iTunes Sales Take a Dive

"i" has been an important letter for Apple. The company literally resurrected itself when it introduced the iPod and iTunes to the world, and the quickly became the leader in digital music and digital music players.

Yet, one half of the "i" team does not seem to be pulling its weight. A new study by Forrester Group revealed that iTunes sales have fallen by 65 percent this year. (Source: theinquirer.net)

The three month study said that 58% of the decrease was due to a fall in the number of transactions, while the remaining 17% was attributed to average size per purchase. (Source: reuters.com)

The huge decline in sales follows a period of solid growth. From April 2004 to January 2006, the number of iTunes transactions grew sevenfold and the average transaction size almost doubled. (Source: reuters.com)

Apple claims that the study results are false. Apple spokesperson Natalie Kerris said that "the conclusion that iTunes sales are slowing is simply incorrect. iTunes sales represent nearly 6 percent of all music sold in the U.S., making iTunes the fourth-largest music retailer." (Source: bostonherald.com)

However, Forrester raises an important issue. If iPod owners continued buying iTunes throughout their ownership, then iTunes sales would be expected to grow faster than iPod sales. But this is not what is happening. (Source: bostonherald.com)

Forrester does admit that while the drop in sales seems quite drastic, its cause is still unknown. Analyst Josh Bernoff said in the report that the sales dive may be temporary. "With only two years of full data, it is too soon to tell if this decline was seasonal, or if buyers were reaching their saturation level for digital music," he said. "During the previous year, iTunes revenue fell after the holidays, but rose significantly in May." (Source: bostonherald.com)

Perhaps it is too soon to pass judgment on the future of iTunes. Then again, if sales do not pick up next year, Apple may have to face the fact that one of their hottest products is getting a bit cold.