Online radio is the fastest-growing music-listening category among U.S. consumers, according to new findings from NPD Group.
The market research firm found that 43% of U.S. Web users in 2011 chose to listen to music via Pandora, Slacker, Yahoo Music and other online radio services -- up nine percentage points from 2010.
At the same time, music-listening on AM/FM radio and CDs remained relatively steady, at 84% and 74%, respectively.
NPD’s annual music study found the number of online radio listeners grew by 18 million last year. The format is most popular among people in the 18-25 age bracket. But strong growth was also seen among people ages 36 to 50, which suggests that young listeners may be turning their parents onto digital radio.
While demand for free online radio is increasing, the appetite for paid options remains low.
Some 42% of Web users listened to free radio in 2011 compared to just 3% who paid for online radio. Sites like Pandora have benefited directly from the growing audience for online radio. Despite lower-than-expected revenue in its fiscal fourth quarter, the company still saw ad sales climb 74% to $72.1 million from a year ago.
Privately held Spotify likewise made a successful entrance into the U.S. market last year. The U.K-based company, however, recently extended a promotion that allows U.S. users to continue to stream music for free, underscoring the challenge of converting people to paying subscribers. Outside the U.S., it also lifted a restriction imposing a five-song limit on free users.
The NPD research indicated Facebook doesn’t play an influential role when it comes to online music. Only 12% of Web users listened to music integrated into Facebook or other social networks by services including Spotify and MOG. Spotify, for instance, has only about a dozen apps on its platform to date.
“There’s no doubt that Facebook has helped drive music listening and discovery,” said Russ Crupnick, senior vice president of industry analysis at NPD. “But what is not yet clear is the platform’s importance, in terms of ongoing music usage and purchasing.” Facebook has long been rumored to start its own music service, but so far has relied on outside partners to supply music offerings through the site.
The NPD study results were based on online surveys of 5,799 U.S. consumers age 13 and up, between December 14, 2011 and January 3, 2012.