NPD: iTunes users show keen interest in cloud music services

More than a quarter of Apple (NASDAQ:AAPL) iTunes, iPhone and iPod users express strong interest in free cloud-based music services, with many willing to pony up a subscription fee to access their music libraries via multiple devices and platforms, according to a new consumer survey conducted by market research firm NPD Group. Asked their reactions on different free and premium options offering combinations of music streaming, music downloads and universal web access to their iTunes library, between 7 million and 8 million U.S. consumers tell NPD they would have serious interest in one of the paid alternatives, indicating a willingness to spend a minimum monthly fee of $10. NPD research also notes that a model giving consumers free streaming access to iTunes would attract 13 million to 15 million subscribers.

NPD estimates that total iTunes users in the U.S. exceed 50 million. "If the consumers who indicated strong interest in a paid subscription actually adopted one of those services at $10 per month, the market opportunity is close to $1 billion in the first year, which is roughly two-thirds the revenue garnered by the current pay-per-download model," said NPD vice president and senior entertainment analyst Russ Crupnick in a prepared statement. "We don't yet know what, if any, effect these services might have on the traditional pay-per-download music model, or whether consumers will ultimately spend more on digital music overall, if or when any of these options eventually rolls out."

Earlier this year, The Wall Street Journal reported Apple is planning to introduce a web-based version of iTunes sometime this year. People familiar with the project said the so-called iTunes.com would enable consumers to purchase music without going through the dedicated iTunes program on desktops and iPhones. In addition, Apple plans to populate other websites with "buy" buttons, integrating iTunes transactions into Internet radio and music review sites. Apple acquired digital music startup Lala in December 2009 for a rumored $85 million, only to shut down the streaming music service on May 31.

The iTunes multimedia storefront now accounts for 70 percent of all premium music downloads in the U.S. according to NPD Group data released in late May. iTunes' growth is slowing, however--NPD notes its share of the digital download market has remained essentially flat since the first quarter of 2009, increasing just 1 percentage point since that time. Rival AmazonMP3 increased its market share by 4 percentage points, and now represents 12 percent of the U.S. digital music market. Sales of digital tracks and albums accounted for 40 percent of overall U.S. music market share in the first quarter of 2010, a gain of 5 percentage points since Q1 2009, NPD said. Adding physical music purchases to the equation, iTunes still leads with 28 percent of all U.S. sales, a 4 percent year-over-year leap.

For more on the NPD iTunes survey:
- read this release

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