Why bother?

Sales on iTunes 'have fallen by 65 per cent'
By Martin Hickman, Consumer Affairs Correspondent
Published: 14 December 2006

Apple has experienced a short shock in its dominance of the online music business according to research that reports a slump at its song shop, iTunes.

A report from the US company Forrester Research says that an analysis of almost 3,000 purchases at iTunes show sales fell by 65 per cent in the first six months of the year.

If correct, the figures would be a surprise for Apple, the iconic Californian company that has revolutionised the music industry with the iPod.

An Apple spokesman denied any problems: "The conclusion that iTunes sales are slowing is simply incorrect. Apple is leading the digital music revolution with almost 70 million iPods sold and a stunning 1.5 billion songs purchased from the iTunes Store," he said.

The iTunes Music Store was launched in April 2003, and offers 3.5 million songs, 250 TV shows, 9,000 music videos and 100 movies.

The launch of the service gave hope that the music industry could combat the rampant illegal file-sharing business which pays no royalties to record companies.

But Forrester Research, based in Cambridge, Massachussetts, said that might no longer be the case. "iTunes won't save the music business or Apple," wrote analyst Josh Bernoff in the report.

Forrester, which based its findings on analysis of 2,791 US iTunes debit and credit purchases, said the number of transactions declined by 58 per cent between January and June. The size of the transactions also fell 17 per cent, the researchers reported.

In 2005, iTunes sales dropped after Christmas before rising "significantly" that May. Forrester said the recovery did not materialise this year. However, it said it was too soon to tell whether the decline was seasonal or if demand was falling. Mr Bernoff later stressed that iTunes sales were not collapsing but "levelling off".

Customers can download a song from iTunes for 79p. Apple reported in October $452 million (£230m) in sales in the last quarter from music sold through iTunes and iPod accessories. It also announced that Hollywood films and video games would join TV shows and music as downloadable items, offering more sources of income.

"Our view continues to be that selling music and TV shows and now movies helps us to sell iPods and accessories," said Apple Chief Financial Officer Peter Oppenheimer.

Apple is the world leader in song downloads, with an estimated 80 per cent of the UK market. But, Forrester said that most music on iPods had not been purchased from iTunes. Apple sold about 20 songs for each iPod purchased, even though the devices can store hundreds or thousands.

Apple has experienced a short shock in its dominance of the online music business according to research that reports a slump at its song shop, iTunes.

A report from the US company Forrester Research says that an analysis of almost 3,000 purchases at iTunes show sales fell by 65 per cent in the first six months of the year.

If correct, the figures would be a surprise for Apple, the iconic Californian company that has revolutionised the music industry with the iPod.

An Apple spokesman denied any problems: "The conclusion that iTunes sales are slowing is simply incorrect. Apple is leading the digital music revolution with almost 70 million iPods sold and a stunning 1.5 billion songs purchased from the iTunes Store," he said.

The iTunes Music Store was launched in April 2003, and offers 3.5 million songs, 250 TV shows, 9,000 music videos and 100 movies.

The launch of the service gave hope that the music industry could combat the rampant illegal file-sharing business which pays no royalties to record companies.

But Forrester Research, based in Cambridge, Massachussetts, said that might no longer be the case. "iTunes won't save the music business or Apple," wrote analyst Josh Bernoff in the report.

UPDATE: Josh Bernoff, one of the analysts who authored the Forrester report, says his research has been misinterpreted in the media. "For the record, iTunes sales are not collapsing," he wrote in a Forrester Web log. "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."

It's really simple. After you spend 20 or 100 bucks at the iTunes store, you realize that it is a lot easier to just download what you need or convert your videos at home.

What Apple has never come to terms with is that iTunes is really expensive and when people realize that they can download the same music for free, it becomes an issue of why bother.