Sales are way off for Apple's iTunes Store

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 Peter Oppenheimer.

Updated 12/14/2006:
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.

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