Online Music Sales Dive From 2001

Online sales of recorded music have plummeted 25% through the third quarter compared with the same period last year, dropping even faster than the overall U.S. music market, according to a survey to be released today.

The survey appears to support the contention by record labels that free, online music-swapping networks such as Kazaa and Morpheus are undercutting music sales.

In the first half of the year, online sales of music fell to $424 million, a drop of 20% from the same period last year, according to data collected by ComScore Networks, which electronically monitors consumer habits.

Total U.S. shipments of music dropped 7%, to $5.53 billion, during the first half of the year, according to the Recording Industry Assn. of America.

The decline of music sales online, however, has accelerated all year.

“While a host of factors inevitably impact any consumer behavior, it is likely that file sharing and CD burning are having a more noticeable impact on online sales,” ComScore said in its report.

The survey, which ComScore said is based on its monitoring of 1.5 million Internet users, does not include purchases of some streaming online music or sales from auction Web sites.

But analysts say the sharp sales decline – coupled with a steady rise in users of Kazaa and similar networks – also clouds the prospects for the major record labels to launch their own fee-based online music services.

And the survey appears to support the position of the RIAA, which is engaged in an elaborate campaign to dismantle free file-swapping services and frustrate music pirates.

“All legitimate businesses online have an incentive to fight piracy,” said RIAA spokesman Jonathan Lamy. “Obviously, as this study shows, it affects everyone.”