Overview

Nearly two-thirds of internet users (65%) have paid to download or access some kind of online content from the internet, ranging from music to games to news articles. Music, software, and apps are the most popular content that internet users have paid to access or download, although the range of paid online content is quite varied and widespread.

In a survey of 755 internet users between Oct. 28 and Nov. 1 2010, respondents were asked about 15 different kinds of online material that could be purchased or accessed after a payment. The online content assessed in this survey includes only “intangible” digital products such as software, articles and music that need not have a physical form. This is in contrast to previous surveys which were designed to measure the use of the internet to purchase “tangible” products such as clothes, CDs, books, or computers or tangible services such as hotel reservations or airline tickets.

In this survey we asked the following question: “Please tell me if you have ever paid to access or to download any of the following types of online content?” The findings show that:

• 33% of internet users have paid for digital music online.
• 33% have paid for software.
• 21% have paid for apps for their cell phones or tablet computers.
• 19% have paid for digital games.
• 18% have paid for digital newspaper, magazine or journal articles or reports.
• 16% have paid for videos, movies or TV shows.
• 15% have paid for ringtones.
• 12% have paid for digital photos.
• 11% have paid for members-only premium content from a website that has other free material on it.
• 10% have paid for e-books.
• 7% have paid for podcasts.
• 5% have paid for tools or materials to use in video or computer games.
• 5% have paid for “cheats or codes” to help them in video games.
• 5% have paid to access particular websites such as online dating sites or services.
• 2% have paid for adult content.

And 6% of internet users said they had paid for another kind of content not mentioned in the list of 15 the survey offered.

Of those internet users who have purchased online content, nearly half (46%) have purchased only one or two of the types of content covered in our survey. Some 16% have purchased six or more types of content.

Typical user pays about $10 per month for online content

The average expense for those who have paid for content was approximately $47 per month for material downloaded or accessed, including both subscriptions (an average of $12 per month) and individual file access (an average of $22 per month). However, some extremely high-end users push the average higher, with most purchasers spending about $10 per month.

Accessing and paying for online content

Concerning methods of accessing online content, the majority of the internet users pay for subscription services (23%), versus downloading an individual file (16%), or accessing streaming content (8%).

As shown in Figure 2, most internet users who have accessed online content have utilized only one method of access and payment (66%).

Read the full report at pewinternet.org.

At the ripe old age of 10, the current incarnation of the Napster music service scarcely resembles its former bawdy self. If the original Napster was a loud, raucous garage band made up of drunken college students, the present offering is what happens when the band sobers up, signs to a major label and starts house hunting.

Long gone are the days of free-flowing music from the vine of central servers. Today’s Napster requires a grown-up kind of commitment: a credit card and a monthly subscription. It also faces stiff competition; while Napster morphed from its lawless larval stage to a dues-paying music service, consumers in search of free content have had their pick of surviving peer-to-peer applications and torrent sites that more than make up for the loss of the original rogue website.

The current economic climate makes music an even tougher sell. In today’s economy, how do you compete with free? While it may seem counterintuitive, some experts see consumers’ insatiable appetite for free content as an opportunity rather than a cause for concern. Chris Anderson, author of The Long Tail and editor in chief at Wired ignited a fiery debate among the technology and entertainment community recently when he published an article touting free content as the key to earning income in the digital age. His article, titled, “Free! Why $0.00 Is The Future Of Business,” argues that when digital content approaches zero marginal cost to distribute, the more you give away for free, the more you can sell to the small segment of consumers who are willing to pay for premium content.

For some artists, Anderson’s scenario translates into giving away the entire album for free in hopes that fans will pay for concert tickets or limited access to live streaming video from the road. What’s clear at this point in the evolution of the music business is that there is no clear business model. In the internet age, selling recorded music has become as much of an art as making the music itself.

While the music industry has been on the front lines of the battle to convert freeloaders into paying customers, their efforts have been watched closely by other digitized industries — newspapers, book publishing and Hollywood among them — who are hoping to staunch their own bleeding before it’s too late. And if the music market is any indication of how consumer expectations will evolve elsewhere, the demands for free content will extend far beyond the mere cost of the product.

In the decade since Napster’s launch, digital music consumers have demonstrated their interest in five kinds of “free” selling points:

1. Cost (zero or approaching zero).
2. Portability (to any device).
3. Mobility (wireless access to music).
4. Choice (access to any song ever recorded).
5. Remixability (freedom to remix and mashup music).

All of this makes for a tall order, but if history is any guide, music consumers usually get what they want. And as researchers look back on the first decade of the 21st century, many will no doubt point to the formative impact of file-sharing and peer-to-peer exchange of music on the internet. Napster and other peer-to-peer services “schooled” users in the social practice of downloading, uploading, and sharing digital content, which, in turn, has contributed to increased demand for broadband, greater processing power and mobile media devices. Further, the Napsterization effect extends to non-media areas such as sharing health information, oversight of politicians, access to government data and online dating via free social networking sites.

Read the full report on the history and future ramifications of Napsterization at pewinternet.org including sections on the following:

Partying like it’s 1999-until the subpoenas come in

Music critic Sasha Frere-Jones has referred to the plight of the music industry as the “canary in the economic coal mine,” citing it as “a small example of the enormous financial buckling that is now global.” If the music business was the canary, then the MP3 was its carbon monoxide, choking an industry that had built its empire on the clean, regulated air of analog music products. Yet, in 2009, the record labels are still hanging on to their broken strings. Granted, sales for the music industry continue to decline; the latest reports from Nielsen indicated that total album sales, including albums sold digitally, fell to 428.4 million units, down 8.5% 14%¹ from 500.5 million in 2007. But while digital album sales actually increased 32% during the same period — to a record 65.8 million units — they were still dwarfed by the 362.6 million physical units sold.

And then the suits dropped their suits…

The industry’s legal battle against individual file sharers spanned roughly five years, targeting more than 35,000 alleged file sharers in the U.S. However, at the end of that costly campaign, the challenge of plugging the P2P hole proved to be insurmountable. Also lost down the P2P hole was the reputation of the industry, now widely seen as one that sues its own customers and is out of step with current technology. Moreover, when artists spoke on the industry’s behalf, they didn’t always present a unified message that sharing music in any context without permission was wrong.

Done Restricting Music: The end of DRM and the future of music online

Shortly after the music industry had announced the end to its litigation against individual file sharers at the end of 2008, iTunes halted the sale of music bundled with “digital rights management” (DRM) protection, defined by the Federal Trade Commission as “technologies typically used by hardware manufacturers, publishers, and copyright holders to attempt to control how consumers access and use media and entertainment content.” DRM has made its way into everything from cell phones to in-flight entertainment systems.

Yet, for all the major changes in the industry’s tactics, the relaxed attitude only goes so far. Through digital fingerprinting and other tracking technologies, the record labels are monitoring copyrighted content as closely as ever and are counting on two major new strategies to help them: a landmark partnership with internet service providers to monitor file sharing activity and potentially cut off service to the worst offenders; a series of partnerships with universities that would incorporate music subscription fees (predicted to be less than five dollars per student) into student tuition bills. If successful, a similar ISP-based fee could be implemented for the general public.

Read the full report at pewinternet.org.

_{1. Ben Sisario, “Music Sales Fell in 2008, but Climbed on the Web,” The New York Times, December 31, 2008. The AP article which was originally referenced here included an error in the reporting of music industry sales figures. The article referenced a decline of 8.5% in total album sales, however, the new reference points to the correct rate of decline (14%).}

As gadgets with digital audio capability proliferate, podcast downloading continues to increase. Currently, 19% of all internet users say they have downloaded a podcast so they could listen to it or view it later. This most recent percentage is up from 12% of internet users who reported downloading podcasts in our August 2006 survey and 7% in our February-April 2006 survey.

Still, podcasting has yet to become a fixture in the everyday lives of internet users, as very few internet users download podcasts on a typical day. Even of those who say they download podcasts, just 17% do so on a typical day.

These results come from a nationally-representative telephone survey by the Pew Internet & American Life Project from April 8 – May 11, 2008 of 2,251 adults. The portion of the survey that covered podcast downloading was administered to 1,553 internet users. The margin of error on the internet sample is plus or minus 3 percentage points.

More Options for Podcast Downloaders

As demand for podcasts has grown, so too has the catalog of offerings for users. In November 2006, we reported that Podcast Alley, a popular podcast directory, cataloged over 26,000 podcasts with more than 1 million episodes.¹ Now, that number has nearly doubled to over 43,000 podcasts and well over 2 million episodes. The most extensive podcast genre is “technology” with over 4,000 podcasts available on the subject; this genre is followed closely by comedy, religion and spirituality, and business.²

Companies like iTunes regularly prompt users to subscribe to automatic daily downloads of their favorite podcasts.³ “Get podcasts, served fresh daily,” reads an advertisement on the iTunes Store podcast webpage. Instead of getting your morning newspaper delivered to your doorstep, you can get your daily podcast delivered to your iTunes desktop. (For instance, users can subscribe to daily podcasts of newspapers and magazines such as The Wall Street Journal and The Economist.)

College campuses have also served an important role in promoting podcasts. Many colleges and universities now provide podcasts of various lecture series and important speakers on campus. Some professors are experimenting with podcasts in other ways, such as producing their own podcasts or having their students respond to readings and lessons by creating podcasts rather than (or in addition to) traditional papers.

Who is Downloading Podcasts?

Men continue to be more likely than women to download podcasts; 22% of online men compared with just 16% of online women report ever having downloaded a podcast. However, men and women are equally likely (3%) to download podcasts on a typical day.

Age differences are more defined with regard to podcast downloading than they were in 2006 when all age groups, except for those 65 and older, were almost equally likely to download podcasts. Now, the dividing line is around the age of 50, with internet users under 50 years old significantly more likely than older users to download podcasts. Fully 23% of those under 50 say they have ever downloaded a podcast and 4% downloaded one yesterday, compared with 13% and 1% of their older counterparts. Since 2006, younger generations have more fully embraced the technology, their percentages nearly doubling since 2006.

Internet users with six or more years of internet experience are significantly more likely than those with less online experience to have ever downloaded a podcast, and they are also more likely to download podcasts on a typical day.

Broadband Access and Podcast Downloading

In a recent report on broadband adoption, we found that internet users who have broadband internet access at home are significantly more likely than those who have dial-up to have ever done certain online activities.⁴ In many cases, those with high-speed internet access at home are also significantly more likely than dial-up users to do these activities on a typical day. Over time, podcast downloading has been a key activity that internet users are much more likely to do if they have broadband access. Internet users who subscribe to premium home broadband services are even more likely to download podcasts.

Internet users with broadband and premium broadband access at home are also significantly more likely than the average internet user to have ever downloaded a podcast.

iPod and MP3 Player Ownership

Like podcast downloading, ownership of iPods and MP3 players has also increased since 2006. According to a December 2007 Pew Internet Project survey, 34% of American adults and 43% of internet users report owning an iPod or MP3 player, up from 20% of the total population and 26% of internet users in April 2006.

Young adults between 18 and 29 years old are the age group most likely to own MP3 players, 61% of whom own these gadgets. Parents, those with broadband access, and those with higher socio-economic status (higher income and education) are also considerably more likely to own MP3 players or iPods.

Notes

¹ “Podcast Downloading” (Pew Internet & American Life Project, November 22, 2006)

² Site statistics accessed on July 17, 2008 via the Podcast Alley website. Genre-specific statistics

³ Information found on July 17, 2008 on the iTunes store website podcast page.

⁴ “Broadband Adoption 2008” (Pew Internet & American Life Project, July 2008)