Apple's iTunes no. 2 music retailer

Apple Inc.'s online iTunes music store is now the number-two music retailer in the U.S. behind Wal-Mart Stores Inc. as measured by unit volume, market researcher NPD Group said Tuesday.

NPD said that iTunes moved into second place due to the amount of music it sold during 2007, which was based on a 12-track CD equivalency for song downloads.

The market researcher began tracking music sold stateside during the middle of 2006. In the fourth quarter of that year, Best Buy (BBY, Fortune 500) Co. took second place behind Wal-Mart (WMT, Fortune 500), while Target Corp (TGT, Fortune 500). took third place and Apple's (AAPL, Fortune 500) iTunes store fourth place, NPD analyst Russ Crupnick said.

For the full year 2007, Best Buy came in third and Target fourth, he said.

Crupnick called Apple's move to the number-two spot "fairly understandable given the pressure that's been on CDs and the almost 50% growth in digital downloading in the past year."

About 10% of music acquired in the U.S. was through legal downloads in 2007, and consumers who bought digital music legally through pay-to-download Web sites grew by 5 million to 29 million in 2007, NPD said Tuesday.

Meanwhile, an estimated 1 million consumers did not buy CDs in 2007, and 48% of U.S. teenagers didn't buy any CDs during the year, up from 38% in the year before, according to NPD data.

"It wouldn't surprise me if we see the same things continuing into 2008 because what our research is showing is that teens are continuing to check out on the CD," Crupnick said.

NPD also said that the amount of music consumers bought in the U.S. rose 6% in 2007, though the decline in CD sales and increase in legal digital download sales still led to a 10% overall decrease in music spending.

Apple shares fell $2.55, or 2.1%, to $117.19 in morning trading, while Wal-Mart shares rose 80 cents to $51.13.