{"id":620,"date":"2006-12-11T10:10:35","date_gmt":"2006-12-11T17:10:35","guid":{"rendered":"https:\/\/www.roughtype.com\/wp\/?p=620"},"modified":"2006-12-11T10:10:35","modified_gmt":"2006-12-11T17:10:35","slug":"more_evidence_t","status":"publish","type":"post","link":"https:\/\/www.roughtype.com\/?p=620","title":{"rendered":"More evidence that iTunes has peaked"},"content":{"rendered":"

Last week, I noted<\/a> a Wall Street Journal article<\/a> describing how online sales of digital music appear to be flattening this year. Because those sales are dominated by Apple’s iTunes store, the numbers suggested that music companies would be under increasing pressure to seek strong new outlets for online sales, which would in turn likely require the sale of songs in unprotected MP3 format – in other words, without copy protection.<\/p>\n

A new survey<\/a> by Forrester Research provides further evidence that iTunes sales may have peaked. Forrester analyzed nearly 3,000 iTunes transactions made by a group of about 7,000 consumers between April 2004 and June 2006. It found that iTunes purchases grew rapidly between April 2004 and January 2006, from 2 transactions to 17 transactions per 1,000 households. This year, however, the trend reversed, and sales actually began to slow. According to Forrester, “the number of monthly transactions declined 58%, while transaction size fell 17%, leading to a 65% overall drop in monthly iTunes revenue.”<\/p>\n

Because the decrease has been sharp and has continued into June, it seems to be more than merely a seasonal fluctuation. In June 2005, according to the Forrester data, there were 10.3 iTunes transactions per 1,000 households, while in June 2006 there were just 7.0. The average transaction size in June 2005 was $7.85, while the average in June 2006 was $5.54. In combination, those two drops led to a fall in iTunes sales per 1,000 customers from $80.92 in June 2005 to $39.01 in June 2006. What’s particularly interesting, or, if you’re a music company, particularly troubling, is the fact that iTunes began selling videos in the fall of 2005. That means that the drop in sales for music has been even greater than the aggregate numbers indicate.<\/p>\n

The Forrester study provides other clues that, while iTunes may help promote iPod sales, it’s been no panacea for music companies or musicians. Rather than being a central source of new music for consumers, iTunes’s business is dominated by occasional impulse purchases. The average household that buys from iTunes makes fewer than 6 transactions over the course of a year, and the median size of the purchases is just $2.97. One-third of all iTunes purchases are for $1.08 or less, and three-quarters are for less than $10.00. About 10% of all iTunes buyers bought a grand total of one song over the past year. Sales of music through iTunes continue to be dwarfed by sales of music on CDs, notes Forrester.<\/p>\n

Moreover, Forrester found (as the New York Times reports<\/a> today) that the ratio of iTunes songs sold to iPods sold has remained steady at around 20-to-1 since the iTunes store opened. That indicates that iPod owners reduce their iTunes purchases over time. As Forrester notes, “If iPod owners continued to purchase music tracks throughout the lifetime of their ownership, one would expect to see iTunes sales growing at a faster rate than iPods.” (Note that you’d need data on the number of iPods that are sold to people who already own an iPod, rather than to first-time buyers, to confirm this hypothesis. If you have two iPods and you buy 40 songs, you’ve bought 40 songs, not 20 per iPod.)<\/p>\n

The upshot of the study is clear. Online sales of digital music continue to be relatively modest, and if music companies want to increase them they’ll probably need to look beyond Apple’s iTunes store, which may well be tapped out as a source of growth. I’d be surprised if we don’t see record companies make a concerted effort to open more online retailing channels in 2007, probably selling songs in unprotected MP3 format.<\/p>\n

Finally, one should take reports of the imminent demise of the music CD with a grain or two of salt. The music market continues to be dominated by the sale of CDs and the unauthorized trading of songs ripped from those CDs.<\/p>\n

UPDATE: A Piper Jaffray report<\/a> paints a very different picture of iTunes sales so far this year. The report found “that the number of songs sold per week on iTunes had risen 78 percent in the first nine months of 2006 compared with the same period in 2005,” according to Reuters.<\/p>\n","protected":false},"excerpt":{"rendered":"

Last week, I noted a Wall Street Journal article describing how online sales of digital music appear to be flattening this year. Because those sales are dominated by Apple’s iTunes store, the numbers suggested that music companies would be under increasing pressure to seek strong new outlets for online sales, which would in turn likely […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[1],"tags":[],"class_list":["post-620","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/posts\/620","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=620"}],"version-history":[{"count":0,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=\/wp\/v2\/posts\/620\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.roughtype.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}