Has the iTunes Store jumped the shark?

Has the iTunes Store jumped the shark?

Summary: Industry analyst Forrester Research has released a report saying that Apple's iTunes has experienced a collapse in sales revenues this year.

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TOPICS: Apple
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U.S. digital song salesIndustry analyst Forrester Research has released a report saying that Apple's iTunes has experienced a collapse in sales revenues this year.

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'."

[poll id=12]

Topic: Apple

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95 comments
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  • Poor quality and crippled with DRM

    Sorry, your poll is sadly lacking. The big problems with the iTunes store are as follows:

    1) Poor quality recordings. 128 kb/s is not good enough.

    2) DRM = Death. Why buy a crippled product, particularly when a non-crippled version is readily available at the same price?

    The decline in iTunes sales is yet another example of proof that consumers don't want DRM, they don't want locked down crippled media.
    tic swayback
    • DRM

      DRM will kill anything. Place lower quality recordings on top of that, and it's lethal. It happened to MusicMatch, too.
      ejhonda
    • agreed

      I love my little iPod and is on my 3rd iPod now, but I have never EVER bought a single song from iTunes.

      As long as they are selling songs with DRM on it, I would rather spend 2-3 dollar more and get the CD album and rip it then buy it on iTune store.
      willyu
    • let me expand

      1) exactly as you've said: quality is good for average Joe, but sucks for people with some sensitivity

      2) People used to buy music in iTunes without even knowing what DRM was or that it was there. They did this for years. Now people are starting to get laptop computers, switch systems, etc and they finally realize what was happening the whole time. So many are going back to P2P: why paying and getting screwed, when you have full control for "free"? Many people (including myself) don't mind to pay, but they don't like getting screwed during the process

      3) it only works with itunes. iPods are good, but they are not the only players out there. iTunes is not the only program out there and many people just don't like it.

      4) No linux support. Not many. But I know a few people that have switched to Linux

      This poll is about the worst one I've seen in long time. At least make an option "other reason".
      patibulo
  • Read Carefully! Title is a little misleading?

    Not zdnet! No they would never twist figures or leave out words just to elicite a reaction from readers!
    Note from the links several contridictions, example:
    Revenue from sales down 65%!
    ---- iPod sales up.
    ?
    The truth is not easily found here, I think that the closest we can come is that as you approach 100% the rate of growth flatens.
    Reverend MacFellow
    • Revenue from sales of iTunes is down 65% ...

      ... from January while sales of iPods are up. Where is the contradiction.
      ShadeTree
      • I've already read where this study is in dispute....

        Something about credit cards being the studies only recorded source and iTunes
        having several different sources of payment not counted. Only glanced at it cause I
        figure it's again way too early to make any determinations. I figure there will be a
        dust up...ie like this posting and then sometime for the dust to clear and only then
        will the truth be known.

        Pagan jim
        Laff
        • How does that answer my question?

          If you are going to jump thread at least try to stay on topic.
          ShadeTree
          • Well Iwas thinking since the study is in dispute then it

            MIGHT follow that the 65% number is in question since that is a key part of the
            study's claims. Is that not on topic?

            Besides I'm not one to follow rules...as a rule. ha!

            Pagan jim
            Laff
          • This is what i was talking about Shade ole boy...

            http://news.yahoo.com/s/nm/20061213/bs_nm/apple_itunes_research_dc

            Well dust clouds are still swirling but i can say one thing all this fuss may just be
            good for iTunes as they say no such thing as bad publicity.

            Pagan jim
            Laff
  • Why do you hate Apple so much?

    Ooooo, I HATE you now! I always thought you loved Apple but this article wasn't showering glorious praise on our leader so now I'm going to have to call you an M$ $hill. How much does Bill '$atan' Gates pay you to astroturf and spread FUD about Apple? OOOOO, I'm [b]SO[/b] mad right now!!!!!!! AAAAAARGH!!!!!!
    NonZealot
    • The lady doth protest too much

      Pretty funny, six responses so far, most from iPod owning Mac users, all agreeing with the article and critical of the iTunes store.

      Is your medication wearing off? Are you seeing Mac fanatics creeping out from under the floorboards? Is your obsession overtaking your life? Have you become the very thing you hate, the very thing you rail against? Aren't you a bigger anti-Apple Zealot Zealot than any Apple Zealot around here?
      tic swayback
      • Hehe, analyze responses

        Figures you wouldn't see the Reverend's reply as a "if it doesn't totally praise Apple, it must be typical ZDNet anti-Apple propaganda.

        Then there are all the people who say they still buy CDs, rip them, and transfer them to their device. Yup, the iPod sure changed the way we interact with our art! People are no longer thinking of music in terms of albums and before the iPod, they couldn't rip and sync with their MP3 players. Thanks Apple for giving us a brand new paradigm in "art interaction"! ;)
        NonZealot
        • No, I saw it

          The Reverend's post basically says that the linked articles paint a more confusing picture than is written here, no conclusion drawn either way. He does point out ZDNet's penchant for sensationalism in headlines, but that goes in all directions, MS, Linux or OSX.

          ---Then there are all the people who say they still buy CDs, rip them, and transfer them to their device. Yup, the iPod sure changed the way we interact with our art! People are no longer thinking of music in terms of albums and before the iPod, they couldn't rip and sync with their MP3 players. Thanks Apple for giving us a brand new paradigm in "art interaction"!---

          So the only way people interact with their music is strictly limited to how they put that music on a player? The interaction doesn't involve actually listening to the music in a new way? Is that what you're claiming? That we all just buy cd's, put them on our iPods, then throw them away never listened to? You're not making any sense. Ripping cd's has nothing to do with my earlier statement about interacting with art. Think about changes in listening patterns, and changes in the actual creation of the music and perhaps you'll start to catch on.
          tic swayback
          • Just how is..

            listening to music, in digital format, on a portable device, a new way of interacting with the art? I'd say that has been around since the first portable CD or Digital tape system was introduced..what..in the 80s...90s? I forget.
            I fail to see any significant differences in terms of the listening aspect you are talking about here.
            xuniL_z
          • You missed the full argument the other day

            I'm positing that having the ability to carry one's entire music library around in a portable fashion changes the way one listens to music. I think the ability to shuffle randomly through 80 GB of music creates different listening patterns than having access to one cd or one digital tape. I also think the whole mp3 downloading thing (whether legal or illegal) is causing a shift away from the album and back toward the single.
            tic swayback
          • It's far different...

            It's like having your own radio station. The CD player could only play one album.
            You woul have to burn a special disk to listen to a playlist. (after burners were
            invented.) You could not listen to all your songs at random. You could not rate
            songs to make them come up more or less often.

            Need I go on? I hate to state the obvious here, but you kind of asked for it.

            It is a much bigger difference than it sounds on the surface. Nobody with an iPod
            (or even a decent HD non-iPod) wants to go back to having to pick out albums
            one by one, etc...

            Personally, I don't see how the DRM could be any better or more transparent than
            iTunes. Honestly, if you aren't making more than 10 copies of the CD (or is it 7
            now?) or trying to offload your entire collection to a friend, then you might never
            notice it. If you do want to do these things, then you only need an IQ of 60 or so
            (a bit higher than the typical MS IT person) and google some pages and read how
            to circumvent any of it.) It's not that difficult, and it's brain-dead easy to move
            any purchased song to any device imaginable just by reburning it.

            Furthermore, the quality difference between the original CD, the iTunes AAC and a
            burned and re-ripped copy is negligible. People who whine about this really need
            to get a life.
            comp_indiana
          • The biggest DRM hurdle for me...

            ...other than just the fundamental principle and the idea of renting something instead of buying it, is that I listen to music in my home through a Squeezebox (open source software run bit of lovely high quality hardware that takes music streamed wirelessly from a computer and plays it through multiple home stereos). Squeezebox can not play any Apple (or MS) DRMed file, so I can't listen to any iTunes or Zune purchases in my home.

            ---Furthermore, the quality difference between the original CD, the iTunes AAC and a
            burned and re-ripped copy is negligible. People who whine about this really need
            to get a life.---

            Sorry, can't agree there. I can live with the lower quality AAC files, I just think that since they're of less quality, they should cost less than a CD. A lot less, given the lower cost of production and distribution.
            tic swayback
          • not really

            The conversation had been aobut how iTunes sales had fallen off and most people are ripping CDs for their players. You could do that a long time ago. And yes a playlist indeed. I can see if you don't use MS, they you probably don't work for a living and having a 60BG library of tunes makes a big difference. I personally never have the slack time to listen to more than one, two songs at the most, at any given time. And that's maybe once a day. I love music and it's worth the wait to listen to pure music from an analog source at home late in the evening. Digital music is getting better but it can't compare to vinyl or high quality tape and a great set of speakers. I keep all albums pristine and there are no scratches. The tiny pops on rare occasion are part of the flavor of that full blown richness you can only get from analog. A friend of mine writes and records his own music. He has several synthesizers and only one is an analog moog. And it's of course his favorite of the lot. Man it sounds good.
            xuniL_z
      • Instead of Shakespeare, I was thinking Cervantes

        As in Don Quixote. No need to wait for an actual mac zealot, he just jousts away at those pesky windmills to defend MS's honour! ;)

        Go get em Zealot!
        enduser_z