Is iTunes REALLY Beating P2P?

Related link: http://www.npd.com/dynamic/releases/press_050607.html

Not everyone believes the numbers in the widely reported (including by me) NPD Group study that claims the for-pay iTunes is the 2nd-most popular digital music service, tying with the free P2P service Limewire. The NPD study said that "Both iTunes and LimeWire were used by 1.7 million households. The most popular digital music service that month was WinMX, which was used by 2.1 million households to download music."

Tom Mennecke of slyck.com wrote to me to say he believes the study's results to be "completely false." Mennecke argues, "They are saying that 1.7 million households downloaded a song in March 2005 using iTunes. The same amount of households downloaded... using LimeWire. Do you really think that is true when billions of files are transferred via P2P every month, with hundreds of millions being traded every day?"

P2Pnet.com is also skeptical, to put it mildly: "...complete and utter nonsense. The corporate online music business exists only in the minds of the media and those trying to promote it and iTunes' sales of some 300 million since it started in September, 2003, don't even merit a statistical blip against what's happening in the real world of online music... P2P research firm BigChampagne says in the US in May, on average 6,290,327 people were logged onto the p2p networks at any given moment. The global statistic was 8,665,319."

And a March 9 article in USA Today, drawing on Big Champagne research, set this context: "Most of the action... remains outside industry confines. While paid downloads skyrocketed to 140.9 million tracks in 2004 from 19.2 million in the last half of 2003 (no earlier figures are available), unauthorized file-sharing dwarfs purchases. Since mid-2003, 19 billion peer-to-peer transactions have occurred, predominantly current hits."

Note that the NPD study measures how many people used a service, not how many files were downloaded. So it seems reasonable that even if roughly equal numbers of people used iTunes and Limewire, for example, the Limewire users may have downloaded many more (free) files. I haven't heard back yet from NPD in response to questions about the study.

Securities research firm Piper Jaffray has reported that iTunes sold 85 million songs in the first two months of this year, for an average of about 1.5 million a day during that period. That's a steep growth curve from about one million sold in iTunes Music Store's first week two years ago, which was itself an impressive achievement. But a match for free P2P? Maybe not.