Has the iTunes Store jumped the shark?
Forrester conducted an analysis of credit card transactions over a 27-month period and concludes that since January the monthly revenue has fallen by 65 percent, with the average transaction size falling 17 percent.
What's worse is that the previous spring's rebound wasn't repeated this year. According to the report Nielsen Soundscan indicated that the sector suffered from three consecutive quarters of flat or declining revenues.
Earlier in the week The Wall Street Journal reported that online sales of digital music sales appear to be flattening. To stem the tide and compete against Apple's iTunes juggernaut, labels and artists are taking a new approach - selling songs in unprotected MP3 format:
Blue Note Records and its marquee artist, jazz-pop singer Norah Jones, are selling her latest single through Yahoo Inc. as an MP3 -- despite the risk that it may add to piracy problems... EMI Group PLC's Blue Note and other music companies are beginning to think they will have to sell some MP3-formatted music both to satisfy customer demand and to provide access to Apple Computer Inc.'s iPod for songs that are sold by online stores other than Apple's iTunes Store.
The downward trend in digital music sales indicates that the market is getting saturated. Curiously, sales of iPods have increased dramatically. iPod sales quadrupled in the period monitored by Forrester and Apple has expanded iTunes content offerings to include videos and movies.
What can Apple do to stimulate digital music sales? The company is in the peak of the holiday buying season and spending a lot of money on promoting the service to new iPod owners but that doesn't seem to be enough. There are two things that Apple should consider if they expect to get more sales from the iTunes Store: a) lower or tier prices, b) introduce a subscription service for a fixed monthly fee.
Apple has thus far resisted an iTunes subscription model because individual tracks and songs were selling well, but then again Steve Jobs also assailed flash memory music players as too small to be useful not that long ago. To quote Bob Dylan "The times they are a-changin'."
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