March 04, 2012

According to an annual study of the consumer music market in the U.S. by The NPD Group, online radio is the fastest growing music listening option among U.S. consumers. In 2011, 43 percent of U.S. Web users chose to listen to music via Pandora, Slacker, Yahoo! Music, and other online radio options, which is 9 percentage points higher than the previous year. At the same time listening to music on AM/FM radio stayed relatively steady (84 percent) in 2011, as did CD listening (74 percent).

Based on the findings of NPD’s “Annual Music Study,” there were 18 million more online radio listeners in 2011. Listening to free online radio is most popular among young adults age 18 to 25, and strong listener growth is also occurring among the 36- to 50-year-old age segment.

“Licensed online radio services are having two important effects on consumer music listening habits” said Russ Crupnick, senior vice president of industry analysis at NPD. “Listeners are citing these services as a reason to do less file sharing, and they credit online radio with improving their ability to discover new artists.”

Although consumers are overwhelmingly opting for free ad-supported online radio options, consumers’ conversion to paid versions of online, on-demand radio remains low. While 42 percent of Web users listened to free radio options in 2011, just 3 percent paid to listen to radio online.

The draw of unlimited online-radio listening and music discovery is also much more compelling to consumers than performing the same activities on social media sites, according to NPD. Just 12 percent of Web users listened to music integrated into Facebook or other social networks by services like Spotify and MOG. “There’s no doubt that Facebook has helped drive music listening and discovery,” said Crupnick, “but what is not yet clear is the platform’s importance, in terms of ongoing music usage and purchasing.”

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