Apple now No. 2 music retailer in the U.S.

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The popularity of the iTunes Store has propelled Apple to the number two music retailer spot in the US, following only Wal-Mart, according to market research firm NPD. The report from NPD also showed a decrease of CD sales as younger buyers continue to shun traditional media in greater numbers.

Apple said that there are now over 50 million iTunes Store customers and that iTunes has sold over four billion songs — 20 million songs were sold on Christmas Day 2007 alone, the company said.

Boosting the world’s largest music catalog of over six million songs, Apple has positioned itself to appeal to the growing number of young people that are no longer buying CDs. NPD says that 48 percent of US teens did not purchase a single CD in 2007, compared to 38 percent in 2006. The report estimates that one million consumers dropped out of the CD buyer market in 2007.

However, not all of the teens are leaving the CD market for Apple. While the percentage of the Internet population involved in peer-to-peer file sharing peaked last year at 19 percent, the number of files each user downloaded increased. Not surprisingly, music sharing continued to grow among the young market.

Legal downloads from online retailers like iTunes now account for 10 percent of the total music acquired in the US. The number of people buying online music increased five million to 29 million this year over last.

According to NPD, sales growth was largely driven by consumers age 36 to 50.

“The continued growth in legal download sites is encouraging, yet the industry struggles to improve the value of each digital customer,” said Russ Crupnick, entertainment industry analyst for The NPD Group. “With so many baby boomers and gen-Xers entering the market, there are certainly opportunities to sell more digital albums, promote older catalog titles, or create bundles that will raise revenues. In the near term that’s going to be the best means available to narrow the gap on dwindling CD revenues.”

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