Downloads Up, CD Sales Down among College Students

Music sales over the past two years have increased almost everywhere except near college campuses, according to a recent study undertaken by Reciprocal, Inc., a digital-rights management company. The first quarter of 2000 showed a 12% rise in overall music sales compared to the same period in 1998—except at stores located within five miles of a college campus. Reciprocal reached its conclusions based on figures supplied by sales-tracking organization Soundscan, Inc.

Stores near colleges showed a 4% drop in sales during the same period—a significant figure in light of the fact that such stores account for approximately half of all music sold. The practice of downloading free music from the Internet is the likely cause, say observers. "I think it's clear that it has had an impact," said Soundscan CEO Michael Fine. The popularity of CD burners is another factor in the decline of music sold near schools.

More than 70% of students download music at least once a month, according to another survey, undertaken by Internet music concern Webnoize, Inc. Of the 4294 students at 10 New England colleges who took part in the Webnoize survey, conducted in April, 63% claimed they now spend more time listening to music downloaded from the Web than they did a year ago. Those who reported spending "significantly more time" listening to downloads (approximately one-fifth of the total) said they were spending "significantly less time" listening to CDs.

Almost all of the students were using file-search software from embattled Napster to download music. Many college administrators have banned Napster from their campuses after legal threats from rock group Metallica, rapper Dr. Dre, and lawsuits launched against the San Mateo, California–based software firm by the Recording Industry Association of America and its allies. Excessive downloading by students slowed campus computer networks, interfering with basic e-mail and other essential functions, officials say.

Despite its continuing legal problems, Napster has attracted $15 million in investment capital from Hummer Winblad Venture Partners of San Francisco, according to a May 23 report in the Wall Street Journal. The investment by a well-known venture-capital company provoked "harsh criticism" from the music industry, the report stated. Founded last year by Northeastern University freshman Shawn Fanning, Napster has about 35 employees, and has been working out of about $2 million in seed money raised nine months ago. Until recently, Napster's legal problems had spooked venture capitalists throughout Silicon Valley. Hummer Winblad partner Hank Barry will join Napster as interim chief executive and will serve on its board, as will his colleague John Hummer. Details of the financing weren't disclosed.

Napster has always claimed it is against pirating music, even though that is what most people use it for. Its file-searching software has many other potential uses besides downloading music, the company maintains.