iTunes' phenomenal growth continues as latest industry research performed by the NPD Group officially states it is now the second largest music retailer in the U.S. The report prepared by the research firm analyzed 2007 music sales figures in the U.S., including the sales of both physical CDs and digital music. iTunes falls short in music sales only to Wal-Mart.

The latest sales figures, which holds every 12 songs downloaded as the equivalent of an entire CD, is not just a win for Apple, but also proves that the entire paid digital music download industry is rapidly growing. According to NPD, legal digital downloads "sharply" increased in 2007. Interestingly, there was also a 10 percent decline in overall music spending -- most likely because online digital music retailers give consumers the ability to purchase single songs in place of entire albums.

NPD went on to estimate that one million consumers moved away from buying music CDs in 2007. The firm believes that younger consumers led the way in the CD walkout. It estimates that 48% of teens in the U.S. decided to not purchase even a single CD in 2007, up from 38% in 2006.

P2P usage among teens to share music also grew last year, with the number of music files downloaded via P2P rapidly increasing among teens.

Despite the heightened P2P activity, which is estimated to be used in 19% of American households, NDP states that 10% of all music purchased in 2007 was legally downloaded via sites such as iTunes or Amazon. The number of consumers who legally downloaded music grew to 29 million consumers, whereas previous sales figures placed that number at 24 million. Sales growth can largely be attributed to consumers in the 36 to 50 age group, which also happened to purchase a large number of digital music players in the same year.

Apple said today that there are now over 50 million iTunes store customers. In addition, Apple states that iTunes sold over four billion songs, and that 20 million songs were sold on Christmas Day 2007.

The latest sales figures boosted iTunes past Best Buy, which previously held second place in retailer rankings. Apple similarly overtook retailer Amazon.com for third place last June.