AppleInsider StaffAnalysts for PiperJaffray are refuting claims recently made by Forrester Research that sales at Apple Computer's iTunes Store are declining rapidly, stating instead that their own analysis reveals strong growth.
In refuting claims made by Forrester Research that Apple's iTunes sales are 'collapsing,' the analyst used the iPod maker's announcements of iTunes sales milestones to interpolate weekly run-rate figures for the period between announcements, therefore accurately tracking iTunes sales growth.
Specifically, he compared total sales between January and September of 2005 and 2006 and saw 78 percent growth during that period. "From Jan. to Sept. in 2005 Apple sold 10.4m songs/week and in 2006 that number was up 78 percent to 18.5m songs/week," he wrote.
Munster acknowledged that with only two full years of iTunes Store data, he is able to identify several seasonal sales trends but not all.
"It is clear, for example, that iTunes sales spike upward in January," he wrote. "In the month of Jan-05 the store's songs-per-day average was up 58 percent sequentially and in Feb-06 (the closest data point year-over-year) the store's songs-per-day average was up 51 percent sequentially."
The analyst attributes the post-holiday growth to new iPod owners and iTunes gift card users, saying he expects another uptick in early 2007. In what he views as a "regular seasonal" trend, Munster noted that the iTunes weekly sales rate declined in both 2005 and 2006 (-5% in '05 and -27% in '06) post-holiday.
"While Apple does not release the financial details of the iTunes Store, the company has indicated that they run the store 'above break-even,'" he told clients. "The iTunes Store, therefore, is a supplement to the iPod as Apple's vehicle to monetize the free iTunes software."
Munster explained that the integration of iPod with the iTunes software along with some profitability from the iTunes Store represent the three ingredients of Apple's digital music ecosystem.
"We continue to believe the shift to online distribution of media is in its infancy," he said. "We estimate 5 percent of worldwide music sales were online in 2006."
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38 Comments
Just to say first post woohoo!!
Of course iTunes sales are going up! The more people see the advantage of buying songs instantly rather than waiting until the next day, when you've probably forgotten what you wanted, the more people use the service. I buy more songs on iTunes than ever, because I mostly don't want the whole album.
I am glad to see this story come out. Now that we have more accurate numbers I changed my mind about what I said regarding the video iPod. With this impressive sales growth by iTunes, it now make perfect sense to transition into video. With iTV and a new video iPod combined with a larger selection of movies with improved quality, we should see similar results in video sales at iTunes. I will be one happy AAPL owner in two years
Forrester should be sued- some poor trigger happy saps sold their stock yesterday based on that report, and now it ran up.
Stock manipulation at its worst.
I didn't realize they released their 2008 figures yet.When I read the forrester report I figured it was shenanigans. It must have been nice for their friends who wanted to get in the stock on the cheap for the big run up. Market manipulation if I have ever seen it. I still don't understand how they can claim to have credit card data from the iTunes store. Apple doesn't even report quarterly sales numbers for the iTunes store and they claim to have analyzed all related credit card data. I don't know where they are getting it from, but I believe that would violate privacy policies. I believe the Forrester report was in the same paper who did the report awhile back which accused Apple of using 3rd world sweat shop labor.
It surprises me that people like Forrester can get away with this. It was the perfect time to drop the stock after a decline in order to let people get in at a great price.
Just to say first post woohoo!!
Of course iTunes sales are going up! The more people see the advantage of buying songs instantly rather than waiting until the next day, when you've probably forgotten what you wanted, the more people use the service. I buy more songs on iTunes than ever, because I mostly don't want the whole album.
"Waiting until the next day", what are you talking about?? If I want a CD, I drive 5 minutes to the nearest Wal*Mart, Target or Best Buy. And since I'm fresh out of college and don't have a full-time job yet, I can't afford anything but dial-up. So in a race, a 15 minute trip to the nearest Big Box is quicker for me than the iTS. PLUS if I was a total audiophile, I could rip the music at a higher bitrate for better quality... something that the iTS doesn't offer.
SECONDLY, this might be just me, but I am ALWAYS finding favorite songs on an album that I had never heard before and hadn't anticipated liking. Like, I'd buy an album for a certain song or two but end up LOVING three or four others even more. As a result, I am unwilling to settle for what the radio sh!ts out these days. It's all-or-nothing as far as albums are concerned.
-Clive