Apple to Sell 37 Million iPods 2005?

[MacRumors]

http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com)

One analyst believes (http://www.pcpro.co.uk/news/79464/apple-to-shift-37-million-ipods-in-2005.html) that Apple may have sold as many as 37 million iPods by the end of 2005.

'We expect the iPod to continue to be a foundation for growth in other parts of Apple's business, and we expect that by the end of calendar 2005 more than 37 million iPods will have shipped, providing Apple with a greater scope of awareness for various products'

Apple's iPod sales, however, hasn't yet translated into booming music download sales according to this Bloomberg report (http://quote.bloomberg.com/apps/news?pid=nifea&&sid=aHP5Ko1pozM0). According to that article, digital download sales have plateaued and are still a small percentage of total music sales. As a result, music industry leaders are still pushing for a multitier pricing to boost income.

[terrorbite]

I really hope they don't introduce multitier pricing. Knowing my luck, all the music I want will be more expensive :) Also, if they increase the price of albums it will be cheaper to buy the actual cd from stores like Amazon.

And woo, first reply.

[Hertog]

http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com)
According to that article, digital download sales have plateaued and are still a small percentage of total music sales. As a result, music industry leaders are still pushing for a multitier pricing to boost income.

Yes, that will probably increase sales, making songs more expensive..

[cxny]

That's a cumulative total not 2005 only numbers, though still an impressive figure.

[HiRez]

The quote to me sounds like they expect Apple to have sold a total of 37 million by the end of 2005, not 37 million in 2005, which is sort of what the article makes it sound like. That would mean 19 million sold in 2005 to meet that mark. Still optimistic, but not impossible,

[rtdunham]

either you didn't quote the pertinent parts of the report, or the report simply expects accrued sales to reach 37M by the end of 05. The quote you included in your report supports only that conclusion, and not your idea that it's reporting sales in the year. Can you clarify your report?
thanks
terry

[chukronos]

19 million sales seems possible, but not likely, to me, with the iPod shuffle and such.
-Chuc

[nbs2]

I may be missing something. What is the logic in boosting prices? More iPods are sold, music sales are flat. How does multi-tiered pricing, meaning higher prices on "popular" music, boost online sales? I would expect the higher prices to reduce demand online, boosting it at traditional media. Wouldn't the labels be better served by extending the scheme for one year and seeing whether there is a trickle-down from iPod to music sales?

I did go to wal mart and compare the 14.99 for a CD vs. the 9.99 itunes. If price had been the same, I would have opted for physical media. Wouldn't this result in lower income for the labels? I'm sure that I could find a good post in the myriad of threads here that would present a rational economic argument. But, that would take a long time. Any economists want to save me the time and explain it here?

And a final question. If Apple doesn't budge, and the labels don't budge, does that mean the iTMS becomes a video store. And do the labels really think they could win a PR battle?

[jrv3034]

99 cents is the magic number. Don't change it.

And I agree, it sounds like the quote means that a total of 37 million iPods will have been sold by the end of the year since 2001, not just in 2005 alone.

[manu chao]

99 cents is the magic number. Don't change it.


Right, if they want to have multi-tiered pricing why not introduce $0.79 songs?

They could naturally introduce lossless songs for $1.49, although part of that extra 50c would be eaten up by two to three times higher streaming costs.

[cxny]

I may be missing something. What is the logic in boosting prices? More iPods are sold, music sales are flat. How does multi-tiered pricing, meaning higher prices on "popular" music, boost online sales?

I did go to wal mart and compare the 14.99 for a CD vs. the 9.99 itunes. If price had been the same, I would have opted for physical media. Any economists want to save me the time and explain it here?



You are assuming most people will buy a full album, while I personally prefer to hear music the way the artist intended it, most people like to "cherry pick" the hits which means that the labels get only a couple of bucks out of a typical albums songs. I think tiering may be beneficial as long as complete albums don't go above $10.00

[Photorun]

Another thought on this (just an thought, nothing concrete) is at one point is there market saturation for the iPod... that is, when people who have the money or the where-withal to buy one sales will slow down significantly. This same principle has effected computer sales, once the people who would have a computer bought one, aside from the upgrade cycle or the "oooh, shiny" buyers, at some point iPod sales should fall off. Relevant to this it seems many of my acquantances from college students on up to even some peeps in their late 40s have an iPod, at what point is there that people own them will slow the sales.

[arn]

either you didn't quote the pertinent parts of the report, or the report simply expects accrued sales to reach 37M by the end of 05. The quote you included in your report supports only that conclusion, and not your idea that it's reporting sales in the year. Can you clarify your report?
thanks
terry

Yep, I think you're right... looks like it may have been misinterpreted. it appears 37 million all time ipod sales.

arn

[2A Batterie]

Eventually Apple's wild ride on top is going to end unless they change some tactics. Tethering consumers to the iPod and iTunes and the iTMS can only last for so long. Understandably, Apple wants to keep everything exclusive to drive up profits, and it has worked very well so far because other companies can't come up with product that comes close to the iPod or iTMS. I just fear that eventually Apple is going to shoot itself in the foot by not budging on such issues as pricing nd compatibility. I also think that record companies are getting a bit fed up with Apple's stubborn attitude... at least that is the vibe I am getting from music trade magazines. I'm not trying to flame Apple, as I love their products, I just hope they don't end up screwing themselves.

[nichos]

Shouldnt that read "Apple to Sell 37 Million iPods by 2006?" 2005 is already here.

[macmansc]

I think the key in the quotes are to boost profits not necessarily sales. If they can sell songs at $2 each then they don't have to sell as many. I'm sure that the sales would drop though. Increases in costs, whether taxes or prices don't lead to increased sales.

[centauratlas]

Shouldnt that read "Apple to Sell 37 Million iPods by 2006?" 2005 is already here.


It should read:

"Apple to Sell 37 Million iPods by the end of 2005" depending on what they are saying.

Also this is messed up too:
"One analyst believes that Apple have sold as many as 37 million iPods by the end 2005"

It should be:
"Apple will have sold..." (given what the report seems to be saying)

[Stella]

.. and if Music download sales were significant the music industry would be saying the market is mature enough to allow price hikes ( whilst still screwing artists ).

Any excuse to fleece the consumer.

>Quote
According to that article, digital download sales have plateaued and are still a small percentage of total music sales. As a result, music industry leaders are still pushing for a multitier pricing to boost income.

[centauratlas]

just fear that eventually Apple is going to shoot itself in the foot by not budging on such issues as pricing nd compatibility. I also think that record companies are getting a bit fed up with Apple's stubborn attitude.


:)

1. Apple is attempting to keep switching costs as high as possible so that people are locked in. If you have a $99 iPod shuffle, but have $990 (0r $495 or $99 or ...) of iTunes songs that you've purchased you are probably going to buy another iPod when drop the shuffle too many times or whatever. Eventually the hardware will become (for many people, not just those of us who are here) the less valuable part of the equation. I now have 15234 items (songs, audio books etc) in my iTunes library (all legal, most from older CD that my parents had and ones I had) and so the cost of the iPod itself is negligible in comparison to the cost of the music.

Allowing the songs to be played elsewhere would hurt this goal. Later, once the market has matured, they will be able to *judiciously* license to others. Until then, their logic is that they need to keep it closed until they have control on the consumer side, which means control on the record company side. To get the recording industry to change, there needs to be a big player to challenge them.

2. I think increasing prices would be a bad idea for the same reason - you want people to get as much as possible. I believe that was the intent behind the "free music <whatever day>" - get people to download iTunes and get a free song meaning that no matter what, if you buy a non-iPod player you will have to throw out some music. Psychologically not what people want to do.

3. For me, I'll buy CDs if they are pretty close in price to the version on iTunes. If I only want one song from the CD, then I'd do iTunes, otherwise the CD. The problem is that on most CDs there are 2 or 3 songs (at most) that you want. Once the recording industry sees that people usually buy CDs for just a few songs, it will have to change.

4. The CD model is essentially - buy this one (or 2 or 3) song on CD for $11.99 and get the rest of the songs for free. iTunes says - buy this one song for $0.99 and don't get the rest of the songs. That is the key analysis of the difference in economics of the two. It is a LOT easier to just spend $0.99 on one song on a whim than $11.99 on a whim.

The conclusion is that digital downloads have NOT plateaud or anything close too it. The so-called analysis that argues that is as wrong as the ones who thought the VCR would kill TV and movies and...

You'll get a lot more people to buy singles when it is easy and quick and people don't have to worry about losing their music. Other arguments ignore history and ignore human behaviour.

These are the same group who said things like "It's going to be the biggest bust of all time" - Jack Warner of Warner Bros Studios prior to the Dec 1939 release of Gone With The Wind.

[whiskeybravo]

As a result, music industry leaders are still pushing for a multitier pricing to boost income.

OK, don't flame me 'cause I'm just trying to be a little funny here. I guess we can now conclude that the record companies are full of Democrats since they obviously understand that raising the unit price (tax) automatically results in a like increase in revenue. Certainly nothing wrong with this economic model ;)

There is a problem breaking below the .99 level, the credit card companies want nothing to do with it. Higher prices will certainly hurt sales, but the $64 million question is will it hurt them enough to offset the price increase? The record companies want to play with it and see. They aren't interested in a price model based on costs, they are interested in determining what the market will bear. Maybe they are capitalists afterall :rolleyes:

[Maestro64]

What this is saying is the people who are buying ipods are not new customers to itunes. Meaning current Ipod users are replacing the existing ipods and most likely they are giving away or selling thier old iPods with the songs on them. Apple may be selling 19 million ipods this year but most of them are replacements to exisiting users and not going to new users so the growth is slowing instead of growing.

On the point of raising prices this is called the death spiral, companies who are use to yr over yr growth and then see a slowing they raise prices in hope to maintian or improve their profits which most of time have the reverse affect people buy less so they raise prices again to try an maintain until they die.

Face it, the people who listen to music all the time is a finite size, it will only be so big and once everyone owns a song or ipod it will then becomes harder and harder to get them to buy another one.

In the past the music industry would release another CD/Album with a different mix of songs to get to you buy again. In the new model why would you do that, you already own the songs you want without having all the other songs you do not like. This is what the music industry is worried about. Once you have the digital version you will never have to buy the song again.

I have a friend who once owned all his songs on 8 tracks, & LPs and when casettes came out he again bought them all over again plus new ones, Then CD and bought again plus new ones and now he is on mp3s and loves it since he will never have to buy again. Do you think the Music industry likes this.

[manu chao]

:)
1. Apple is attempting to keep switching costs as high as possible so that people are locked in.
.... most from older CD

Your point is correct, however applies only to people who buy a lot from the iTMS, which the majority of iPod owners probably don't do (take you for an example). Anything you have on CD, you can re-rip if you would like to get a different MP3-player.

:)
A) The problem is that on most CDs there are 2 or 3 songs (at most) that you want.
B) It is a LOT easier to just spend $0.99 on one song on a whim than $11.99 on a whim.

While I agree with B), as I myself have done a couple of impulse buys on iTMS, I find it a real drag to listen to any individual songs. Choosing a new song every 3.5 min is not something I want to do, and building my own playlists take way too much time.

[jrv3034]

Right, if they want to have multi-tiered pricing why not introduce $0.79 songs?

I highly doubt they're talking about lowering prices. One should only assume that they mean "popular songs for $1.99, crappy songs nobody wants for $.99."

Maybe a few obscure songs from some band in Mongolia or Iceland would be offered for $.79... ;)

[manu chao]

Apple may be selling 19 million ipods this year but most of them are replacements to exisiting users

Sure, everbody who bought an iPod in 2001-2004 will upgrade it exactly this year. This would generate sales of 18 m iPods this year.

[cr2sh]

According to that article, digital download sales have plateaued and are still a small percentage of total music sales.

And reality kicks in.

[PretendPCuser]

I may be missing something. What is the logic in boosting prices? More iPods are sold, music sales are flat. How does multi-tiered pricing, meaning higher prices on "popular" music, boost online sales? I would expect the higher prices to reduce demand online, boosting it at traditional media. Wouldn't the labels be better served by extending the scheme for one year and seeing whether there is a trickle-down from iPod to music sales?

What would make sense is the reverse of what people are saying. Lower the price on the popular songs, thus lowering your margin, but (hopefully) making up for it in volume. The less popular songs that people don't download that often, well, you need to keep a higher margin on those since they aren't downloaded as much.

<rant>
But wait, that would be business logic, and i forgot the the music industry doesn't work that way. They have a much simpler formula. "Gouge them any which way you can!"

Hey pinheads. Watch online downloads die a slow withering death if you think that raising prices is going to help your bottom line in anything but the short term. Think sustainable business model here. You can't go back to the heyday when you could charge $18 for a CD just cause there's no where else to get your music.

Would be like thinking we could go back to the days of charging pre-dot bomb prices for logos, web sites and graphics. That time is done. Get over it. Adapt.

</rant>

[cubist]

... most people like to "cherry pick" the hits which means that the labels get only a couple of bucks out of a typical albums songs. ...

Which explains why singles have disappeared from record stores. Long ago, singles were the main product, in the days of the 45. They sold for around 89 cents when they were discontinued. They were replaced by singles cassettes, which had crappy quality but sold for around $3. The record companies avoided CD singles (3") like the plague, since they now have people thinking albums are the way to buy music.

The story of the record business is the story of brazen greed, ripping off the artists and consumers at every step. It is not a new story, it has always been that way. I was surprised to see a slam of the record companies in Elvis' 1957 movie "Jailhouse Rock".

Boycotting their products won't help. Nothing will help, really. One thing we can do is rub it in their faces at all times. If you know someone in the record industry, sneer at them and insult their business at any opportunity.

[Lertie32]

Apple's had great success with the iPod and I think the market may slow down, but the cycle of people buying and upgrading every few years will continue at least a certain amount.
:cool:

Again, I think that tiered pricing is a stupid and bad idea. It's the perfect way to drive everyone back to P2P. Apple has a pretty reasonable music resource model in the iTMS.

Record companies are just greedy and manipulative. Computers, self-recording and self-publishing, and the internet have changed their industry and they can't come to terms with it. Apple probably saved them a lot of money already with iTMS profits, but they have come up with no solutions or industry evolutions of their own. And now they're still whining? Not our problem, so don't make it ours.
:mad:

iPods rock and even though they may not necessarily continue to fly off the shelves, they've become a fairly solid staple item in today's world of tech gadgets.
:cool:

[Cinch]

How many Sony Walkman (the cassette variety) had been sold since its introduction in the 70s? I think this is a good standard to compare total iPod sale. Off course we must factor in the world population of today v. that from the 70s to the early 90s.

Will the iPod achieves a critical mass in the world? 70 millions? 150m? I hope Apple will continue to set trends through innovation by offering compeling products. Personally, I can definitely see myself buying another iPod when the battery goes belly-up on this one.

Cinch

[AlmostThere]

The conclusion is that digital downloads have NOT plateaud or anything close too it. The so-called analysis that argues that is as wrong as the ones who thought the VCR would kill TV and movies and...

I don't think there is much analysis going on, they are simply quoting figures.

From TFA:
Digital music sales in the U.S., the world's biggest market, have hardly budged in the past five months. They almost tripled to 6.6 million downloads a week in the year through May, and were at 6.7 million in the week ended Oct. 23, according to Nielsen SoundScan, a unit of Dutch media company VNU NV.

In Jan sales were 2.2 million per week.
In May sales were 6.6 million per week.
In October sales were 6.7 million per week.

How doesn't that suggest a plateau?

[Maestro64]

How many Sony Walkman (the cassette variety) had been sold since its introduction in the 70s? I think this is a good standard to compare total iPod sale. Off course we must factor in the world population of today v. that from the 70s to the early 90s.

Will the iPod achieves a critical mass in the world? 70 millions? 150m? I hope Apple will continue to set trends through innovation by offering compeling products. Personally, I can definitely see myself buying another iPod when the battery goes belly-up on this one.

Cinch
Sony sold 135 million walkman type devices since their inception. In business school we did an analysis of the mp3 market based on what Sony did with walkmans and the Ipod and others are are following about the same trend just a bit faster mostly due to market acceptance and the fact that all the people who grew up on rock and roll now have money to spend in this technologies. The total market size for these types product is not that large and most of the 135 million that sony sold were yr over yr replacements of older models. Music players is not something that everyone feels they need unlike a phone and now mobile phones. More TVs and Radios are sold then Computers.

Our estimated at the time based on current population in the US was about 20 million people would buy mp3 players which is about where Apple is at right now. My number may be a little low since we did not factor in the WOW factor of an Ipod and the icon symbol of having one.

[dontmatter]

I don't get it. If something (music downloads) doesn't sell well, you.... raise the price? What on earth?

Dissapointing, though, that it looks like itms isn't going to grow much more for a while. Makes it really ironic, with all the rush to get into the digital downloads market before any profits had been made, all the worries that when Sony or Microsoft or even Napster worked hard, apple would lose the market that someday soon WOULD BE the way music is purchased.... it was just taken as a given.

But no worries for mac people, in my book- it never was intended as a money maker, just an ipod booster, and 37 million sounds like enough ipods to me. (though, apple was behind ipod predictions this last quarter, what makes them think they'll be so incredible next year? Sure, the nano is hot, but now if they don't sell the astounding number of 37 million, it will be a dissapointment).

Furthermore, mac sales look helthy, and Dell... is chasing after apple's market!

[Maestro64]

I don't think there is much analysis going on, they are simply quoting figures.

From TFA:
Digital music sales in the U.S., the world's biggest market, have hardly budged in the past five months. They almost tripled to 6.6 million downloads a week in the year through May, and were at 6.7 million in the week ended Oct. 23, according to Nielsen SoundScan, a unit of Dutch media company VNU NV.

In Jan sales were 2.2 million per week.
In May sales were 6.6 million per week.
In October sales were 6.7 million per week.

How doesn't that suggest a plateau?

Because you have to look at the overall trend, just not what is happening right now. They look at growth rates, in order to do that you need all the data from day one and plot the information. Once you have this then you most likely will see a flatting of the curve, it is no longer accelerating up at the same rate.

[bretm]

I highly doubt they're talking about lowering prices. One should only assume that they mean "popular songs for $1.99, crappy songs nobody wants for $.99."

Maybe a few obscure songs from some band in Mongolia or Iceland would be offered for $.79... ;)

That seems idiotic. Crappy band CDs in the store are often $7.99. And that's for full 44.1 Aiff audio, no DRM crap.

So what's gonna happen with this DRM. I just updated to tiger and when I launched iTunes it said I had to authorize this computer. Since this is my thirds OS upgrade, it now says I've authorized 3 out of a possible 5 computers! I've only got the one computer. What happens when I upgrrade a again, then get a new computer or something? I think many people may be in the same boat and discover they''ve basically just deactivated thousands of dollars of songs. There's gonna be some pissed folks out there in a year or two.

[lopresmb]

thats a lot of iPods, good for Apple, the more money they have, the more they can put into making newer batter faster sweeter machines:D

[Maestro64]

Boycotting their products won't help. Nothing will help, really. One thing we can do is rub it in their faces at all times. If you know someone in the record industry, sneer at them and insult their business at any opportunity.

Boycotting them may not work, but the pyridine shift soon will. Right now the music industry makes money because they control distibution. Remember Rockefeller, he made billions controlling the distribution of oil and then the US broke up his deal since no one could figure out a new way to distribute oil.

Well this is not true for music now. Soon you will see musicians selling music directly to you. I bet right now as part of the ITMS and music industries deal is Apple has agreed not to do deals directly with artists. The only question I have is the Madonna deal, it appears the deal is with her but I do not know who owns the rights to all her songs

[Maestro64]

Something to keep in mind about how the music industry makes money. They pay a per song royalty to the artist no matter how much the song sells for. In the old model they had cost of distribution, making the CD, trucking it somewhere, paying stores to place ads about the new CD and paying radio stations to play the song. In the ITMS model they pay a royalty to the artist and collect pure profits, they do not have all the other overhead costs for what is sold on ITMS. So the more they can raise the price the more they take home in bonuses.

[JohnHummel]

Shamelessly stolen from my blog earlier today, but it seemed appropriate :).

When I was a young man, there were things called "records". I remember them - they were flat, black, and when you put them onto the record player with it's little diamond needle, they would play songs like "Macho Duck" or hits from "Sleeping Beauty". (Hey, I said it was when I was young. Like, six. Give me a break.)

Records had been around for a long time - since the turn of the last century, at least. The problem was: they weren't very portable. So some clever folks figured out a way of getting music not from analog grooves in a record, but from analog recordings onto a tape that could record electromagnetic information - and thus the 8 track was born.

So what happened? Everybody rebought their music! Obviously, they couldn't play their old records in their cars, so they started buying 8 track cassettes. I think I once saw an 8 track - they were big, and could only store a few songs. But people were rebuying music they had already bought so they could play it on the new systems.

But then something *better* came along: the cassette tape. Smaller, able to fit up to 90 minutes of music at a time! Wow! Now you could actually carry your music with you in your pocket. That is, if you rebought all of the music you had already paid for so you could have it on cassette tapes.

The problem with cassettes, though, was the sound quality. So when the CD format came out, it was a boon for quality and storage. No more bulky cassettes - CDs were in, and they were smaller and way cooler. It took some time for them to be as portable as the cassette, but hey - they were better! Of course, you had to - say it with me, my little clucks - rebuy all of your old music.

Now we're in the next phase. Instead of buying CDs in the store, now you just do it from home, over the Internet. It didn't start with the iTunes store, but right now that's how most people get the music online. CD sales are still bigger, but I expect that to change over the next 10 years. The audio quality isn't as good, but for most people who aren't audiophiles, who cares? It's good enough, and instead of shilling out $15 per CD for the one song you want, it's just $1 for the one song you care about - or $9.99 for the whole album. It's a deal!

Except - and here's the rub - you don't have to rebuy all of your old music.

The reason why the music industry has grown so large and rich was because of not talent or marketing, but because technology. Every 10 to 15 years, people were rebuying their music all over again. So a recording studio could stand to make money 4 times off of the same recording - the first time probably paid the bills, the rest was just gravy.

The recording industry is going nuts, saying that they aren't making enough money off of music sales. The problem is, they have it wrong. They're probably selling the same amount of music as before - but people aren't rebuying what they already have. In my case, I have a library of songs collected over the years, as do most people who listened to music over the last 20 years.

To move my song to digital, it's "insert CD, push a button to copy into my computer, plug in iPod (or your preferred MP3 music player". Done. Simple. Whole companies now exist to drive to your house and help you rip your music to MP3 format for you. (Seriously.) And how much money does the music industry get?

Nada.

I expect the next 20 years are going to be hard on the recording industry. Not because of piracy - though that will still exist - but because they aren't getting the same boom as people rebuy old music. Of course, there is a simple solution:

Put more music available for download.

I know what you're thinking. "But John - didn't you just say that people aren't rebuying their old music?"

That's right - I am. But not everybody owns the music they want. Take my case. I was sitting at home when My Lovely Wife (MLW) turned the channel to VH1's "I Love the 80's 3D". Some song came on - I think it was "Kiss Me Deadly", and then Ozzie Ozbourne's "If I Close My Eyes Forever". I remember those songs.

5 minutes later I was $1.98 poorer after I hopped on the iTunes music store. Why? I didn't already have those songs in my library!

There are tons of music rotting in record company warehouses just waiting to be unearthed again. Jazz recordings, old rap, folk songs, comedy skits, radio dramas - things that lie forgotten. Why should they? Put it out online, for $0.99 apiece. and people will buy it. Not everything will sell, of course, but based on the "long tail theory" of economics, everything will sell at least once, making it worth the effort.

Even that won't stave off the record industry shrinkage to come - but it will at least soften the blow, and give them a chance to decide what to do. Odds are, the world is going to become a lot more fragmented for a time as independent music publishers - now free from having to push their CDs into every music store in the country, when they can just sell it online and bypass all of the middle men between them - start to rise, and the market will become more even until the next round of consolidations happen.

Either way, the record industry is just going to have to realize that the days of massive profits every 10-15 years are over. Things are moving to digital, and they aren't going back.

[alandail]

Another thought on this (just an thought, nothing concrete) is at one point is there market saturation for the iPod... that is, when people who have the money or the where-withal to buy one sales will slow down significantly. This same principle has effected computer sales, once the people who would have a computer bought one, aside from the upgrade cycle or the "oooh, shiny" buyers, at some point iPod sales should fall off. Relevant to this it seems many of my acquantances from college students on up to even some peeps in their late 40s have an iPod, at what point is there that people own them will slow the sales.

when did computer sales ever "fall off"? Last I checked, they were still growing at 15%+/year. Unless by "fall off" you mean slower growth.

[Hiroshige]

1. These analysts predicting 10 million+ iPod sales this quarter may be setting Apple up for a fall if it doesn't meet these expectations. I am worried about the iPod nano scratch issues and the screen damage issues hurting sales. I think Apple should have continued to offer the iPod mini. More choice is better and it was still selling.

2. iPod sales could continue well past the 20 million people and 135 million unts that the M.B.A. said is the number that his group expected would purchase the product. This could happen IF Apple continues to add value and features to the product. Add satellite radio and a voice recording feature to the iPod (either or both) and that will open up new markets.

Also, there may be a larger market of potential consumers today than in the 1970s-1980s: add in the upper and middle classes of China and India, and the former Eastern Bloc, for example.

3. It just seems that downloading music is going to be a major component of sales- not the ONLY way music is sold, but maybe accounting for over 50% of sales. Because a) why would you want to drive to a record store when you could get a bigger selection on your computer? b) even in a city, iTunes is going to have a bigger selection than any 3 record stores.
Somebody just wrote an article and book called "The Long Tail" about part b.

4. Pricing: Everything Steve is saying is correct, although I wish he would be more diplomatic in how he says it! Often if you criticize people as harshly as he has, they dig in their heels and refuse to change.

[Maestro64]

2. iPod sales could continue well past the 20 million people and 135 million unts that the M.B.A. said is the number that his group expected would purchase the product. This could happen IF Apple continues to add value and features to the product. Add satellite radio and a voice recording feature to the iPod (either or both) and that will open up new markets.

Also, there may be a larger market of potential consumers today than in the 1970s-1980s: add in the upper and middle classes of China and India, and the former Eastern Bloc, for example.
The 135 million is total over the life of the walkman history. Those are total sales from Sony themselves so it is world wide. The numbers I quoted for mp3s was US since US data is easier to come by since they are many people collecting that data.

You could expect Apple to sell as many iPods maybe a little more over its history as well, Sony walkman is 25 yr history, ipod maybe only a 10 or 15 yr history due to rapid change in technology.

[AlmostThere]

Because you have to look at the overall trend, just not what is happening right now. They look at growth rates, in order to do that you need all the data from day one and plot the information.
10 months for an industry that is barely 3 years old is not really "right now", is it?
Once you have this then you most likely will see a flatting of the curve, it is no longer accelerating up at the same rate.
Er, so you agree that there is a plateau ... or not? I was curious how the previous contributor felt that there was NOT a plateau and different conclusions should be drawn, given the sales figures at 5 month intervals show ~2.2 -> 6.6 -> 6.7, giving growth rates of ~3 and ~0.

Now, the figures are only for download sales in the US, which might be criticised but subscription services in general don't seem to make up a large part of the market and I wonder if there is good reason to suggest that European or Antipodean markets should differ in the trends. Furthermore, while iPod sales are increasing, the article points out that fewer songs are being sold on a per iPod basis, suggesting that lock-in is not a strategy (or effective one, anyway) of Apple, at around $15 per player.

[solvs]

So what's gonna happen with this DRM. I just updated to tiger and when I launched iTunes it said I had to authorize this computer. Since this is my thirds OS upgrade, it now says I've authorized 3 out of a possible 5 computers! I've only got the one computer. What happens when I upgrrade a again, then get a new computer or something? I think many people may be in the same boat and discover they''ve basically just deactivated thousands of dollars of songs. There's gonna be some pissed folks out there in a year or two.
Well, first of all you're supposed to de-authorize first. :p If you are just doing a simple upgrade to the same machine, it shouldn't have counted as a new one. If you did (and even if you didn't, like if you did a full re-install), and it thinks you have 3 computers, you can just e-mail Apple and they'll reset it for you. They give you some warning about making sure you check first, and de-authorize, and don't steal music, and whatever... but they'll do it. You re-activate your Mac and boom, back to 1 authorized computer. Not really that hard, it's right there on the support page. ;)

[Maestro64]

10 months for an industry that is barely 3 years old is not really "right now", is it?

Er, so you agree that there is a plateau ... or not? I was curious how the previous contributor felt that there was NOT a plateau and different conclusions should be drawn, given the sales figures at 5 month intervals show ~2.2 -> 6.6 -> 6.7, giving growth rates of ~3 and ~0.

Now, the figures are only for download sales in the US, which might be criticised but subscription services in general don't seem to make up a large part of the market and I wonder if there is good reason to suggest that European or Antipodean markets should differ in the trends. Furthermore, while iPod sales are increasing, the article points out that fewer songs are being sold on a per iPod basis, suggesting that lock-in is not a strategy (or effective one, anyway) of Apple, at around $15 per player.

I can not comment on whether a plateau is occuring or not without seeing the plotted data and what information they are including. For ITMS it is easy to know how many songs are being downloaded, however with subscriptions it really had to know how many songs are being access.

[ioinc]

I may be missing something. What is the logic in boosting prices? More iPods are sold, music sales are flat. How does multi-tiered pricing, meaning higher prices on "popular" music, boost online sales? I would expect the higher prices to reduce demand online, boosting it at traditional media. Wouldn't the labels be better served by extending the scheme for one year and seeing whether there is a trickle-down from iPod to music sales?

I did go to wal mart and compare the 14.99 for a CD vs. the 9.99 itunes. If price had been the same, I would have opted for physical media. Wouldn't this result in lower income for the labels? I'm sure that I could find a good post in the myriad of threads here that would present a rational economic argument. But, that would take a long time. Any economists want to save me the time and explain it here?

And a final question. If Apple doesn't budge, and the labels don't budge, does that mean the iTMS becomes a video store. And do the labels really think they could win a PR battle?


They are trying to increase income... not sales.

The thought is that they can increase the price without significantly lowering sales.

100 songs sold at 99 cents = $100
90 songs sold at $1.25 = $112.50

extend that out to big volume and you are talking big money.

The trick is to find the best price point.

[savar]

Yes, that will probably increase sales, making songs more expensive..

Yet another industry that just "doesn't get it".

If all markets were structured like the music biz, this would be a dismal world.

[ioinc]

Yet another industry that just "doesn't get it".

If all markets were structured like the music biz, this would be a dismal world.

Yeah... they don't get it like Apple does not get it with the price they have for the iPod. :eek:

Apple could sell way more if they just dropped the price (and lowered their profit margin).

But they dont... why? Because they make more money at the higher price point.

99 cents may not be the most profitable price point for online music. They may be correct.

[Maestro64]

They are trying to increase income... not sales.

The thought is that they can increase the price without significantly lowering sales.

100 songs sold at 99 cents = $100
90 songs sold at $1.25 = $112.50

extend that out to big volume and you are talking big money.

The trick is to find the best price point.

You are exactly right here, ideally they want to find the point of max profits, messing with the prices to see at what price point people will stop buying.

This works well consumable product, but the electronic industry has not been very successful with this pricing method. The main reason is because we all can shop around and price compare and there is always someone willing to undercut the next guy and you can have it shipped to you.

It this much harder to do with consumables, you are not going to cross the country to by gas at the cheapest station in the country or go to cheapest grocery store.

I think the music industry will have the same issue since every subscription service is will to under cut the next. And as we all know we can get our music free if we want.

[Multimedia]

Sure, everbody who bought an iPod in 2001-2004 will upgrade it exactly this year. This would generate sales of 18 m iPods this year.Nope. Still happy with 2G 20GB native 6 pin FW model. Still holding out for the 3-4" widescreen video iPod with 80GB HD coming next year. :p

[Thanatoast]

Eventually Apple's wild ride on top is going to end unless they change some tactics. Tethering consumers to the iPod and iTunes and the iTMS can only last for so long. Understandably, Apple wants to keep everything exclusive to drive up profits, and it has worked very well so far because other companies can't come up with product that comes close to the iPod or iTMS. I just fear that eventually Apple is going to shoot itself in the foot by not budging on such issues as pricing nd compatibility. I also think that record companies are getting a bit fed up with Apple's stubborn attitude... at least that is the vibe I am getting from music trade magazines. I'm not trying to flame Apple, as I love their products, I just hope they don't end up screwing themselves.I think the reason Apple is so restrictive is that they don't want to sell you a music player, they want to sell you a whole system. If they provide the computer, the OS, the player, the music store and the jukebox, they control every piece of the experience from beginning to end. This has so far worked pretty ok.

As for song pricing, I can see people paying $1.50, but not $2. I would also say that I've bought about $60 worth of music that I never would've if I hadn't found it on the music store. So the music industry got about $40 from me that it never would've seen otherwise. But hey, if they wanna shoot themselves in the foot...

[bigandy]

So what's gonna happen with this DRM. I just updated to tiger and when I launched iTunes it said I had to authorize this computer. Since this is my thirds OS upgrade, it now says I've authorized 3 out of a possible 5 computers! I've only got the one computer. What happens when I upgrrade a again, then get a new computer or something? I think many people may be in the same boat and discover they''ve basically just deactivated thousands of dollars of songs. There's gonna be some pissed folks out there in a year or two.

you're meant to DEAUTHORISE your iTunes before selling / wiping your computer, which goes to the apple store and says "ok that machine doesn't exist now" and you're back to 5/5 or 4/5.

if you get stuck and haven't done this, then phone Apple and they'll reset it. but you'll have to add your authorised devices again.

[Lacero]

If they want to increase music downloads, they'll need to lower prices to 79¢ and strip off DRM.

That is why I am increasingly buying my music from allofmp3.com

[gugy]

I think increase album prices is complete suicide. For me I only purchase one album on itunes so far. I rather pay few extra bucks and get a physical used cd with better quality and artwork.
IMHO albums actualy should be cheaper maybe $5 to $7 that way it would promote sales. If I go to Amoeba Store and buy an used cd I'll pay sometimes less than $9 and get a cd. I rather do that than buy at Itunes.
The biggest perk of Itunes is when you just want to buy 1 or 2 songs for an album and discover new music.
The music industry is loaded with greed bastards. CDs should cost $7 by now and not $18 to $22. that's a total rip off. And they don't understand when people rather go to piracy. Itunes is a great legit way to buy music and they still not happy about it. Screw the music industry! Viva Itunes and musicians!

[ioinc]

You are exactly right here, ideally they want to find the point of max profits, messing with the prices to see at what price point people will stop buying.

This works well consumable product, but the electronic industry has not been very successful with this pricing method. The main reason is because we all can shop around and price compare and there is always someone willing to undercut the next guy and you can have it shipped to you.

It this much harder to do with consumables, you are not going to cross the country to by gas at the cheapest station in the country or go to cheapest grocery store.

I think the music industry will have the same issue since every subscription service is will to under cut the next. And as we all know we can get our music free if we want.

Correct.

But what is the most profitable price point for the record industry.

Odds are that apple did not hit the perfect price point right out of the box. (life just does not work that way)

It may be wise to test 75 cents a song as well as $1.25.
For obvious reasons the industry is more eager to test the higher number.

Unless you test, you don't know what will happen.

[solvs]

That is why I am increasingly buying my music from allofmp3.com
Legalities aside, do you really think any of your music goes to the artist? You might as well d/l from P2P. Not that I'm advocating that.

[Maestro64]

Correct.

But what is the most profitable price point for the record industry.

Odds are that apple did not hit the perfect price point right out of the box. (life just does not work that way)

It may be wise to test 75 cents a song as well as $1.25.
For obvious reasons the industry is more eager to test the higher number.

Unless you test, you don't know what will happen.
I think the real issue is this, as someone pointed out records use to be sold by the single for about $.45 when they finally were taken off the market infavor of LP which you got 6 to 8 songs and they charged you more than 6 to 8 times that of single. The music industry try to telling us you paid more to get more since they were giving more than one song.

The problem as we all have pointed out is most of those songs were worthless to us. In a sense you were now paying more for one or two songs you liked verses what you use to pay for the single. The music industry also new this and reaped the benefits of your willingness to pay more for a single song. With that in mind the music industry has placed a higher value on a single song on CD since we all have been willing to pay more in the pass. However, this is only true since they were a monopoly, in the past there is only one sourse for song, it was the record lable. If you like the band you had to pay the record label to get the music, it was not like you can shop around to different labels to get the songs you wanted at the lowest price

So the real price for a single is probably $.45 but the music industry perception is more like $4 or $5 since this is what you have been forced to pay to get the one or two songs on an entire CD.

[Maestro64]

Legalities aside, do you really think any of your music goes to the artist? You might as well d/l from P2P. Not that I'm advocating that.
I advocate that the artist should start to distribute thier own music online, let get rid of all the middle men, they are just driving up the costs and this way we all get to reward the artists we like not the one once the labels want to promote, this way the likes of Britney and Back Street boys would never exist.

[winmacguy]

I really hope they don't introduce multitier pricing. Knowing my luck, all the music I want will be more expensive :) Also, if they increase the price of albums it will be cheaper to buy the actual cd from stores like Amazon.

And woo, first reply.
Well considering I submitted it for posting, I thought I should let someone else get first reply;)

[manu chao]

I advocate that the artist should start to distribute thier own music online, let get rid of all the middle men, they are just driving up the costs and this way we all get to reward the artists we like not the one once the labels want to promote, this way the likes of Britney and Back Street boys would never exist.

Yes, and farmers should market their produce directly to the producers as well in order to cut out the evil 7/11s.

[mugwump]

oops, double post.

[mugwump]

Digital downloads from Apple are 6% of net revenues of Warner Music Group. This is not a blip, it's significant source of revenue and it's only growing.

Does anyone know if the Billboard chart includes digital song purchases? If it does, how can any label pull out and drop all of their artists down the charts?

[p0intblank]

Damn... 37 million iPods. Now that is what I call a success. :) As for the multitier pricing, I was never fond of the idea. A flat fee of 99 cents is already a huge success, so why change it?

[Lertie32]

OMG...
And now I know I am NEVER buying another CD again!
:eek:

This link is about a news alert that Sony BMG (and maybe others?) is installing SPYWARE on its CDs!
What the hell???
:mad:

It seems centered around Windoze, hidden files, and "manipulates the Windows core processing center, or "kernel," to make the DRM [digital rights management] almost totally undetectable on Windows systems.

These DRM files are almost impossible to remove without fouling Windows systems and could be used by malicious hackers to hide their own programs..."

Perfect. Now we've got the music industry resorting to hacking and spyware tactics. How much you want to bet that these do or will soon have interaction with UNIX/Mac operating systems too?!
:mad:

If a company is ALTERING someone's OS and screwing around with system security they should be SUED and SHUT DOWN. Just wait until a hacker stays up tonight and writes some great new virus that takes advantage of these "rootkits" and starts a rampage of identity theft!!

Sony BMG is also the company that was at the root of the "payola" scandal this summer. BOYCOTT SONY BMG!!!

http://www.foxnews.com/story/0,2933,174334,00.html

Maybe I'm ranting, but this could have MAJOR ramifications and at the very least is one of the most reckless and unethical business actions I've seen in a long time!
:mad: :mad: :mad:

[Aliquis]

Aw yeah. I mean, just look at the specs on all the videos they sold in just the short time they were up. And that's to a lot of people who don't even have video pods yet.

[Maestro64]

Yes, and farmers should market their produce directly to the producers as well in order to cut out the evil 7/11s.

Your example does not work, farmers gain larger market share by using a distribution channel plus and an apple is an apple no matter where it is grown or the truck it is driven on. Apples have low precieved value so people will not pay extra. unless you are talking to vegan who pay extra to make sure their apples was not grown with chemicals.

In the startrack future when food replicators exist then you can cut out the middle man.

[bousozoku]

It's pushed the stock price, along with a positive day to almost $60, which with the two splits, would put the price at almost $240 in 2000 terms, after the original iMac made such a change.

[dejo]

I can get the top-selling CDs from Amazon for $7.99 - $9.99.

Here are the top two albums for ITMS US and their prices on Amazon US:

All That I Am - Santana : $10.99

Wherever You Are - Third Day : $13.99

Also, here are the top two albums from Amazon US and their prices:

Thanks For The Memory...The Great American Songbook IV - Rod Stewart : $13.29

Sings the Peggy Lee Songbook [DualDisc] - Bette Midler : $13.49

How are you getting these from Amazon for $7.99 - $9.99?

[ack_mac]

I think having multiple price points for digital music downloads would be a big mistake by the record companies. The .99 price point is symbolic (under a buck) and psycological. When you start charging people 1.50 for popular songs or artists vs. .99 for lesser known artists it is more greed than anything. If they do this it is going to piss people off and then people are going to turn back to P2P tools like bittorrent to get their music..

Then the record companies lose big... And if they do that with music then why not do the same thing with video? Hmm.. People seem to like this Lord of the Rings series on DVD, lets charge them $40 a DVD since they will pay it... Or, what if cable companies decided that if you want to watch Lost on their network you have to pay an additional $2 fee every week....

Greed. Economics 101 tells you that when you have the supply and not demand, you lower cost. I say wait until after the holidays.. There will be a ton of new iPod owners this year that have never owned one and will be snatching up iTunes songs left and right. I do not believe that the demand has leveled off.

[ioinc]

I think the real issue is this, as someone pointed out records use to be sold by the single for about $.45 when they finally were taken off the market infavor of LP .....

So the real price for a single is probably $.45 but the music industry perception is more like $4 or $5 since this is what you have been forced to pay to get the one or two songs on an entire CD.

So songs should cost the same in 2005 as they did when 45's were taken of the market (1975?)

While we are at it I think we should pay the same for gas today as we did 30 years ago.

[manu chao]

Your example does not work, farmers gain larger market share by using a distribution channel plus ...
... and so do musicians when they sign up with a record company (and get into the iTMS).

[winmacguy]

thats a lot of iPods, good for Apple, the more money they have, the more they can put into making newer batter faster sweeter machines:D
IF Apple (and their component suppliers) can make enough iPods to meet the building demand this Christmas shopping season - (I have noticed shortages already due to Australian customs and shipping issues in Auckland stores) I would say that Apple will be able to sell as many iPods as it can put on shop shelves around the world. So in the region of 9 million+ depending on manufacturing capacity. As for songs downloaded, well I would say that will continue to grow in size accordingly although probably not to the extent that the music industry would hope for.:rolleyes:

[generik]

Maybe that's why the rest of the mac userbase can't help but feel forgotten :(

[lolex]

Citing Jobs' prior comment, " Pushing up the price will make everyone lose, the online store is struggling to survive, "

He did tell we the heartily turth, Apple devotes great efforts on ITune in bids to correct the market's behavior, which hoping people would feels comfort to buy online songs rather than committing piracy.

Frankly , the situation's growing critically, big personal files getting traded too fast too easy an unforbidable way via broadband network, hence free stuffs everywhere is undebtalbe.

Big Labels boycotting ITune won't hurt Apple , just too stupid a way to get their doom come faster. Every little dime from Itune will help them breath.

[generik]

My fear is instead of giving in, they will hang Apple high and dry and pull our from iTMS altogether, and start negotiating with Microsoft instead.

Sure, iPods don't play WMV, but what if Microsoft starts suing Apple, saying as to how Apple has a "monopoly" in the music player industry, and is "exploiting this monopoly" to gain an "unfair leverage" in the music sales market?

Hey, it sounds convoluted but who knows, America's legal system is nuts.

That might be the end of Apple as we know it, and M$ will be laughing their way to the bank.

Oh, and if they get their way we will have Trusted Network Connect and a lot of "Trusted" technologies shoved into our faces. Good bye downloads.

On the bright side we can always migrate to some Arabian/Muslim country, no way in hell will they accept such technology, short of the Americans actually invading them.

[nborders]

I'll be one.

Never thought of myself as a follower. however the video, bbc news and more to come, makes it hard not to.

~n

[lolex]

Lol.... you've got some points right. :)

Turning to Microsoft may be mostly the scenario would happen, however,
What price they're to set is the match point of the game.

With the 1st recordable domestic device announced , the bomb was lited , n internet favours the bomb to burn faster, I believes this is not a matter could be solved easily insight.

However , Apple would be the ultimate survivor even encountered with the bombing, allowed no clone vendor , licensed no software seller,hence Apple winned the copyright game.

People come to an Apple's product will love n buy it intuitively, softwares for free, this is the key to win .

Always , Jobs holds little leverage , he founded Pixar, he could produces the best pictures , why not to produce the best music tunes for itself, who know what would accomplishs when genius come together like early Apple years. So Itune is not alone then. :)

[Maestro64]

So songs should cost the same in 2005 as they did when 45's were taken of the market (1975?)

While we are at it I think we should pay the same for gas today as we did 30 years ago.


On the song thing, if you look at the cost to produce a 45 and the cost to produce and distribute a mp3, the music companies make far more profits than they ever did with a 45, so why not pay less from a comsumer stand point. Hey I do not fault the Record lables for trying to get every dollar they can, but then again I am invested in Apple not Sony or EMC, and dinosaurs must die.

On the gas thing, you are paying less today for a gallon of gas then in the 70's if you take in account inflation and other economic factors. This is because there is competition for your gas dollars and the huge improvements in the refining and distrubiton of gas.

[Maestro64]

Sure, iPods don't play WMV, but what if Microsoft starts suing Apple, saying as to how Apple has a "monopoly" in the music player industry, and is "exploiting this monopoly" to gain an "unfair leverage" in the music sales market?
Just remember on thing, you do not have to buy your music from ITMS to use it on your iPod, you can always buy a CD and rip it yourself and put it on your iPod. I think this is something people keep forgetting. All the songs I have in iTunes came from my CD collection. why buy a DRM version of what I already own. Remember as long as you have a choice and you do there is no monolopy.

[Maestro64]

... and so do musicians when they sign up with a record company (and get into the iTMS).
This use to be true, musician need record lables to get their product to market. Today this is no longer true, this is the reason the record lables are figthing so hard to maintain control. Today musicians can product their own music in their basement using apple software or hire an independent studio and then they can easily convert it mp3 and market it directly to us.

The record industry today are signing artists to longer and longer contract because the realize once the group has name recognition they no longer need the record lable to get their product to market. In the past artist would get a 1 or 2 yr contract with 1 or 2 records deals, today they are more.

[snowmoon]

iTunes only deals with labels so they are not dealing with all the musicians directly. I don't see anything wrong with this since you can go from Garage to iTunes for less than $100 and keep your copyrights.

http://cdbaby.net/dd

http://www.macnn.com/news/20271

[Maestro64]

iTunes only deals with labels so they are not dealing with all the musicians directly. I don't see anything wrong with this since you can go from Garage to iTunes for less than $100 and keep your copyrights.

http://cdbaby.net/dd

http://www.macnn.com/news/20271
This is what is great about the american enterprise system, build a better mouse trap and people will buy it. Just shows you how stupid and non-technical the record labels are. Yeah the put a clause in ITMS contract that said Apple must not deal directly with musicians so some enterprising person makes themself a record label giving musicians direct access to ITMS for a small fee.

[ruffas]

Apple's sales have slipped a little on iPod and the nano and the 'video' have helped bring them back on track but I still fell that the clamping down on URLs with the word iPod in is going to cause a problem.