Apple Inc.'s online iTunes stores is officially the second-largest retailer of music in the United States, trailing only Wal-Mart, according to consumer tracking firm NPD Group.

The online store moved into second place, edging out bricks-and-mortar rivals Best Buy and Target, which placed third and fourth respectively, based on total music sold in 2007, NPD said. Sales were calculated on a 12-track CD equivalency for song downloads.

Apple said it now has 50 million customers and has sold more than four billion songs worldwide, but it does not break down how many tracks have been sold in each country.

NPD said about 10 per cent of music acquired in the United States in 2007 was done through legal downloads. Consumers who bought digital music legally through pay-to-download websites grew by five million or 20 per cent to 29 million in 2007.

Online sales growth was largely driven by consumers between the ages of 36 and 50, a segment NPD said was aggressive in acquiring digital music players in 2007.

The firm also said an additional one million consumers dropped out of the CD market in 2007, led by teens. About 48 per cent of U.S. teenagers did not buy any CDs during the year, up from 38 per cent in the year before.

The growth in downloads could not offset the continuing decline in physical CD sales, which led to an overall 10-per-cent decrease in music spending — to $40 US per capita from $44 US per capita among internet users.

"The continued growth in legal download sites is encouraging, yet the industry struggles to improve the value of each digital customer," said Russ Crupnick, NPD's entertainment industry analyst, in a statement. 

"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."

NPD did not have any estimates of iTunes sales in Canada. However, according to a recent report by Nielsen Soundscan, overall digital album sales in Canada rose 93 per cent in 2007 to 1.98 million units.

As in the United States, growth in album downloads also could not offset the large decline in the sale of physical discs, with overall album sales falling 6.9 per cent to 41.8 million. Digital album downloads thus made up only 4.7 per cent of total album sales in Canada in 2007.