Apple ITunes Sales Slid in First Half, Forrester Says (Update4)
By Dina Bass
Dec. 12 (Bloomberg) -- Apple Computer Inc.'s iTunes music store suffered a 65 percent slump in sales during the first six months of the year, reversing almost two years of gains, according to a Forrester Research Inc. report.
The number of iTunes transactions declined 58 percent between January and June of this year, while transaction size fell 17 percent, the Cambridge, Massachusetts-based market- research firm said today. ITunes spokesman Tom Neumayr said the report is ``simply incorrect.''
``ITunes won't save the music business, or Apple,'' analyst Josh Bernoff wrote in the report.
Forrester, which based its findings on analysis of 2,791 U.S. iTunes debit and credit purchases, said it is too soon to tell whether the decline is seasonal or if demand for digital music is falling. Apple got $452 million in sales last quarter from music sold through iTunes as well as accessories for its market-dominating iPod device, the company reported in October.
Shares of Cupertino, California-based Apple fell $2.61, or 2.9 percent, to $86.14 as of 4 p.m. New York time in Nasdaq Stock Market composite trading. Before today, the stock had gained 20 percent this year.
In 2005, iTunes sales dropped after Christmas before rising ``significantly' in May of that year. That recovery didn't materialize this year, Forrester said.
Steve Lidberg, an analyst at Pacific Crest Securities, said in a note today he doesn't see a slowdown in digital music sales. Lidberg, who's based in Portland, Oregon, and rates Apple ``outperform,'' cited other data from researcher SoundScan that show weekly digital album sales have more than doubled to date.
The Forrester report also found that most music stored on iPods isn't purchased from iTunes. Apple sells about 20 iTunes songs for each iPod purchased, even though the devices can store hundreds or thousands of songs.
Many iTunes buyers purchase a few songs at a time with the median size of transactions at $2.97, the report found. One- third of all purchases cost $1.08 or less.
The iTunes store had a profit in the quarter ended Sept. 30, according to Apple. ``Our view continues to be that selling music and TV shows and now movies helps us to sell iPods and accessories,'' Apple Chief Financial Officer Peter Oppenheimer told analysts on an Oct. 19 conference call.
Apple started iTunes in April 2003 to help broaden the iPod's appeal. The iTunes store offers more than 3.5 million songs, 250 TV shows, 9,000 music videos and 100 movies. Apple has sold more than 1.5 billion songs through the site and said it sells more than 1 million videos a week.
To contact the reporter on this story: Dina Bass in Seattle at firstname.lastname@example.org .
Last Updated: December 12, 2006 17:24 EST
I propose we offer Apple some constructive criticism on how to make iTunes music a hot item again in case the decline continues. IMHO, the price is good but a few tweaks are in order to make it more user friendly, like first removing the crazy padlock on the music. You have to admit that a lock on a peice of music regulating when, where or how it used is pretty darn strange, and maybe the decline in sales is caused by people now knowing this is no ordinary purchase of a recorded piece of music.
When i reinstalled XP, I put it on a larger hard drive than before, and when I tried to play an iTune it said I had to authorize my computer, which I did. Then it informed me, I can authorize up to 5 computers. Shouldn't the limit be however many computers I have, as in no limit?
Policing should not be on the piece of music (which is not only crazy and something very new, it is probably very also very costly), they should just have a law against stealing music with cops arresting the violators and their accomplices.
A feature that i think would be nice, since they already spy on you like peeping toms to watch what you play and know what you purchased, is if you lost a tune that you payed for, you could go get again for free.
What do think would improve sales? Is this is just a slump that will soon work it self out?