I'm involved peripherally in a dust-up over iTunes data between John Gruber, Comscore, Rob Enderle, Paul Thurrott, and Forrester research, so I thought I'd comment.
The trouble started with a Forrester research report showing that Apple iTunes music sales had dropped off. I'll give you my data on this in a minute, but first let me point out - even if it's true, it doesn't matter much to Apple. Apple makes essentially no profit off of the iTunes Music Store; the primary value is marketing, and they get that either way. What's more, iTunes has never generated enough sales to create significant "stickiness" or barrier to switching for most users, so there's not much lost there.
Ok, so why isn't this surprising? iTunes sales over time (check here), show a great looking upward trend. A better graph would be songs sold per month, but that has a similar pattern.
The key to understanding this trend is that it's entirely driven by iPod sales. The more ipods there are, the more songs get sold. This is confirmed by looking at songs sold per month per iPod. Here's that graph:
There's an even more important question - what's the buying pattern of an ipod user? Do they buy a lot at first and then stop, or do they keep on buying over time? Until recently, it's been hard to tell. With iPod sales growing 3x year over year, at any given time most iPod owners are new owners who would be buying in either case. This year, that's changed. iPod sales are growing MUCH more slowly year over year, and more of the buyers are replacing exiting ipods, so the proportion of users who are new is much lower. If the installed base is sustaining their buying, then you should see continued sales growth. If users stop buying after the first months, then sales should drop.
That's exactly what the Forrester data showed. Sales dropped in the runup to the holiday crunch exactly as we'd predict. I've actually modeled this out and to see the size drop Forrester reports, you'd have to see a pretty dramatic decrease in buying by an average ipod user - as much as from 10 per month to under 1 per month.
So to be clear about my model. The world before last holiday:
- Every single quarter (even post holiday) shows a huge influx of new iPod owners on top of the Installed base (IB) because the iPod market is growing at 3x/yr
- IPod users buy ~30 tracks on average in the first 3 months they own a device. Then they slow down or stop at around 2 songs per quarter.
- Thus, it looks like iTunes is growing continuously because the huge influx of new (iTunes buying) users offsets the IB falling off into non-iTunes buying status.
The world after last holiday:
- IPod sales hit a wall. Now they begin to grow at "only" 1.3x per year.
- Suddenly the influx of new users (buying 30 songs per quarter) can’t keep up with the dropoff in sales from the IB
- ITunes sales level off or even drop a bit.
By the way; nobody should be very surprised; Apple suddenly stopped announcing momentum on itunes in February...hmmm.....
57 Comments:
Great post Dave :)
Brace yourself for the angry hordes though.....!
I don't own an iPod; I've purchased a large number of titles (albums/songs/video) from iTunes. Where do I show up on your chart?
brichpmr...I am guessing no where. That’s because number of people who do not own an iPod but buy media from iTunes is so low that they don’t get accounted for. In other words they are a non factor at this moment.
Great post by the way! Explains a lot.
Rohit
By the way I will second the “Brace yourself comment”. Storm heading your way. Kind of fun….:)
brichmir -
you would add to the sales numbers and be averaged over the ipod owners, inflating the sales per ipod number.
David,
Do you think the Forrester Research report that iTunes sales are dropping off was correct? You don't really answer that point except to say "even if it's true". Your figures then look at purchases per iPod, but that's not what Forrester looked at.
Scotty
"I am guessing no where. That’s because number of people who do not own an iPod but buy media from iTunes is so low that they don’t get accounted for. In other words they are a non factor at this moment." (from Rohit)...
Rohit, what source can you cite to backstop your assertion?
Seems silly... The non-Apple-fans and the competitors jump on slowing gorwth numbers, but (the growth over the past 5 years has been astronomica):
1. the iPod continues to gain marketshare against competitors even if it's growth has slowed.
http://www.macdailynews.com/index.php/weblog/comments/npd_apple_ipod_gains_market_share_over_holidays/
2. iTunes per iPod continue to grow despite that growth slowing (over the life of the store from 19 to 21+)
http://blogs.forrester.com/devicesmedia/2006/12/is_20_itunes_pe.html
3. The digital music market continues to grow rapidly and Apple continues to have the lion share of the market (they have lost no marketshare at all)
So... if you work for an Apple competitor and don't like Apple, you can point to these statistics which are actually rather obvious and Apple and everyone has never claimed the contrary (I don't know anyone who has ever said iTunes growth would continue to grow expontentially beyond rates of 150% -- did you expext 250% this year? 500% next year?, that digital music would supplant traditional media -- even though digital music continues to grow and CDs continue to erode, or that Apple should have iPod growth rates that guarantees every human being has one in the next two years.)
The question is: why aren't people interpreting this as HORRIBLE NEWS for Microsoft and every other competitor. The numbers apply to EVERYONE! And Apple's numbers still outpace everyone meaning Apple is GAINING on everyone!
Also, the claim that Apple stopped making milestone announcements in February because of any of these trends to ABSURD NONSENSE!!!
(Firstly, they did announce 1.5 billion in Sept. They did this quietly, not in a PR, because it does meet their announcement criteria.)
Apple doesn't make announcements on a regular period, they make announcements for a significant number. That number usually most be double the previous or an order of magnitude greater. Apple isn't going to announce 1.6 billion, 1.7 billion, 1.8 billion....
However in a month of two they are likely to announce TWO BILLION sold, and they will be able to say they sold over a billion in less than 16 months.
(When was the last time you heard any substantial announcement from anyone else in the field.)
funny; I agree with much of what's said. I agree this isn't anything like horrible - or even bad - news for Apple. It's just an indicator of what's going on in the market.
I'd be super interested in pointers to the 1.5B number. In any case that sounds like a reasonable number. If they hit 1.5B in sept, that means they sold 2.6M songs per day, compared to 3.6M per day in the previous period. It also drops the songs/month/ipod to 1.3. That confirms the forrester data that the rate of song sales had dropped.
So... you've got "more accurate" data but didn't know they surpassed 1.5 Bill months ago? Jesus... Pretty absurd for you to not now this, but then to do some quick, simplistic math to show further slowing (despite the fact that we know that Jan-July is the slowest period)...
During any significant Apple event that has time for an update (not to mention any financial reporting updates), Apple provides new data.
During the September launch of Movies for the iTS, they stated they had surpassed 1.5 billion. They do not provide specific enough data to determine whether this occurred in September or previous to the event.
Get on Google and find the video of the event or read a financial report for some more up to date data, please.
Agreed, sad not to have the 1.5B but I must hae forgotten to update my spreadsheet with it upon my return from the event.
The "simplistic math" is actually pretty powerful; I've just got the models ready for additions in spreadsheets to make it easy.
David, that raises the question: when are we going to get ANY milestones from the Zune?
It took Apple 5 days to sell a million tunes, 16 days to sell 2 million, about 4 months to sell 10 million, and about eight months to sell 25 million...
It's almost been 2 months... should we assume (similar to your assumptions about Apple) that the Zune Marketplace is doing poorly, certainly worse than Apple's initial track record?
Oh come on, you have a spreadsheet with some formulas already set... That doesn't make your math powerful...
What makes your math absurd is that you had ZERO data for the last ELEVEN MONTHS and you are now using ONE DATA POINT in the midst of that long period to extrapolate an AVERAGE MONTHLY DOWNLOAD RATE that you KNOW is substantially effected by seasonality. Your math is simplistic and untelling.
Why don't you tell us something about Zune Marketplace numbers... an area where you SHOULD actaully have accurate data?
Good point; ironically I can't announce Zune numbers (they are my employer, after all) but can talk about Apple numbers.
I should stress; the data is the data is the data. Average downloads per day is accurate if Apple is accurate.
I should also stress again that this is all a tempest in a teacup - nobody should care from a strategic standpoint. What is interesting is the academic topic of what's really goine on with digital downloads in general - are they successful? If not, why not? Discuss? Apple is just the foil because they're the biggest and most successful (and thus most public with their numbers).
Of course, there are a bunch of typos and small errors in my previous post, but I feel a need to correct this one: you are using one data point over 11 months to determine an average DAILY download rate.
Also as per , "That confirms the forrester data that the rate of song sales had dropped."
If you are trying to clarify, shouldn't you NOT be saying this. The rate of song sales has NOT dropped. The rate of growth has slowed. Song sales would actually show a decline, and this has not occurred, even according to Forrester.
No, it's not IRONIC. It's pathetic and hypocritical.
Don't claim Apple's afraid to release numbers when they aren't and YOU ARE!
"Average downloads per day is accurate if Apple is accurate."
Who said it wasn't "accurate"? I said it was "simplistic" and NOT "powerful"!
An AVERAGE can be useful and it can be meaninless... Your own charts show large fluctuations over the months, but you now want to claim using one data point to create an average for 270 days is POWERFUL? Simply absurd as I said. It is pretty clear that 2 good months at the end of the year could return the daily average for the year to previous levels, if not greater levels.
ou contrair - both my data and the Forrester data showed that the rate of sales (songs/time period) dropped for the first time ever, from 3.5M per day down to 2.6M per day.
This is getting pretty religious, and frankly it's over something that doesn't matter. If we were talking about foocorp instead of Apple, we'd be able to get on to the interesting topic - why digital downloads in general aren't more successful at generating sustained purchases?
I'm not angry; I'm just surprised you dived into this without doing the requisite homework. You could have read the corrections in the comments to the Forrester blog (to which Bernoff did not respond), or in the blackfriarsinc.com/blog.
First, note that Dec-Jan seems to be a peak selling season for songs. From 12/16/04 to 1/24/05, the rate jumped from .79M to 1.28M. This makes sense since most iPods and gift cards are sold in Nov-Dec.
Second, the iTunes Store crossed 1.5B songs somewhere between 10/6 and 10/26. On 10/26/06, in a PR about some release, they state matter-of-factly iTunes Store sold over 1.5B songs. The last PR related to iTunes was on 10/6/06. So it's reasonable to conclude it was passed somewhere in between.
On 2/23/06, the iTunes Store crossed 1B songs, which we all know because it was the end of a contest. On 7/18/05, the iTunes Store crossed 500M songs, which we all know because it was the end of a contest.
Let's do the math: From 7/18/05 to 2/23/06, which is 220 days, they sold 500M songs, which is a rate per day of 2.27M. From 2/23/06 to 10/26/06, which is 245 days, they sold 500M songs, which is a rate per day of 2.04M. If we assume 10/7/06, then it's 226 days, for a rate of 2.21M.
So yes, the rate decreased slightly from 2.27M to somewhere in between 2.04M and 2.21M. If you recognize that the last period from 2/23 to 10/7 does not include a peak selling season, this rate decrease becomes immaterial.
So yes, I agree that growth of song downloads has slowed, but year-over-year, accounting for seasonality, the rate has increased by 60+% (you can do the math yourself!). Song downloads are definitely not decreasing. And it's not clear that song downloads per iPod users are decreasing, especially as many iPods are being sold into homes with one or more iPods already.
And more importantly, the iTS has also moved on - from just songs to podcasts, TV shows, and movies. So people may have begun to forego song purchases for the other things. The popularity of the iPod with video (note: it's ranked in the top 3 in electronics, not just mp3 players) certainly attests to the fact that people buying iPods today do so for more than just songs.
So Paul singles you out as someone to trust regarding numbers. But your blog here shows that is not really the case.
Forgot to add that at last year's MWSF, Jobs said that song sales between Christmas and New Year's was stunning (or something like that).
So if you're comparing that week to a week in June, then yes, the rate will have dropped. But if you compare the week in June to last year's week in June, the rate will certainly have increased.
I can compare the number of Xbox 360s sold in Nov-Dec 06 with the number that will be sold in May-June 07, and can arrive at a stunning drop in sales and thus, proclaim that the Xbox 360 is dying. And I'm sure you would call me on it. So that's what many are doing; we're calling Forrester on the lack of sense in their comparison.
As per your request for discussion about the success or failure of the market, I'll take a stab:
Yes, it is a success and a clear one. The market is growing at enormous rates... even if that rate has declined from last year (I believe it was around 160% last year and is at 67% this year (without data for Decmber) without looking up hard numbers to confirm...) We should continue to see rates in the high double digits for years. This segment is growing while existing segments are eroding (and since the market is eroding because the industry as a whole is faltering, the growth of this segment is even greater...)
I do not know anyone who actually believed digital would supplant CDs in any near term... 5 years, 10 years, etc... In fact, it would be healthy for the industry and related industries in particular (retailers like WalMart, Virgin, etc...) to maintain non-digital segments for many years to come. As you say it is a tempest in a teapot. If Apple shows a baseline of 2-4 digital purchases per month, that is healthy. To expect users to be buying 6 the next month, and 12 the next month, and 24 the next month would actually be to suggest that the music industry as a whole has turned around and people are buying significantly more music.
We have not reached a point yet where we can claimed the mp3 player market has eased back enough to expect further growth... and if we were seeing further growth, we would probably seeing precipitous drops in CD and other formats.
Conversely, even if it takes a decade or more for digital to supplant CDs, the profits from digital are magnitudes greater for the industry. So in a year or two we've seen it grow from 2 to 3 to 6 percent, and in the next couple of years it will probably increase to 15-20% of their revenue.
There are greater implications in these numbers for the artists and others within the industry (the artists who are getting a small share of high profits, etc...) than there is for the music industry or for the technology companies.
And, again, the implications for the Apple-haters and iTunes/iPod competitors is great. You concede that this is a tempest in a teapot, that these numbers do not impact Apple or many others really... But it does serve the competitors by attempting to draw a poor image for Apple despite the same being applicable to them, if not more so... However, you and others can't help yourselves... you have to make claims that Apple is afraid to show their numbers (when they aren't and you are), that it doesn't look like the industry is progressing when Apple continues to go ahead full bore and you are the ones who are floundering.
Also, you point to the fact that this benefits Apple and refutes many Zune and other competitors arguments, there is almost ZERO lock-in to the iPod. I know you've said this before, but that doesn't stop your company and others from claiming the contrary.
"ou contrair - both my data and the Forrester data showed that the rate of sales (songs/time period) dropped for the first time ever, from 3.5M per day down to 2.6M per day."
Baloney! "But I will try to focus you on the truth here, which is this: iTunes sales are leveling off" There is no decline at all. They admitted they do not have enough data and that the decline they saw was over a 6 month period but they concede that seasonality and other factors could, and probably would, counteract that apparent decline.
"This is getting pretty religious, and frankly it's over something that doesn't matter."
You sure aren't helping. You continue to be misleading and are making several specious claims. You want this to be about Apple.
So, yes, I agree it's all due to seasonality in iPod sales. That's explicit in the modeling. That's the point; previously that hasn't tended to happen.
The INTERESTING point here is that now that the torrid ipod growth is slowing, we're starting to see interesting and revealing trends in the underlying market that are worth looking at. Like that the iPod is the real driver. And that ipod owners don't really buy that many songs. And that they buy in a burst at first and then buy many fewer.
it's not about apple success or failure, or an insult to anyone there. I personally think they're doing as good a job as possible. But if you look past the Apple good/apple bad issues there are interesting trends here.
One more concession - yes, they grew year over year. OF COURSE they grew YOY, driven by iPod sales.
But they dropped intrayear, for the first time ever. And that change is revealing of underlying seasonality and other trends.
"That's explicit in the modeling."
By taking one data point in September to model a daily average for February to September and ignoring the holiday season?
Baloney! This is why Forrester says there is no decline in iTunes sales, that the growth rate is leveling off despite a sales decline over the beginning of the year. You are not helping yourself. You are getting nonsensical.
Maybe you should get your bosses to release your own numbers if you want to make this a truly interesting conversation. I'd imagine you'd start looking at the data a lot differently.
"But they dropped intrayear, for the first time ever."
This is not true at all. Can't you look at your OWN DAMN DATA!!
There have been numerous fluctuations already. This is not the first drop and is not significant.
Please, if you want to HELP the conversation, gets some accuracy and/or integrity.
To clarify the previous post, if we are looking at songs/time period, we know that there was already one other drop last year for the first quarter when looking at a quarterly basis. We do not have precise enough monthly data, but certainly this would show drops and increases. And if we are looking at songs/iPod, we specifically see numerous fluctuations.
Now THAT's a fair comment. It has dropped in the past.
"Like that the iPod is the real driver. And that ipod owners don't really buy that many songs. And that they buy in a burst at first and then buy many fewer."
All 3 of these "conclusions" are just as inaccurate as the data.
1. We do not have good numbers showing what the trends are. As one person here demonstrates, some are using the store without iPods. Forrester does provide an interesting number of 34% of iTunes users purchains 80% of the content. And we also know that iPod users buy more digital music than non-iPod owners. But I don't know what this statement is supposed to mean: that Apple makes more money on iPods than iTunes? Was that ever a question. That the music indsutry could extract more revenue from hardware extortion as it did from the Zune than with tunes? Not likely. That if you are an iPod owner and an iTunes user, you are further ahead in the digital revolution? No kidding.
Really what does this statement say that wasn't already non-obvious and/or has not been demonstrated at all?
2. As I mentioned there is a clear 80/20 rule (or rather 80/34). That the number is 34% not 20% shows that a larger number of iTunes users than should be expected are actually buying a large percentage of songs.
3. This isn't demonstrated at all. Your own averages show it to be about 2-4 tunes per month (or 24-48 tracks per year). Which is a decent rate. (I think the average CD purchaser is at 4-6 or so CDs per year -- or 40-60 tracks per year.)
And thus far there has been no reporting or any attempt whatsoever to guage churn/upgrading in the hardware itself. What is the true userbase of iPods? Moreover, we know that amongst iPod owners households and individuals frequently own greater than 1. One of the benefits to digital is that these individuals/households do not have to pay for music per iPod... Only the music industry would absurdly expect such figures.
"Now THAT's a fair comment. It has dropped in the past."
That's pretty snarky, ain't it? You've already conceded several points, and you haven't pointed out one UNfair or inaccurate statement I've made yet.
Again, are you trying to help the conversation (by being accurate and not snarky) or are you trying to make any comments serve your interest (by being inaccurate, manipulative with the data, and obnoxious)?
I meant to elaborate on "conclusion" #3 but forgot:
What is "new" or inciteful about needing to make an initial investment in a new media and then making periodic purchases subsequent? Again, as we don't have good data about the 34% buying the 80% of content and the other 66% only purchasing 20%, we don't know what % of users have stopped using iTunes, what % made initial purchases and have dramatically slowed but continue to buy, the % that only periodically buys, and the % that do not buy at all... Etc... Again, we are suffering from poorly applied averages... The average continues to get spread out over the number of iPods and the entire history of the iTS's existence... rather than looking at segments of the markets and to what extent they are manifesting different behaviors... But, even if it is true, is this really a new conclusion?
Apple does have data that they have not shared with us recently, such as the growth in iTunes accounts, and the number of songs purchased per account. They did divulge some info at previous events, but they certainly don't have to tell us any of it. Maybe this brouhaha will provoke the Steve to dump a load on Forrester/Enderle/Thurrott by telling (bragging to) us about the success of iTunes.
Anyway, one huge flaw in your chart is that it doesn't capture the number of iPods replacing iPods, and the number of iPods entering a household that already owns iPods (you know, mom, dad, the older kid, the younger kid, the little kid, and on and on). Altho the number of iPods sold is nearing 100 million, there is certainly not 100 million households with iPods. And that does dramatically affect the number of songs sold per month per iPod.
I could assert this fully explains why your numbers show a downward trend over time. If I own 3 iPods myself (and I easily could), there's no reason why I would be expected to buy 3x the number of songs. If my household owns 5 iPods, I would expect my 3 children to be sharing songs, and my wife and I and maybe the children to be sharing songs :).
So you (and Forrester) are going to need much more data to assert anything that we didn't know before.
The more I consider it... looking at your own representation of the data, it seems like the number of downloads per day per iPod could be the same if not greater.
From 4/03 to 4/04 the data is so erratic as to make any trend undiscernable...
Then we seem to start to see an annual periodic trend with slight declines from 05 to 06 to 07...
But how little churn and/or multiple iPods per household would be necessary to account for these slight declines? 20%? 40%?
Analysts say its too early and/or they haven't researched the matter yet, but one analysts estimates 10% of iPod users own more than one (and this ignores households, this is just individuals) and that a much larger % have replaced their iPods.
Certainly with some reports of batteries dying before the expected 2-2.5 year life span, churn began well before 2004. That doesn't account for upgraders at all in that time frame.
And it was mid-2005 when we had a clear spread of iPods (the shuffle, the mini, and the photo iPod)... to support those who would not just upgrade but would use more than one iPod...
So certainly, the figures from 2004 on can be off by 20% and more (if not much more) going forward...
Related links:
One Man Who Purchased 23 iPods:
http://torants.blogspot.com/2007/01/cupertino-i-may-have-problem-pre.html
Using More Than One iPod At A Time:
http://www.msnbc.msn.com/id/16267799/
Yeah, my survey data showed that around 15% of ipods are second or third ipods.
I think this thread is dissolving into oblivion; I think we're both pretty entrenched in our positions; readers should judge.
This post has been removed by a blog administrator.
Buried for Inaccuracy.
Where in your graph are the people like me, that have multiple iPods (3 working iPods in my case) but have not bought a single song from iTunes?
What about those iPods sold in countries with no iTunes Store?
the graphs account for multiple ipods per the estimates above.
the ipods sold in countries with no store are a good point; at this point they are a small minority of the installed base though (US, Europe, Japan, etc... are now covered).
David, what is you accounting for multiple iPod owners? (There are 3 or 4 different estimates, and every analyst reporting any data have stated they have not taken it into account in any of there estimates.)
Are you subtracting 10%? `5% 20%? At which point in time did you start subtracting? Are you subtracting the same amount or are you increasing it as time has passed?
I don't see it as dissolving at all. We're just finally getting slightly more accurate. Strange that you didn't mention you were subtracting from the install base all along. Seems pretty significant if you are the only person doing so.
as of early 2006 I found that you multiply cum shipments by .84 to get to users. This is directionally accurate but is probably +/- 5% or so.
I used that and scaled it back linearly to 2003 (assume 2002 was all new purchases)
So are you attempting to identify dead iPods or multiple iPods or both? Going all the way back to 2003 seems inaccurate to measure either. Plus, if 15% have 2 OR 3, shouldn't it be IB *.15 * 1.5 and not IB * .16.
If you believe 15% having two or 3 is accurate and presumably you believe some have died (and that they all don't die at the same rate), the % subtracted from units sold should be higher and that number should have increased over some period, not remained linear.
Sorry, you said you scaled it back linearly from 2006 to 2003. I misread.
My question still remains about if that is to capture just dead iPods or multiple iPods or both. It seems insufficient to capture multiple iPods...
Good question.
survey 1000 ipod owners and ask them how many ipods they've owned (including multiples, replacemenhts, etc...). The answers:
854 say 1
83 say 2
42 say 3
9 say 4 or more
That's a total of 1182 ipods among 1000 users. Do the math, and I think you'll find that you multiply iPods * 0.85 to get users.
So what you have shown here is that iTunes owners spend about $6.25 a year on music for iTunes to fill in their collection.
Compare that to Napster. In 2006 the average Napster user rents 76 songs a month (500,000,000 downloads / 549,000 subs /12). The Napster users pays on avg. $12.50 a month or $150.00 for the "all you can eat" subscription model.
Now you know why people are rejecting the music rental services. One must spend $150.00 a year and have not added one song to your collection.
Just a little fact to throw into your data:
Year end 03 iTunes per pod 12.5
04 iTunes per pod 20
05 iTunes per pod 20
on 09/30/06 iTunes per pod 22
Good points from all. Now here are some that have been touched on or ignored:
1. I own a Mac but don't own an iPod. I have bought maybe 40+ songs since the iTMS opened. Why so few? Personal income income issues:-(
2. Does anyone think the public has this insatiable appetite for music? I think not. At some point it's just money spent on entertainment (i.e. going to the movies, renting a movie, going to a ball game, etc.).
3. I am 42 and I have a large CD collection. I have ripped most of it to iTunes. I only buy music that I don't already have. And frankly, can anyone really think there is THAT much new music worth buying?
4. iTunes gives us the opportunity to purchase individual songs from an album. Best Buy does not. We have to buy the whole CD. $1 vs. $12.99. I would have to buy 13 individual songs to equal a CD purchased at Best Buy. That tips the scales in favor of CD purchases. Even if I buy a whole album on iTMS, it is usually only $9.99. Less money spend on the same amount of songs.
5. Talk to my 15 year old. She grew up with CDs and has ditched them for music from iTMS. I can't tell you how much music she has purchased from all the iTMS cards she has received. She does have an iPod and she is way above the averages you speak of. I can't remember the last time she bought a CD.
It's all about trends, but it's also about the quality of music out there and where our entertainment dollars are spent. However, looking year over year, which is really the only way you can judge iTMS sales, I just don't see the sales drop.
Interesting the passion around this discussion. I'm not sure that iTunes sales mean much. I'm a passionate music consumer and iPod owner. I rarely buy from the iTunes Store because of the releatively low quality audio files and the DRM which limits the value of the downloads over the long term.
Now I have over 8,000 songs on my iPod, but most of them are ripped from my CDs or downloaded from eMusic. I only buy things from the iTunes Store that I can't find anywhere else, or when I just want a specific song.
So I'm not sure the the success of the iTunes Store matters much given that the majority of Apple's revenue comes from the device itsself.
Until I can purchase non-DRM music of high quality from the iTunes Store, my purchases there shall remain limited.
David, I just realized a serious question: how do you get 2-4 iTunes per iPod? That doesn't make sense at all: everyone has it at an around 20x ratio. Certainly spikes will occur, but how do you get to just 2-4 for over 2.5 years when everyone else says its 19-20? What in your analysis am I missing?
It seems to me that according to you that when Apple sold half a billion tracks over 6 months midyear they must have sold 125 million iPods. They're good... not that good.
- The problem with Rob Enderle is that he attributed the ComScore data to a "paid for by Apple" study that--whoops--wasn't paid for by Apple after all. Then he refused to run a retraction.
- MicroShill Paul Thurrott then repeated the lie, and also refused to point out that Enderle made up the lie.
You posit that sales of music on iTunes are leveling off. Huh? Nielsen SoundScan reports "overall music sales were up 19 percent in 2006. Sales of digital tracks jumped 65 percent over the year before, and digital album sales increased 101 percent."
I would imagine iTunes is getting the lion's share of that activity, so how can it be "leveling off"?
Seriously...can you help me make sense of this?
your confusion is justified. The correct answer at this point is that nobody really knows what's going to happen, but we have some clues.
In my own mind, "leveling off" means that the growth rate is slowing rapidly year over year. That is bad news given that there needs to be insane, torrid growth for the next 10 years for digital sales to make up lost physical/cd sales. previous years looked good, with 300 growth. but now sub 100% growth might be a problem.
In an absolute sense, apple has a runaway hit with the ipod, and is selling millions of units. And those users are buying some music - on average (I claim) 10 songs a month for the first 3 months, then about 1 song a month thereafter. This isn't a very satisfying platform from an entertainment industry standpoint (for those who care about that). On the other hand, I don't really think that's Apple's fault - they tried, they did the service, and it's the most successful thing out there. But it is a fact that the industry needs to deal with.
The next best datapoint will be if Apple announces genuinely stunning itunes sales growth on Tuesday. They'll of course have some huge number (to match the huge number of iPods) but the issues that I think about go deeper. For my purposes, I'll define genuinely stunning as "numbers that indicate the sales per ipod user is growing". That will indicate that the iPod is an increasingly successful platform for entertainment content commerce.
After that, look for riaa sales for 2006.
Linking iTunes growth to iPod growth is frankly bizarre. You don't need an iPod to buy songs from the iTunes store.
I've been using it for years and up until this Xmas past we didn't have an iPod in the house. Now we've two shuffles for the kids which have ZERO songs on from the iTunes store.
The only metric that counts is the number of sales per iTunes store account and you don't know that.
Sales per account is almost certainly lower than sales per iPod since I already corrected for multiple ipods and adding accounts without ipods would just lower the average.
David, will you please explain your 2-4x iTunes per iPod when everyone else says ~20x? Please? It makes no sense to me!
20 is songs per ipod since 2001. 2-4 is songs per ipod *per month*.
" 2-4 is songs per ipod *per month*."
I follow that, but it still makes no sense: you show less than 5 for the entire life of the store. Any average whether it's a day, a month, a quarter, a year, a millenium should get close to 20. Your numbers would never do that. So what are you doing? What is this analysis?
I've done cumulative iTunes/iPods, cum iTunes/iPods per day, average iTunes/iPods, average iTunes/iPods per day, and can't get close to your numbers. If I do cumulative, I get a graph that mostly trends up to around 23 (with some fall off but less data over the past year), and if I do iTunes/iPods per day, I see it spike up and down with highs over 50 per day (post holiday when iPod sales drop and iTunes sales peak) and lows of 6-8 during low points... but with an average of around 20+.
How do you get to 2-4x for any period of time? Please explain.
David, I'm also curious how you arrive at your data point for 4/28 when the iTMS launches? You show the number dropping from slightly less than 6 to around 4.5 in the interval that the store launched and numbers were first released? Shouldn't this go from 0 to 4.5 not from 6 to 4.5?
I think we can put this to rest now. Jobs said Apple past 2B songs, and is selling at a rate of 5 million per day. Further, he said they sold 1B in ten months, which would put the crossing in Dec. So update your numbers, and there's definitely some growth, no matter how many iPods Apple sold over the last quarter.
David, I appreciate what you're trying to do with your sons per ipod per month figure, but is generalistic.
You can't just lump all iPods together. That's like basing all autmobile usage stats on every car buyer in the world, or every car ever sold.
There are many types of iPod users and many of those are not going to be big music listeners, or big music buyers.
I have owned 2 ipods (a shuffle and a 30GB) for the last 18 months and have bought 22 songs and my wife (who uses the shuffle most of the time) has bought about 15 - thus ((15+22)/18)/2 = 1 song per month per iPod.
I have 1200 songs in my iTunes library but have bought no music CDs in that time.
The fact is, as an older guy, I already have on CD most of the music I will ever want to listen to. Also, I don't listen to music much anymore. I do like to listen to audiobooks more than music.
But am I a typical iPod user? Is there a typical iPod user?
If there is and they represent a significant majority, then your songs/ipod/month figure is useful, otherwise it's as useful as using a world miles/car/month to justify building freeways in Fiji, (or if that figure is low, then not building freeways in the US)
Songs/ipod/month is an interesting stat, but not one that can be used standalone to prove or disprove anything significant.
All it tells me is that more people are buying iPods who either have all the music they need, are less technologically inclined, or don't listen to a lot of music.
Lastly, does you figure take into account people replacing iPods (because iPods are made to fail and replace. Grrrr)? (Like I just got a new shuffle this month) How do you determine how many iPods are still in use?
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