A Jupiter Research survey shows that the real penetration of authorized music downloads is abysmal. Only 20 of the tracks on an iPod or MP3 player, or 5% of the total, are purchased from iTunes or a download site. The remaining 95% of the music comes from various sources - ripped CDs from the owner, files copied or sent by friends, or P2P file sharing services. Furthermore 83% of users do not buy digital music on a regular basis.

Jupiter said there is no easy way to separate user segments. "Digital music buyers do not necessarily stop file-sharing upon buying legally." On the plus side, MP3 player owners are more likely to buy more music.

The study makes it clear that authorized services like iTunes only tap a small part of user demand for music. The major labels need to be more innovative about both pricing and distribution if they are to generate higher revenues.