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Old Dec 12, 2006, 10:39 AM   #1
caccamolle
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iTunes Store Seeing Revenue Crunch?

wow, I just read this, I find it quite surprising, if not shocking.

I just can't make sense of the figure: is it that in general music sales have dropped so dramatically or is it that people are buying elsewhere ?

Any comments ?
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Old Dec 12, 2006, 10:57 AM   #2
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iTunes Store Seeing Revenue Crunch?



According to a report published by The Register, digital music stores including Apple's iTunes Store may be seeing a sharp decline in sales this year.

The report is based off of an analysis of credit card transactions over a 27 month period. While the beginning of the period showed steady growth, months since January 2006 have apparently shown revenue decline as much as 65% (with the average transaction size falling 17%).

Quote:
And it isn't just Apple's problem. Nielsen Soundscan has grimmer news for prospective digital download services, indicating three consecutive quarters of flat or declining revenues for the sector as a whole.

Speaking to The Register, Forrester analyst Josh Bernoff warned against extrapolating too much from the figures. It may reflect a seasonal bounce that hasn't yet manifested itself. However, it might not.
The report is surprising in that Apple has routinely given the impression that the iTunes store has been doing well. During Apple's 3rd Q 2006 conference call, Apple estimated that it had 85% of the legal download market. This year also saw the addition of full-length movies from Disney to iTunes, of which 125,000 were sold in the first week (generating $1 million in revenue for Disney during that time period).

Admin side note: we apparently have lost posts made in an original thread during a thread merger. not entirely clear what happened, but it does not appear that the other thread is recoverable at this time. sorry to those who's posts were lost. I'd ask you keep this thread on topic, and not respond to this note in this thread..

If you want to discuss this, you can reply to this thread:
http://forums.macrumors.com/showthread.php?p=3143635#post3143635

Last edited by arn; Dec 12, 2006 at 12:07 PM.
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Old Dec 12, 2006, 11:01 AM   #3
Katharine
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Could more people just be using pre-paid gift cards?
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Old Dec 12, 2006, 11:04 AM   #4
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Quote:
Originally Posted by Katharine View Post
Could more people just be using pre-paid gift cards?
Maybe. I know one person that buys a lot but only uses pre-paid cards. And I usually get a gift card or two a year that I use.

Still, I don't think that alone could account for that large of a drop.
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Old Dec 12, 2006, 11:04 AM   #5
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Quote:
Originally Posted by tk421 View Post
Maybe. I know one person that buys a lot but only uses pre-paid cards. And I usually get a gift card or two a year that I use.

Still, I don't think that alone could account for that large of a drop.
Seconded - there's no way 65% of iTunes purchases are being made via gift cards.
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Old Dec 12, 2006, 11:05 AM   #6
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Quote:
Originally Posted by Katharine View Post
Could more people just be using pre-paid gift cards?
I don't know... It feels like the entire article is a little hokey, so I don't know how much weight we should put into it. We know that Apple doesn't make a ton of profit off the store, but when they add $10+ movies and they sell at a clip of 125,000 a week, you can't tell me that they are loosing revenue THAT badly.
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Old Dec 12, 2006, 11:08 AM   #7
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Am I the only one who's a little creeped out by the fact that these credit card companies are crunching data on our bills about specific items? I'm not the least bit surprised because they are scum, but it's kind of scary. Oh, I know they'd probably say it's all aggregated data and no personal information can be compromised, but does anyone believe that?
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Old Dec 12, 2006, 11:09 AM   #8
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If Apple is only making pennies on this anyway, who cares? It's not like people aren't buying music anymore. It is still being purchased, ripped and played on an mp3 player. For as long as the iPod is the player of choice, Apple should be sufficiently pleased.

-Clive
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Old Dec 12, 2006, 11:12 AM   #9
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When iTunes was first released, everything was new. After the first few months, people had gotten the available songs they wanted. Now, those customers simply wait for new songs they want to be released.

The inital surge and the subsequent drop should have been expected.
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Old Dec 12, 2006, 11:12 AM   #10
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Originally Posted by HiRez View Post
Am I the only one who's a little creeped out by the fact that these credit card companies are crunching data on our bills about specific items?
That's exactly what worries me too.
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Old Dec 12, 2006, 11:15 AM   #11
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I bet all music consumption is down. IMO, there hasn't been anything worth buying in a long time. Frankley i beleive the quality of the current music is not worth my money now
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Old Dec 12, 2006, 11:15 AM   #12
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They studied every credit card transaction since Jan? right

Only Apple knows Apple's iTMS sales trends - I don't have much faith in those numbers, at all
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Old Dec 12, 2006, 11:17 AM   #13
Ha ze
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does this include Debit card purchases? cause I have my iTunes setup with my debit card
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Old Dec 12, 2006, 11:19 AM   #14
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Quote:
Originally Posted by AvSRoCkCO1067 View Post
Seconded - there's no way 65% of iTunes purchases are being made via gift cards.
The previous thread about this seems to have disappeared in a failed merge. The thread was here: http://forums.macrumors.com/showthread.php?p=3143367 titles "iTunes sales apparently fown 65%"

This seems to be typical disinformation, damn lies and statistics. What seems to be down 65% is the rate of increase of sales not the sales themselves.

It's kind of like the way that congress "cuts the budget" by spending more than they actually did last year, but less than what they had anticipated.

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Old Dec 12, 2006, 11:20 AM   #15
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Quote:
Originally Posted by Ha ze View Post
does this include Debit card purchases? cause I have my iTunes setup with my debit card
The statistics would have shown a similar trend before January as well. Of course there will be Debit card purchasers, just like there will be some folks who use the PayPal option that Apple put in. But the idea I guess that the report is trying to get is that the trends will be the same amongst all of the purchasing options.
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Old Dec 12, 2006, 11:23 AM   #16
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Quote:
Originally Posted by balamw View Post
The previous thread about this seems to have disappeared in a failed merge.
We may have had a rift in time/space and it looks like a few posts were gobbled up during the merging process for some reason. Sorry for anyone's comments that were affected by the thread merge failure (we're looking into it). Post on...
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Old Dec 12, 2006, 11:24 AM   #17
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Yeah both of my insightful/brilliaant posts are gone.

Basically, this is not a drop in sales or profits. Simply a drop in the rate of increase.

But the media (the ones with there own agendas anyway - aside from reporting news) love playing on the vast majority of people's ignorance or ambivalence in all things economic to further their own theories - as flawed as they may be.
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Old Dec 12, 2006, 11:24 AM   #18
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Haha, I initially read, "Apple Stores Experiencing Drop".

Ok, song downloads have tapered off. As long as its system wide and not just Apple's problem, eh. Did CD sales suddenly pickup? I doubt it, but that would be actual news:

"Internet sales down, physical sales up".
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Old Dec 12, 2006, 11:25 AM   #19
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does this article explain the 2.5% drop in Apple stock today?
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Old Dec 12, 2006, 11:26 AM   #20
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i don't find this hard to believe. many people probably went and got digital versions of older songs they had on tape or records. i know i did.

so my initial purchasing was a lot higher than it is now. most of the itunes songs i bought were from 2-3 years back, when it was new.
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Old Dec 12, 2006, 11:26 AM   #21
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Other forms of Payment.

Credit cards are not the only form of payment accepted...

I personally use PayPal, as well as gift cards.


On another note: Could it possibly be the music industry's fault? I mean, they are the ones imposing strict DRM and taking all of the money for themselves. And the artists could have some fault for not putting out much quality music lately. I mean, Fergie? Come on.
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Old Dec 12, 2006, 11:28 AM   #22
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That's my impression too....

Truthfully, once people fill up the capacity of their music player's hard drive, they're often pretty much satisfied. It's just like back in the late 80's when I was trying to build up a nice collection of music CDs. I got to about 150 or so, filled up the "CD storage tower" I bought, and figured my collection was pretty nearly "complete".

The typical person can only think of so many artists and albums of music they want to own, anyway. I know several people with 30GB iPod videos who only have them about half-filled, and they've pretty much stopped buying or collecting any more music for them. Basically, they listen to a certain collection of music, and only rarely want something new that comes out.


Quote:
Originally Posted by topgunn View Post
When iTunes was first released, everything was new. After the first few months, people had gotten the available songs they wanted. Now, those customers simply wait for new songs they want to be released.

The inital surge and the subsequent drop should have been expected.
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Old Dec 12, 2006, 11:29 AM   #23
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i agree w/ most of the posts. the one thing that people need to keep in mind is that the itms is just a way to sell more ipods, which is where apple is making most of it's $$$. if the ipod starts slipping, that would be more of a concern.

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Old Dec 12, 2006, 11:30 AM   #24
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I'm really not surprised. iTunes is not a very good deal. $1 per track is about the same price as buying a CD, give or take and the quality (of 128Kbps AAC) is not very good. If CDs are the same price I much prefer the CD. Downloads need to be priced at about 1/3 the CD price. It can be done. Check out emusic.com they sell digital tracks of better quality than iTunes for $0.25 each.

I think what's happed with iTunes is the same thing as when CDs where new. Most CDs then were "back catalog" re-releases of vinyl albums. People bought the CDs fast and then "caught up" and after that only bought a recent release now and then. I think the same has happed with iTunes. The Apple music store is mostly "back catalog"

I remember when I thought "Cool, I can get John Coltrane on CD now" and I did I have a dozen of them . But he ain't making any more records so now I have to wait for something I want to come out and it does now and then but when CDs were new there were many hundreds of CDs I wanted. Possibly it is the same with iTunes. When you buy a new iPods there are hundreds of tracks you might want, but then after you have those

Maybe an analogy. You have a tank with all the air removed, just a vacuum inside. That is like an empty iPod. You crack the valve and let air in. At first it rushes in until the pressure equalizes. After that you just get a slow exchange of air
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Old Dec 12, 2006, 11:32 AM   #25
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Originally Posted by alec View Post
does this article explain the 2.5% drop in Apple stock today?
Ouch could be, looks like a good time to load up AAPL before MWSF '07.

In reaction to the iTunes drop in revenue. I think Forrester is just overreacting. They think iTunes is a big hit forever and ever but that shouldn't be expected. Put it this way, iTunes is like a stock company. In 2005, iTunes was like an IPO, which skyrocketing sales. Now, iTunes is nothing more but a regular stock that would have a drop in sales every now and then.
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