I'm cramming to get packed for my trip to San Francisco tomorrow, but one of the responses was pretty in depth so I wanted to respond. They say:
David believes that the success of the iTunes Store should depend on iPod sales. There is an obvious connection between the two, yet there is no reason one could not be successful without the other. There is not a single reason that songs have to be purchased from iTunes, it's simply an option among dozens of methods for obtaining music. Furthermore, I know over a dozen people who are/were buying music from iTunes, sans iPod. I also know dozens of people with iPods who have never bought a song from iTunes Store - many buy an iPod just to hold their entire CD collection. The device and the store can exist independently.
These are all good points, and true in an individual basis. But they don't escape the basic fact that iTunes sales growth is actually slower than iPod sales growth, and the number of songs bought per iPod is very low (compared to the number of songs bought per CD player in the 1990s). If there were lots of people without ipods buying music, or if ipod users gradually fell in love with itunes and accellerated buying, the opposite would be true and itunes would be growing faster than iPods.
Second, David claims that the iTunes Store had a period in which they sold 3.6M
songs per day. I have yet to find a way to reach this conclusion.
Pretty simple(minded?). Apple announced sales of 850M songs on 1/10/2006 and 950M on 2/7/2006. They thus sold 100M songs in 28 days. Likewise, you can do a similar anlysis for 10/25/2005 (600M) and 1/10/2006 (850M).
His graphs do a good job of talking about itunes songs per ipod, and I think we can draw roughly the same conclusion. Sales per iPod isn't taking off.
The last point I'll address/agree wtih is the point of averaging over variable periods. It's unfortunate Apple won't release daily sales figures (hah) but I think the key points in this discussion are more around long term trends (e.g., overall itunes sales/time/ipod is at best staying constant, or dropping) rather than point-to-point changes. These work nicely in spite of the churn in data points, and in fact you could make them largely go away by doing moving averages.
This post necessarily talks a lot about apple and itunes, and that's bound to bring on the Apple madness again. In a vain effort to avoid that, let me say again that this isn't a criticism of Apple - they've done a good job of parlaying profitable massive device sales into the #1 online music sales channel.
11 Comments:
re: the number of songs bought per iPod is very low (compared to the number of songs bought per CD player in the 1990s)
Should you not, in the same breath, be saying the the number of songs per iPod relative to songs per CD player would obviously be lower as the only choice in the 90's was to buy CD's that "bundled" 10 or so songs, vs, iTunes unbundled method wherin people can buy one song at a time .
So... a run rate of a Billion songs today really equates to something much much grander.
Would you not agree?
Thanks for the reply David.
For the record, I don't think you're criticizing Apple at all. I've been reading your page since you started and respect your opinions and blogs.
I had clearly missed a couple of numbers announcements, particularly the iTunes milestone release at MacWorld (should have known). That explains the main difference when I tried to recreate your graph. Thanks for clarifying and pointing out the data.
Of course, it covers two very short periods which both include holiday stimulation. A decline after such a rush is expected. The question is how does that trend over the rest of the year.
The long term trend appears to be a slow growth in music downloads with peaks at the holidays. And like you said, no real increase in songs per iPod.
I actually believe iTunes sales are growing slightly faster than iPod sales. Maybe we can revisit the graphs at the end of Jan.
Have a safe trip and enjoy the show.
"But they don't escape the basic fact that iTunes sales growth is actually slower than iPod sales growth, and the number of songs bought per iPod is very low (compared to the number of songs bought per CD player in the 1990s)."
The first isn't a fact and the former is obvious.
iTunes per iPod has grown slowly but steadily from the low teens (early days of the store) to 19 to 20 to 21 to 22.+. Forrester who you trumpet so highly says as much.
"It's unfortunate Apple won't release daily sales figures (hah) but I think the key points in this discussion are more around long term trends (e.g., overall itunes sales/time/ipod is at best staying constant, or dropping) rather than point-to-point changes."
It's unfortuynate and pathetic that you keep repeating this when your own company is afraid to release any number. It's pathetic that a competitor to Apple can't get any useful data without cribbing numbers from Apple press announcements... particularly when you act as if you have performed some thorough data analysis. (You haven't.)
And particularly when you misrepresent the data. The data showns a slow growth, not holding steady and NOT a decline.
"In a vain effort to avoid that, let me say again that this isn't a criticism of Apple - they've done a good job of parlaying profitable massive device sales into the #1 online music sales channel."
This is absurd. I can say that I'm not criticizing you, but that doesn't mean I'm not. You have no data outside of Apple and begrudge them that, you claim Apple doesn't have a "compelling entertainment platform" when they have the MOST compelling platform, you claim you are addressing the whole industry but you haven't presented an alternative... instead your company has copied Apple and you continue to throw potshots.
well, sure, that's cumulative. It *can* only grow. the question is whether the average itunes user buys more or less over time.
CD players, on the other hand, delivered massive music sales on an ongoing basis. 20 years later the average cd buying is still getting 7-9 songs per month.
"the question is whether the average itunes user buys more or less over time."
And? No crap, that's the question. The point is: you don't know and the fact is the evidence suggests that it is slowly growing.
"20 years later the average cd buying is still getting 7-9 songs per month."
Again, and? 20 years later! Duh! It's a mature market that SHOULD be 10x larger than the digital market now.
The question is: since you haven't posited any solutions and since your own strategy copies the existing best alternative, what are you really trying to do?
And David, if you claim that for each iPod user, Apple is selling 2-4 songs per month (a number that you still have not explained very well at all), doesn't that compare well with 7-9 per month?
I think you haven't performed any compelling data analysis and have gotten yourself lost in various sets of differently derived and misleading data.
Look, it's very simple. Not complicated. We've gotten into the weeds, so let's look at it this way.
Between 2/23 and 9/1 of this year, apple sold 500M songs. That during a period when there were well over 50M ipods. That's 10 songs per ipod over 190 days or 6.33 months. That comes to 1.58 songs per month per ipod.
"We've gotten into the weeds, so let's look at it this way."
You have, not I. My own analysis looks very different from yours, and yours is not very well-explained.
"Between 2/23 and 9/1 of this year, apple sold 500M songs. That during a period when there were well over 50M ipods. That's 10 songs per ipod over 190 days or 6.33 months. That comes to 1.58 songs per month per ipod."
So what? Again, you OCCASIONALLY admit seasonality and now you are arbitrarily using poor data (that I had to provide you) from the period where we would expect a decline in iTunes sales to make a point that still is inline with my own views. Isn't 1.58 per month EXTREMELY healthy in comparison to 7-9? That is 22.6%-17.6% of the CD market for iPod users. Everyone else says that digital represents 3-6% of the music market.
However, thanks for clarifying what you are doing, but I don't know it's value at all. The number of iTunes/iPod IS increasing despite your attempts to slice disparate data points provided by your competitor's PRs to suggest that they are less successful than is apparent.
Saying that current iTunes / total cumulative iPod base per month is decreasing is not as revelatory as you think if total iTunes / total iPods is still increasing. It only shows that this is a market transformation that will take over a decade... which is not anything new.
I should clarify that my percents should be divided by 10 (tracks per CD), but again, this remains inline with all rational expectations for this market: between 2.2-1.7% of units and much higher revenue (3-5% if not greater).
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