As Virgin Megastores get their “going out of business signs” pinned up, the loss of a major brick and mortar music retailer will certainly hasten the demise of the CD and the continued rise of online downloading. The latest research from market analyst NPD group is hardly a surprise: there were 17 million fewer CD buyers in 2008 compared to the year before.

—More paid downloads, less total buying: And while the number of internet users who paid for music increased by 8 million to around 36 million last year—purchased music downloads grew by 29 percent since last year, accounting for 33 percent of all music tracks bought in the U.S.—NPD’s report could not mask the dire circumstances the music industry finds itself in. Without CDs, it seems that many people are giving up on buying music entirely. In ‘08, the number of total music buyers fell by 13 million in the U.S. The decline in music buyers was led by a 19 percent drop in CD sales. Only 58 percent of web users said they bought CDs or digital music downloads last year, versus 65 percent in 2007.

—Less buying, more listening: Asked why they hadn’t been buying music, the 4,000 respondents to NPD’s online survey said they were spending less on entertainment in general due to the recession. Meanwhile, web users are becoming more aware of free streaming services. In the case of online radio company Pandora saw its recognition double, NPD says, as 18 percent of web users were able to identify it. The introduction of MySpace Music is also appears to be having an affect on listening habits, the study said. Social net usage climbed from 15 percent in Q407 to 19 percent in Q408. Nearly half of U.S. teens say they listen to music on social nets, which is an increase from 37 percent a year ago; among college-age web users, the percentage rose from 30 percent in ‘07 to 41 percent last year.