Amazon, Rhapsody Gain in Digital Music Market – iTunes Dominates Still

October 9, 2008

This article is included in these additional categories:

Media & Entertainment | Retail & E-Commerce

Despite Amazon.com Music’s phenomenal showing in its first year and Rhapsody’s gains in part due to expanded advertising and partnerships, iTunes remains the best fee-based digital music destination according to Ipsos’s fifth annual TEMPO Digital Music Brandscape study (via Retailer Daily).

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iTunes continues to expand its lead despite increased competitive pressure, the study of fee-based online music brands and consumer digital music behaviors found:

  • Awareness and use were steady among most dominant brands this year, but did increase for three top competitors while declining among many lesser-known players.
  • iTunes continued to grow in terms of awareness, usage, familiarity, and “best brand” mentions.
  • Amazon had a strong first year, with initial awareness, usage, favorability and “best brand” ratings comparable to any of the top brands after iTunes. Moreover, Amazon actually matched iTunes in user satisfaction.

In a significant development, Rhapsody gained in both aided and unaided awareness, usage and favorability, the study found:

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Those gains, Ipsos said, are not merely a reflection of market-level changes but a direct result of its advertising efforts, its broad partnerships (e.g., MTV Networks and Verizon Wireless), and the fact that it competes in a niche alongside rather than in direct competition with iTunes.

Lesser-Known Services Suffer, Consolidation Likely

“The reason iTunes’ brand strength has not weakened in light of increasing competitive pressure is that, during this same time frame, consumers became more demanding of the digital music services they use,” said Karl Joyce, lead author of the TEMPO study.

“Table stakes such as good sound quality, variety, and being a reputable brand grew significantly in importance versus both of the past two years. As a result of this, lesser-known brands who fail to add unique value and whose offerings are limited are beginning to lose out in favor of larger, more robust services able to meet all of these consumer demands.”

  • Many service attributes increased in importance in 2008 versus both of the past two years.
  • Amazon’s 9% share and iTunes’ and Rhapsody’s 7% and 3% respective increases as ‘best brand’ came predominantly at the expensive of lesser-known brands, though other top brands did share some of the burden.
  • For many secondary brands, total awareness, familiarity, and favorability decreased as well.

“Consolidation of brand power among a handful of larger, better-known digital music services will continue. In this space, halo effects have had a real impact on consumer awareness and usage; if not always on brand perceptions,” continued Joyce.

“We have seen this with iTunes, Yahoo, Wal-Mart, MySpace and, now, Amazon. And, just days ago BestBuy acquired Napster, a brand that has ridden a different kind of halo – residual awareness from its stint as the first filesharing service – for years. This acquisition is exactly the type of move we should anticipate as this sector continues to evolve. A dedicated or small digital music brand trying to break into this space will not be able to sustain market share unless its offering is truly unique. To date, Rhapsody is the only top-tier digital music brand without strong, pre-existing brand strength in some other arena.

About the study: Data on music downloading behaviors was gathered from TEMPO: Keeping Pace with Digital Music Behavior?(pdf), a quarterly shared-cost research study by Ipsos MediaCT, examining the ongoing influence and effects of digital music in the US. Data cited above were collected between July 15 and July 28, 2008, via a web-based representative sample of 1,249 US downloaders age 12 and over.

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