iTunes Moves Up the Charts to Number Two
29 February 2008ITunes in 2007 was the US’ second largest seller of music - including sales of CDs and digital tracks, trailing only retail giant Wal-Mart, according to a report from the market research firm NPD Group.
BestBuy has fallen to third place.
In June 2007, iTunes passed Amazon.com to take the third place. NPD did not say whether Amazon.com has passed BestBuy.
Wal-Mart has so far faltered in its attempts at selling tracks for downloads. Last August Wal-Mart started selling DRM-free tracks from EMI and Universal Music but not from Sony BMG or Warner.
Amazon.com is the only online store that sells DRM-free tracks from all four major labels.
Despite their rapid growth, digital music still does not come anywhere close to equaling the decline in CD sales.
Apple says iTunes has more than 50 million customers and has sold four billion songs, including a whopping 20 million on Christmas Day 2007. Apple did not define what it meant by customers such as how recently someone had made a purchase.
At the urging of the makers of portable media players led by Apple’s Steve Jobs, all the major labels now sell tracks that are both DRM free and better quality than the copy-protected versions.
Tracks of music CDs have never been copy protected. When a CD is inserted in most PCs, the consumer is immediately given a choice of playing or copying the music. It is not clear why the labels think that offering tracks on CDs that are easy to copy will increase sales.
However, iTunes only has DRM-free tracks from EMI. The other labels, perhaps because they resent Apple’s public urgings for DRM free tracks, have not given Apple their DRM-free tracks but licensed them to other online services such as Amazon.com.
Executives from several of the other labels are not pleased that Apple has used their digital music to make lots of money by selling iPods and iPhones.
is not clear why three of the four major labels think that not having their DRM-free tracks available from iTunes, the second largest music retailer, will help their revenues or hurt Apple. Want to bet that most of the tracks that consumers buy from Amazon.com end up being played on Apple gear? The more digital music that consumers have, the more they are likely to buy and keep buying Apple products.
The outlook for the recorded music’s future looks bright for all the participants in the digital media sector except for the labels.
NPD Research findings included:
- There was “a sharp increase” in legal digital downloads, but a 10% drop in total music purchases. After all, why buy CDs with tracks consumers don’t want when they can get just the tracks they do want from the online services.
- Five million more people bought digital music tracks in 2007. The big surge was buyers between 36 and 50.
- An estimated one million prior CD buyers did not buy a CD in 2007. Most of them were in the younger demographics as evidenced by 48% of US teens not purchasing a CD in 2007, compared to 38% in 2006.
It’s not increasing illegal P2P piracy that is costing the labels. The percentage of US consumers using P2P file sharing for music leveled off at 19% during 2007 and legal music downloads increased.
- About 10% of the music acquired in the States is from legal downloads, the report said - most of them from iTunes.
“The continued growth in legal download sites is encouraging, yet the industry struggles to improve the value of each digital customer,” said NPD analyst Russ Crupnick. “With so many baby boomers and gen-Xers entering the market, there are certainly opportunities to sell more digital albums, promote older catalog titles, or create bundles that will raise revenues. In the near term that’s going to be the best means available to narrow the gap on dwindling CD revenues.”
Apple’s Video Venture
On the online video front, Apple is still struggling to make a success of its iTunes store for TV shows and movies.
Last month, the company added movie rentals to its previous purchase only option on iTunes. (Remember Jobs’ saying that people wanted to own, not rent, their media?)
Apple has movie rental deals with 20th Century Fox, The Walt Disney Studios, Warner Bros, Paramount, Universal Studios, Sony Pictures, Metro-Goldwyn-Mayer (MGM), Lionsgate and New Line Cinema.
Users can rent movies and watch them on Windows PCs or Macs, current generation iPods that can play video, iPhones and on a wide screen TV with the Apple TV box.
Apple says it’ll have over 1,000 titles by the end of February including over 100 titles in HD and 5.1 Dolby Digital surround sound.
Apple has recently added the ability to rent movies directly from the TV set - no PC required.
ITunes movie rentals are available only in the US.
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