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Tuesday, December 12, 2006, 09:00 am

Are Apple's iTunes music sales plummeting?

By Slash Lane

Apple Computer's industry leading iTunes digital download service has experienced a collapse in sales revenues this year according a recent analysis from Forrester Research.

While Apple has remained tight-lipped on the revenues and profits it generates through the service -- stating only that it operates at above 'break even' cost --Forrester believes credit card transaction data may offer some clues.

The firm recently conducted an analysis of all related transactions over a 27-month period. And according to a write up over at The Register, this year's numbers are far from encouraging.

"While the iTunes service saw healthy growth for much of the period, since January the monthly revenue has fallen by 65 percent, with the average transaction size falling 17 percent," the report states. A rebound in sales that took place during the spring of 2005 wasn't repeated this year.

Meanwhile, data from Nielsen Soundscan indicates the problem is not Apple's alone, showing three consecutive quarters of flat or declining revenues for the digital download sector as a whole.

The Register notes that this ominous trend has manifested despite healthy growth for digital music players. During the same period monitored by Forrester, iPod sales quadrupled and Apple's grew digital download inventory on iTunes significantly as video and movie catalogs joined the plethora of digital music tracks.

According to Forrester's data on the purchasing trends of iTunes shoppers, some 3.2 percent of online households -- around 60 percent of the wider population -- bought at least one download during its sample period.

"These dabblers made on average 5.6 transactions, with the median household making just three a year," the report states. "The median transaction was slightly under $3."
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