They Try It, They Like It: DualDisc Music Buyers Appreciate Integrated Music/Video Features; NARM report prepared by The NPD Group shows much growth potential for CD/DVD hybrid format.

PORT WASHINGTON, N.Y. -- Just one year ago, DualDisc technology was heralded by the music industry as a dramatic expansion of the music experience. According to a recent report prepared for the National Association of Recording Merchandisers (NARM) by The NPD Group, consumers who have tried the new format already have a high level of satisfaction with it. Since their introduction in the fourth quarter of 2004, nearly five million DualDisc units have been sold, which accounts for two percent of total CD sales.

"Based on the results of our survey of music consumers, a majority of those who are aware of the DualDisc format plan to purchase," said Russ Crupnick, president of NPD's Music & Movies division. "It's now incumbent on retailers and manufacturers to better educate consumers as to the availability - and value - of this new, integrated format."

According to the NARM/NPD report, more than a quarter of recent music buyers were aware of the DualDisc format. Nearly 60 percent of consumers who were aware of the format expect to buy one for themselves in the next six months. Among those who have already purchased DualDisc, nearly three quarter expect to do so again in the next six months.

The consumers who purchased the most music overall were also the heaviest buyers of DualDiscs. This technologically savvy consumer segment is also most likely to purchase a la carte digital downloads, subscribe to online music services and by all measures highly value exclusive content. DualDiscs give manufacturers and retailers of physical music a powerful way to garner a greater share of these consumers' entertainment budgets.

"Our research shows that building awareness of the added value of the DualDisc format may go a long way toward increasing sales potential, especially among the heavy music buying segment," said NARM President Jim Donio. "Once consumers are aware of the format, their purchase intent is strong. Additionally, once buyers experience the format, repeat purchase intent is very high - especially when the features integrate music extras with the video."

Topping the list of DualDisc features that consumers find most important were the addition of exclusive music tracks (i.e., those not found on the traditional CD) and music-oriented videos (e.g., music videos and concert footage). According to Crupnick, "If all that DualDisc does is offer exclusive music tracks, it will have a more limited appeal, because music consumers can download tracks from the Web or get them on a CD. DualDisc must present bonus tracks in a compelling way that integrates seamlessly with the video component."

NPD's MusicWatch tracking study shows that early adopters of DualDisc believe that its value is better than that of regular CDs. Seventy-three percent of early adopters described the value of this format as "excellent" or "very good," compared to 63 percent for CDs.

"Consumers definitely understand the better value proposition of DualDisc in relation to traditional CDs," said Crupnick. "So now it's incumbent on manufacturers and retailers to increase promotions to raise awareness of - and knowledge about - this valuable and lucrative hybrid format."

Methodology

The NARM/NPD DualDisc Study was based on an online survey of 2,075 CD buyers and 361 DualDisc buyers, which was fielded between July 7, 2005 and July 14, 2005. Historical pricing and value information was based on the NPD MusicWatch, which collects information at the title level from members of NPD's online consumer panel of more than 2.5 million registered members. An average of 1,000 music buyers are surveyed each week.

About NARM

Established in 1958, the National Association of Recording Merchandisers (NARM) is a not-for-profit trade association that serves the music retailing community in the areas of networking, advocacy, information, education and promotion. The Association's membership includes music and other entertainment retailers, wholesalers, distributors, record labels, multimedia suppliers, and suppliers of related products and services, as well as individual professionals and educators in the music business field. Our retail members operate 7,000 storefronts that account for almost 85% of the music sold in the $12 billion U.S. music market.

About The NPD Group, Inc.

Since 1967 The NPD Group has provided reliable and comprehensive sales and marketing information for a wide range of industries. NPD provides critical knowledge on what is selling, where, to whom and why to help our clients make more successful, fact-based business decisions. Today more than 1,300 manufacturers and retailers rely on NPD to help them better understand their customers, product categories, distribution channels and competition in order to help guide their business and positively impact sales and revenues. Information from The NPD Group is available for the following major vertical sectors: apparel, appliances, automotive, beauty, cellular, consumer electronics, food and beverage, foodservice, footwear, home improvement, housewares, imaging, information technology, music, software, travel, toys and video games.