Despite garnering 63% of the portable audio player market
with its iPod according to NDP Group, Apple is facing lagging sales with its
iTunes Store. For the first half of 2006 Apple witnessed a 65% slide in iTunes
sales according to Forrester Research. Average transaction size also
dropped by 17%.
Forrester also showed that for every iPod that Apple sells
20 iTunes songs are purchased as well. This leads many to believe that given
that iPods can hold hundreds or thousands of songs, many consumers are looking
mostly to other means to load their devices up with musical content. This could
be either through ripping existing CDs to the iPods, sharing MP3 files with
friends or through piracy.
Despite the drop in sales, Apple still made a profit on its
iTunes Store for its last reported quarter. Apple also notes that iTunes
will remain an essential part to its overall business. "Our view continues to be that selling music and TV
shows and now movies helps us to sell iPods and accessories," said Apple CFO
A UK outfit called The Register and Bloomberg
decided to dive in and highlight one finding of the report -- that
iTunes sales had dropped in the first six months of this year. We got
treated to wonderful headlines about iTunes sales "collapsing" and
"dropping" and "plummeting" and so on. Now for the record, iTunes sales
are not collapsing. Our credit card transaction data
shows a real drop between the January post-holiday peak and the rest of
the year, but with the number of transactions we counted it's simply
not possible to draw this conclusion . . . as we pointed out in the report. But that point was just too subtle to get into these articles.