PC Data found that new Napster users are just as likely to purchase music at Bertelsmann-owned CDNow in the first month after downloading Napster software as they were before becoming members of the file-swapping service. But those consumers' purchases decreased after 90 days, even though they visited online music retailers more frequently.
"Apparently Napster users visit online retailers to get information about music and then use Napster to download the music free of charge," PC Data chief executive Ann Stephens said in a statement.
The report comes as Napster is fighting the major record labels--including Bertelsmann's BMG Entertainment--in a heated legal battle. Bertelsmann said Tuesday that it would drop its lawsuit against the file-swapping service once the two companies successfully launch a subscription service that lets people legally trade music copyrighted by the recording giant.
Tuesday's survey adds an unusual note to the agreement between the two former adversaries, since Bertelsmann recently purchased cash-strapped CDNow.
PC Data has been conducting an ongoing study to track the online purchases made by Napster users. Tuesday's survey is the latest effort to gauge the debate centered around the economic effects of file-swapping services. The company tracked the purchasing behavior of 120,000 home Web surfers for the study.
The research found that 10.4 percent of home Web surfers visited CDNow, and 8.3 percent of them bought music from the retailer the month before they started using Napster. In the first month of Napster usage, 25.6 percent visited CDNow and 8.4 percent made purchases. But by the fourth month, only 18.5 percent visited CDNow, and 5.5 percent bought music.
Research released by Jupiter Media Metrix in July revealed that Napster and other file-swapping services increase music spending. An earlier report by Soundscan concluded the opposite, showing the decline of CD sales at stores near universities. The Recording Industry Association of America submitted Soundscan's study in its lawsuit against Napster and is using it as evidence that the file-swapping service has harmed the music industry's revenues.
But Napster isn't the only factor in changing patterns of CD purchases, according to PC Data's research. The company predicts that 2 million CD-RW standalone drives, which can be used to "burn," or copy, music CDs, and another 3.5 million PCs with CD-RW drives preinstalled will be sold this year.
"Portable MP3 players and recordable CD-ROMs are simply too easy and too cost-efficient not to use," PC Data's Stephens said.
The market-research company said that the number of Napster users has more than doubled over the past six months to 18.7 million, or nearly a fifth of the total online population. PC Data found that more than 40 percent of Napster users are between the ages of 12 and 24.