Los Angeles - Demand for music among U.S. Internet users fell 2% in the third quarter of 2008, a figure that includes CDs, purchased downloads, songs downloaded via file-sharing networks, and borrowing CDs to rip to computers, according to a report from market research firm NPD Group.

The proportion of consumers purchasing a CD fell from 25% in the third quarter of 2007 to 22% this year, and NPD estimated that the volume of CDs purchased overall declined 19% compared to last year.

By contrast, the number of digital downloads purchased, and number of buyers both saw an increase.

Fifteen percent of Internet users, up 2% from last year, purchased tracks from online music stores, and legal music download volumes were up 29%.

"The continued growth in the customer base for paid digital downloads is positive, particularly for teens, but it's counteracted by deepening softness in CD trends," said NPD analyst Russ Crupnick.

"Alternative distribution deals in mobile and social networking are important ways for the music industry to fill the gap left by the decline in traditional revenue streams."

NPD also found that use of file-sharing services held steady at 14% of U.S. Internet users year-over-year, while the volume of music shared via such services rose 23%.

Among teens, peer-to-peer usage was up 46%, although teens also purchased 34% more paid digital downloads compared to the same period a year ago.

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