S. online users regularly listen to music through the Internet, either via downloaded or streaming audio files. Online music listeners represent the key target market for playback devices. Playback device penetration will be hampered by the lack of online music listeners in the near term, but this population will grow substantially. Overuse Of Promotions Conditions Consumers To Wait For Deals Now that a high percentage of online shoppers are online buyers, promotions are reaching greater numbers of already-acquired customers. Promotions are so common that consumers have become conditioned to expect them: 73 percent who purchase online have waited for a promotion before making a repeat purchase at a site. Because consumers wait for promotions, e-commerce players should run promotions that are profitable from the outset, rather than using them as loss leaders. Impossible discounts available on a regular basis create consumers who are loyal to the promotion and not the brand. College Graduates Not As Eager To Download As Teens As the market for music on the Internet continues to grow, a slew of new market research is beginning to furnish details of the youth market. And while college students are graduating with jobs and higher salaries than expected, they may not be as eager to buy as their teen siblings. A WebNoize Inside survey found that in December 1998. Only 1.7 percent of college students reported downloading legal, commercial music from popular sites such as MP3.com and GoodNoise; by April that number had increased to 13.4 percent - a jump of nearly 800 percent. College seniors about to join the workforce are bound to be financially prepared to enter the world. A Campus Concepts study of graduating college seniors who have accepted jobs will earn more than $30,000, 24 percent will earn $25,00 to $30,000 and just 8 percent will make $25,000 or less. These salaries are higher than what the graduates guessed they would make after college. Campus Concepts is a marketing company that specializes in targeting the 18- to 24- year old college market. So while disposable income among typically loyal music consumers is bound to exist, for the music business, competition for those dollars could prove intense. The Campus Concepts study found that after living expenses, graduation seniors plan to spend more on household items than on personal care, music and concerts, sports, movies and clothing. The teen market could ultimately prove more lucrative than older consumers with more money. Teenagers represented a considerable portion of Mayís online shoppers, according to a recent survey by PC Data Online. According to the study, individuals aged 13 to 19 account for 17.4 percent of home-based AOL users, and accounted for 16.4 percent of online shopping traffic during the month of May. The online world, however, has at least as many window shoppers as the real world, evidence that ""shopping"" does not necessarily mean ""buying."" PC Data considers shopping traffic the total number of unique users going to one of 200 Internet shopping sites. During May, approximately 5 million teens went to at least one of the 200 shopping sites, from a total of 30.7 million shoppers. Sites highly dependent on teens include music portal Ultimate Band List and BMG.com. Nearly a third of traffic to each site is teenagers. Both Cdnow and Ticketmaster.com are visited by a high concentration of teens as well, 28 percent and 25.6 percent respectively. DVD Reports Explosive Growth More than 1.1 million DVD Video players were shipped through the first half of the year, according to figures compiled by the Consumer Electronics Manufacturers Association (CEMA). DVD video experienced 300 percent growth in second quarter of 1999, shipping more than 730,000 hardware units, compared to 170,000 in the second quarter 1998. Further, the shipments for the first six months of 1999 are an increase of 881,000 units over the same period in 1998, representing more than 300 percent growth. In the first half of 1999, 1.1 million units shipped, compared to the first six months of 1998, when slightly more than 260,000 units shipped. There are now more than 2 million players installed in homes, whereas in mid-year 1998, there were fewer than 500,000 units in homes. CEMA estimates that total shipments for 1999 will exceed 3 million hardware units, with installations numbering 3.5 to 4 million by year-end. Source: NARM