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Gadgets Update: Apple iTunes Sales Take a Nose Dive
Brandon Hill (Blog) - December 13, 2006 12:29 PM
Print E-mail del.icio.us 39 comment(s) - last by DaveInLondon.. on Dec 20 at 3:46 PM
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: Josh Bernoff of Forrester Research has updated his blog to state that Bloomberg's conclusions on the state of iTunes sales were off the mark and taken out of context. Here's a clip from the blog:
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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It's never the music company's fault....
By jon1003 on 12/13/2006 1:07:30 PM , Rating: 4
quote:
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.
Or hey, how about this novel idea: The quality of the songs has gone down. Meaning that less music people want to listen to has been released recently so of course sales are going to go down if there is nothing people want to buy.




RE: It's never the music company's fault....
By masher2 (blog) on 12/13/2006 1:11:59 PM , Rating: 3
> "of course sales are going to go down if there is nothing people want to buy..."

The key word is "buy", obviously. There's still plenty of music people want to listen to....they're just increasingly less willing to pay for the privilege.


RE: It's never the music company's fault....
By mindless1 on 12/13/2006 7:39:19 PM , Rating: 3
Obviously you are making up nonsense. Those who write about not likely it, tend to really mean it. Why on earth would someone call it crap then listen anyway? They don't, but any time you see that chance to stealth troll on a topic...


By masher2 (blog) on 12/13/2006 11:39:37 PM , Rating: 1
Obviously I am not. Radio audience share is up, concert attendance is steady or rising, personal music players are ubiquitous, and, most telling of all, the majority of Internet traffic is devoted to file-sharing applications. And no, they're not sharing Word files.

People are still listening to music, just as they always have. They're just buying less of it.


By Mudvillager on 12/13/2006 1:52:43 PM , Rating: 5
Quality of music hasn't gone down, it's just the mainstream crap that sounds worse than ever.


RE: It's never the music company's fault....
By Hydrofirex on 12/13/2006 2:09:09 PM , Rating: 2
Thank goddess! I thought I was the only one who hated the mainstream scene right now. Why is there only crap coming out? And, when will rap and hip hop be replaced by the next fad - which is more than over due.

As for Itunes, what about other online stores sales figures? If Itunes is going down, but there are more sources and/or higher sales from other stores we might be observing something different than merely people ripping/pirating/sharing. Maybe consumers are merely unhappy with Apple's selection or their software?

Either way, those figures are definitely drastic enough to warrant some further thought both by Apple and potentially the industry as a whole.

HfX


By hmurchison on 12/13/2006 3:52:37 PM , Rating: 3
Hip Hop was around with I was in High School. I'm not that if something is around for 25 years it can rightly be called a fad.

The figures are calculated by credit/debit card transactions but do not included gift cards which are the safer way to purchase music IMO. Forrester is reaching here.


RE: It's never the music company's fault....
By room200 on 12/13/2006 9:16:46 PM , Rating: 2
LOL, just because you don't like rap. Rappers Delight (Sugarhill Gang) was the first hit rap song and it came out in 1979. That's approaching 30 years. The next big one was Blondie's Rapture. If "fads" last almost 30 years, I can't wait to make a little money on one of them.


RE: It's never the music company's fault....
By Garreye on 12/13/2006 11:28:22 PM , Rating: 2
I think he was referring to the fact that rap is very big in the mainstream compared to what it used to be. If you watched MTV or Much Music even 6 or 7 years ago you'd see maybe 5 or 6 rap videos over numerous hours, now it seems that almost every other video is rap.
I agree with you that rap shouldn't be called a "fad" but it has definitely gotten much focus in the mainstream recently.


By modestninja on 12/13/2006 11:33:56 PM , Rating: 2
I can't remember the last time I've seen a music video on MTV... I thought they were over that?


RE: It's never the music company's fault....
By MonkeyPaw on 12/13/2006 5:55:25 PM , Rating: 2
quote:
Or hey, how about this novel idea: The quality of the songs has gone down. Meaning that less music people want to listen to has been released recently so of course sales are going to go down if there is nothing people want to buy.


How profound! Maybe it's because 65% of the average album is crap, and people are not willing to download the filler for the album discount? I'd like to think that when it comes to music, people prefer quality over quantity.

As for what the article suggests, probably 95% of my collection is from CDs I own, with the remaining 5% purchased from iTMS. I only use iTMS when I consider the Album not worth the full price, as downloading the 2-4 good songs is far cheaper. I'd imagine I'm far from unique in my situation.


RE: It's never the music company's fault....
By wien on 12/14/2006 4:10:19 AM , Rating: 2
quote:
Maybe it's because 65% of the average album is crap, and people are not willing to download the filler for the album discount?
This again. What music are you people buying? I can't remember buying an album with that high a crap percentage... ever.


By GonzoDaGr8 on 12/14/2006 8:37:51 AM , Rating: 2
Have ya bought a Metallica cd lately??


Apple iPod
By dpope on 12/13/2006 1:39:43 PM , Rating: 5
For what it's worth, I bought an iPod Nano. Bought a few songs and used it for a little while. Now I use the iPod Nano for Windows Vista's Ready Boost feature. I formatted the nano's hd in NTFS and now it's an integral part of Windows Vista performance.=0}




RE: Apple iPod
By Master Kenobi (blog) on 12/13/2006 1:49:35 PM , Rating: 2
LOL! Winnar!


RE: Apple iPod
By Griswold on 12/13/2006 4:11:20 PM , Rating: 1
Dont let Steve hear about that!


RE: Apple iPod
By ninjit on 12/13/2006 5:50:34 PM , Rating: 2
Lol, that's awesome dude.

Question:
I've read a bunch about the ReadyBoost feature, but no real subjective comments on how well it works.

do you know any significant differences from befer and after using the nano for ReadyBoost?


I know how to fix this
By encryptkeeper on 12/13/2006 5:38:26 PM , Rating: 2
I think the ITunes site is losing business because of the selection. They really have to have some more classic bands one there, as it seems like the pop music scene isn't as wonderful as it was a few years ago. Some of the bands you can't download from ITunes are very good, and it's surprising to see them missing. You can't even download AC/DC albums for christs' sake.




RE: I know how to fix this
By otispunkmeyer on 12/14/2006 4:23:37 AM , Rating: 2
ill agree here

im very much into old house, techno and electro from the 80's/early 90's.

i tried to get hold of propeller heads - decksanddrumsandrockandroll ablum...

itunes - no, napster - no, connect music store - no, allofMp3 - no, pretty much everywhere i went no cigar. i actually ended up bit-torrenting it and in good 320kbps quality (much better than any of these download stores offer) then after deciding it was a great album ordered it off Amazon.

theres alot to chose from if you like todays pop/rap/rnb but not alot of choice if your into anything else.

to be fair though, even some popular online record stores (ie stores that still sell vynil) dont carry some of the tunes im looking for.

i dont actually have an ipod (though i use itunes store) but i can tell you that most of its 6Gb is dedicated solely to live recordings (DJ's essential mixes etc from BBC Radio 1 and the like)

you cannot beat live, you just cant, Live DJ sets = teh pwn

Sony's connect music store isnt any better though. Napster seems to have more choice but i dont like to use it.


RE: I know how to fix this
By jtesoro on 12/14/2006 6:54:43 AM , Rating: 1
If I'm not mistaken, AC/DC is one of those bands which refuse to sell in iTunes because they don't want their tracks sold individually. The Beatles is another holdout, although Fortune magazine is saying that Apple is close to making a deal with them.


RE: I know how to fix this
By INeedCache on 12/14/2006 11:53:29 AM , Rating: 2
if people were smart enough not to buy anything from artists like AC/DC who won't allow their songs to be sold individually, those said artists would quickly change their tune(no pun intended)and allow individual sales. The consumer really holds all the cards if they would only step back and think for a moment.


Movies, TV Shows?
By ninjit on 12/13/2006 12:50:54 PM , Rating: 2
What about sales on other stuff?

I don't know about the Movies they sell (seems like a rip to me), but I was under the impression TV show sales on iTunes were doing very well.




RE: Movies, TV Shows?
By vgermax on 12/13/2006 2:03:08 PM , Rating: 4
Ars looked at this the other day too. Nothing like bad statisticians.

http://arstechnica.com/journals/apple.ars/2006/12/...


old news
By chrisrosa on 12/13/2006 1:02:55 PM , Rating: 4
This news is so yesterday. Both Apple and PiperJaffray are refuting the claim today. http://www.appleinsider.com/article.php?id=2302




RE: old news
By vgermax on 12/13/2006 2:07:24 PM , Rating: 2
One other thing to consider. If the sales on the iTunes Store were so poor, how would Apple have any clout in setting the song prices. As the last round of negotiations with the record labels showed, Apple is holding the cards. There was some interesting commentary on Stereophile regarding the steps the recording industry is taking to counteract all the leverage Apple seems to have obtained with the iTunes Store.

http://www.stereophile.com/news/121206move/


Possible saturation
By SmokeRngs on 12/13/2006 3:37:38 PM , Rating: 4
Has it occurred to anyone that the market is a bit saturated? Some of these people already have the albums in another format. After some purchases, they decided it's just easier to rip the CDs.

In other cases, the initial "frenzy" of purchases has worn off somewhat and this is a natural correction. Not all new iPods sold are sold to new users. In this case, the person getting a new iPod for whatever reason already have the songs they want. They don't buy them again because they got a new iPod.

I don't see this as a bad or good thing. Right now it doesn't prove or really hint at anything substantial.




RE: Possible saturation
By encryptkeeper on 12/13/2006 5:41:17 PM , Rating: 2
The whole DRM thing has kind of turned people off as well, but the saturation is a good point. DRM sucks, but there are ways around it. Just burn an audio CD and rip it wherever you want when you run out of computers that DRM allows you to copy to.


Snapple
By thebrown13 on 12/13/06, Rating: 0
RE: Snapple
By Oregonian2 on 12/13/2006 1:45:15 PM , Rating: 2
Hope they don't. I don't like the music rental model, I like to pay for things only once, not repeatedly forever.

Or if they do, have it as an option, not as a paradigm shift.


RE: Snapple
By bisoy on 12/13/2006 3:17:38 PM , Rating: 2
I've always been a fan of the subscription model. Ever since it was offered by Musicmatch (yes they still exist) I was using their service. I can listen to my music at work at home and anywhere else where I can connect my laptop to the internet.

If there's a music I like very (with emphasis to very) I buy it, burn it to CD, rip it again then upload it into my Ipod.

Now I'm testing out Rhapsody where I can use with my SONOS to distribute music anywhere in the house and carry it around with my Sansa player.


RE: Snapple
By jtesoro on 12/14/2006 6:48:17 AM , Rating: 1
Not sure if it will help, but another way of looking at it is like cable TV. You pay a monthly subscription fee to watch movies and stuff but you don't get to keep it (you can record, but let's not go there).

Actually it's better since you get to choose to when and what movie to watch at any time.


Did I miss something?
By zombiexl on 12/13/2006 1:36:30 PM , Rating: 3
quote:
This could be either through ripping existing CDs to the iPods, sharing MP3 files with friends or through piracy.


Doesn't sharing mp3 with friends = piracy (well in most cases anyway)?




RE: Did I miss something?
By Oregonian2 on 12/13/2006 1:45:51 PM , Rating: 2
Not if you have a Zune it seems.


deja vu...
By Doh! on 12/13/2006 12:49:58 PM , Rating: 2
Check the last paragraph. There are two repeating sentences. I thought I was hallucinating for a second.




RE: deja vu...
By ninjit on 12/13/2006 12:52:01 PM , Rating: 2
ditto

He's right, I didn't notice it the first time through, just though I reread the same sentence.


has ANYONE even READ this????
By halfeatenfish on 12/13/2006 7:14:42 PM , Rating: 1
Let me get this straight... everyone is ready to make conclusions based on a report that "based its findings on analysis of 2,791 U.S. iTunes debit and credit purchases..." That's it?!?!?! C'mon people... does this REALLY make sense that you can draw those conclusions from a near infinitesimal subset of iTunes sales?

How about this from the author of the study himself? http://blogs.forrester.com/devicesmedia/2006/12/it...

Please...everyone... read... think... don't just be bah-bah-bah sheep




By masher2 (blog) on 12/13/2006 11:42:35 PM , Rating: 2
An excellent find, Halfeaten, I applaud you. From the link:

quote:
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...



Audio Quality
By jabber on 12/14/2006 5:38:45 AM , Rating: 3
Would be a nice touch if they had at least 256k versions of the tracks too rather than all the 128k stuff.

We now have plenty of storage, CPU power and broadband. Compressing the hell out of an audio track isnt really a factor anymore.

In fact once storage, wireless transmission etc. reaches even higher levels, will we need MP3 and AAC type formats anymore?







iTunes
By DaveInLondon on 12/20/2006 3:46:03 PM , Rating: 2
The best response by far!!

At its conception, iTunes felt incredible, but the novelty soon wore off. I believe the tracks are far too expensive, and short tracks offer the least value for money - soundtracks therefore are a non starter through iTunes.

Personally, I love iTunes software and have no problem paying for good quality music. I just believe iTunes is on the whole, too expensive when considering other options. I'd rather purchase the hard copy CD and put it on my shelf, iTunes album discounts are negligable.

Do something about the cost Apple. Stop boasting huge profits or you'll see iTunes revenues falling further.




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