NPD Music

1
NPD Music MoviesConsumer Insightsfrom home
front to store front
2
From home front to store front

• Aging of music, and Generation i (Pod)
• Flock to big box
• Evolving entertainment consumer

3
Boomers Rule
of US pop. By RIAA Age Segment
Mean age excluding 12 under 41 yrs.
4
And most music is bought by people like
5
1984 John Ritter is between families, and the
average physical music buyer is...
29
6
1994 Ellen isnt a franchise, and the average
physical music buyer is...
31
7
2004 Friends no more,and the average physical
music buyer is...
35
8
Trends to watch

• Women in the majority physical buyers and
  listeners
• Teens and boomers
• Growing importance of African-Americans
• Nearly 20 of physical buyers

9
Distinct Music Buyer Profiles
Source NPD MusicLab March 04
10
Digital Divide
35
Mean age excluding 12 and under
11
Distinct Music Buyer Profiles
Source NPD MusicLab March 04
12
More Statistics

• 8 out of 10 digital music consumers report also
  buying physical product
• True for both legal and P2P users

Source NPD MusicLab
13
More Statistics

• 44 of paid service users also used a P2P service
  in the past 6 months
• One in five P2P users reported using a paid legal
  service to download music

Source NPD MusicLab, NPD MusicWatch, Digital
Estimate- Jupiter, Aug 04
14
What would make you much more likely to buy music
digitally?
Ownership, Quality, Security
Source NPD MusicLab
15
Whats it about?

• Physical is about commitment
  Long-term fan, and Ill buy the CD for my
  collection
• Digital is about dating
  I can pick and choose the songs I want
  instead of buying the entire album

Source NPD MusicLab July 2004
16
Half Hollow Hills East HS Dinner Discussion
Sept 03

• I dont care what Chrissys wearing, a school
  blouse needs to cover your belly button
• No, you cant practice on my car until you
  actually finish Drivers Ed
• What exactly is Cu-zar and is it on my computer?

17
Households Acquiring Digital Music Files Legal,
Ripped, IM- But mostly P2P
Anticipation Period
Post Litigation
Source NPD MusicWatch Digital- adjusted for lag
18
Households Acquiring Digital Music Files P2P,
Legal, Ripped, IM
Source NPD MusicWatch Digital- adjusted for lag
19
Litigation has had an effect
Why have you decreased or stopped usage of file
sharing services?
NPD MusicLab, May 2004
20
Music And The Computer Legal Digital Music
Percent of Households Buying From A Legal Music
Service
Average files acquired per month12
Source NPD MusicWatch Digital
21
Fundamentals

• Getting older, and younger
• Premium on target marketing
• Overlap
• Heavy music buyers choose variety
• Sustained promotion
• To expand the legal user base

22
Music Retailing In America

• Its a Wal-Mart nation
• Battling Consumer Indifference
• Do the basics
• Be a Volvo

23
Retailers Challenge

• There is an ongoing and fundamental shift in
  shopping preferences that puts traditional music
  and entertainment retailers at risk
• Consumers are basically indifferent about where
  they shop for music

24
Change in Channel Shares
Source NPD MusicWatch 9 Months Ending June 04
compared w 9 mos ending June 02
25
In the past two years
Share Among Teens (13-17) CD/Record Stores.- 10
pts Mass Merch6 pts Electronics..5 pts
Share Among 18-25 CD/Record Stores.- 8 pts Mass
Merch4 pts Electronics..9 pts
Source NPD MusicWatch Oct 01-June 02 v Oct
03-June 04
26
Dixie Chips!
We asked video and music buyers what else they
bought at
Nearly 9 of 10 American households shop at
Wal-Mart!
27
Getting your fair share?
We asked video and music buyers what else they
bought at
28
Signs of Consumer Indifference

• Ask them
• Watch what they do

29
I make special trips to buy music
NPD Incidence Study July 2003
30
Doesnt matter where I buy my music
NPD Incidence Study July 2003
31
Why do you purchase physical music?

• I like the whole experience of going to a store
  to shop for music

14
citing as one of top 3 reasons to buy physical
music
Source NPD MusicLab
32
Where else did you buy physical music?
Virgin Megastore Music Buyers
Source NPD Media Link June 04- past 12 mos
33
In search of excellence
Mean 35
Source NPD MusicWatch Feb. 03- Jan. '04 Buyer
.
34
One of three intend to repeat purchase
Likelihood To Purchase Music At Retailer In
Future
"Definitely Would"
A 10 shift upward for a retailer with a 25
Definitely repeat score could translate to
2.5 lift in same store sales
50
45
40
Mean 32
35
30
25
20
Source NPD MusicWatch Feb. 03- Jan. '04 Buyer
.
35
Repeat Music ShoppingProduct Mix, Value And
Convenience/ Organization
Factors Driving Future Shopping Intent
Source NPD MusicWatch Jan. 03- Dec. 03
Correlation of attribute with future purchase
intent
36
Translated to share
37
Birth of the Cool- Teen Music Buyers

• Hummer
• Porsche
• Rover
• Volvo The All New Volvo S40

38
Cool Retailing Concepts for Teens
39
YTD Comp sales down 3
40
Retail Challenge

• Get fair share
• Be outstanding at the basics
• Category Management Best Practices
• Customer Targeting
• Optimizing merchandise mix
• Building basket
• Small changes in customer attitudes translate to
  big gains
• Imagery and connection be Volvo, or Aeropostale
  or PacSun
• Co-branding, co-marketing opportunities
• Continuity and loyalty programs
• Convergence

41
Convergence

• Its about the new entertainment consumer
• Its about brand building
• Its about technology

42
Through the first six months
Dollar Sales in Billions YTD 04
Total Video Game including hardware, guides,
etc- 3.3B
Source NPD Funworld Video Games, NPD Music
Watch, NPD VideoWatch
43
The Entertainment Consumer

• One in four consumers aged 18 plus bought music
  in the past 30 days

44
How many music buyers bought a DVD, or Video
Game or VOD?
Music Buyers Entertainment Activities
67
70
64
58
60
50
40
28
30
26
20
16
13
10
7
6
0
1
Source NPD VideoWatch
45
Why do you buy DVDs?
Source NPD VideoWatch
46
Video Games matches Music
Video Game Unit Sales Trend (MM)
(B)
3.3
10.0
Source NPD Funworld Video Games
47
Profile of the New Entertainment Consumer

• 52 of video game buyers also bought music

Average month Source NPD VideoWatch
48
Convergence

• Content
• Portable View
• Ten Foot View

49
Convergence Content Baking a Bigger Pie

• Karaoke units increased 80 in 2003
• Music/Dance Game units/dollars increased over 90
  
• More than 80 of total software unit sales over
  60 in 2003 were Music/Dance games

50
Convergence Portability Flash In the Pan
Apple ships 860K iPods in qtr. ending June
04 Sales up 183 v. y-a-g
Projection does not include direct sales of
Apple iPod
Source NPD Techworld, Apple Corp. Comm.
51
Portability Like iPod- Think Game Boy

• GBA sold Units between June 01-
  May 02
• GBA SP sold Units between March
  03- June 04

Source NPD Funworld Video Games
52
Convergence 10 Foot Experience
SourceNPD Funworld Video Games, NPD Techworld
53
ConvergenceOutside of the Box

• Routers
• 2003 unit sales increased 67
• Average Selling Price decreased 21 to 78
• Rebates abound
• Gaming Adapters Microsoft Linksys
• Over 58K unit sales In 2nd half 2003
• 60 of YTD unit sales in December 2003

Source The NPD Group / NPD Techworld
54
Convergence Choose Your Place, Choose Your
Connection
55
Convergence Opportunities

• Content
• Portable View
• Ten Foot View
• Wires
• Wireless

56
Thought file sharing was a challenge?
Wal-Mart Share Video Games-23 Music- 16
Source NPD VideoWatch, NPD MusicWatch, NPD
Funworld Video Games
57
Convergence

• Its about the new entertainment consumer
• Its about building branded content
• Its about technology
• It will require breakthrough retailing

58
It will require breakthrough retailing

• Physical Franchise
• Emerging Digital
• Customer Loyalty
• Consumer Targeting
• Destination Shopping
• First Rate Customer Sat
• Discovery
• New Distribution Concepts
• Technology
• Creating Consumer Needs

59
NPD Music MoviesConsumer Insightsfrom home
front to store front