“I always enjoy Forrester’s Josh Bernoff’s writing and analysis, but we often don’t see the same data the same ways. So when I read yesterday’s New York Times quick article claiming that iPods aren’t driving iTunes sales, I decided that they must have misquoted him. When I saw today’s article in The Register claiming that iTunes sales are collapsing, I decided there was enough silliness being repeated over and over that I had to run some numbers myself,” Carl Howe writes for Blackfriars’ Marketing.
In his full article, Howe graphs cumulative iPod and iTunes sales on a logarithmic scale.
Howe explains, “A gradually tailing off curve generally still implies substantial growth — iTunes sold a billion songs just in the past 12 months. So the first takeaway from the above curves should be that both the iTunes and iPod sales are growing dramatically… In December 2003, iTunes had sold about 25 million songs for 2 million iPods, or a ratio of about 12.5 to 1. Today, that number is more like 23. So songs per iPod have actually grown over three years.”
Howe writes, “The bottom line: anyone who claims iPod sales are collapsing can’t do basic math.”
Full article here.
[Thanks to MacDailyNews Reader “LinuxGuy and Mac Prodigal Son” for the heads up.]
Howe is right. Obviously.
Related articles:
iTunes interest climbs as one analyst claims falling sales – December 12, 2006
Akamai Net Usage Index for Digital Music measures real-time global consumption of online music – December 11, 2006
WSJ mistake: ‘digital-music sales have stalled for the first time since Apple launched iTunes Store’ – December 06, 2006
Digital downloads drive world music sales in first half of 2006 – October 13, 2006
Study reports the obvious: most music on iPods not from iTunes Store – September 17, 2006
Apple iTunes Gift Cards help boost growth of digital music in U.S. – April 21, 2006
Anyone who agrees with us is generally considered a genius. Those who disagree are wrong-headed ‘maroons’.
Yes, yes, great job Smithers!
::Rubbing hands together::
Hmmm. I totally agree. “Figures don’t lie, but liers can figure.”
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Its like noting how sales slow down after the first of the year, as compared to christmas. What kind of moron fails to take in the changes that occur over the year when looking at sales numbers??
You can look at numbers to learn something or to prove that your guesses are right. What you do, shows what kind of person you are and how much you can be trusted.
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N.
Ampar…is that really you……? (Reaching thru the Powerbook screen)
Where has thou been?
The data released by apple is very vague on purpose-
They release itunes data at different times that they release ipods sales figures –
Here’s what we see from Blackfriar’s graph
It took apple 7 months (from july 05 to Feb 06) to sell 500 million songs –
and they sold about 25 million ipods in that period –
It also took apple the last 7 months of data (from feb 06 to Sept 06) to sell 500 million songs –
and they sold about 15 million ipods in that period (the slowest ipod buying season)
Less ipods sold, but the number of itunes songs stayed the same.
Seems like more itunes songs per ipod to me….
Regardless of actually numbers. You wont always be able to sell 5000% more quarter after quarter. Just because you sell 2 billion something one day then 1.99 billion the next doesnt mean the sales are falling. you still sold 1.99 billion!!! its immpossible to have a constant rising, it has to end at somepoint.
“Those who disagree are wrong-headed ‘maroons’.”
No. They are wrong-headed morons.
Switched: No. You are incorrect, as i was spelling out the Bugs Bunny pronunciation of ‘morons’
It doesn’t seem that iTunes sales are collapsing but…
It also doesn’t seem like iTunes sales PER USER are ramping up significantly.
What we need to know is:
How many unique active iPod users there are.
What is the current rate of downloads.
I think it is safe to assume that there are an average of 2 iPod per person. I have 4 iPods (1 was a freebie), but only 1 iTS account.
Let’s also assume that roughly 3 million DLs occur per day.
With those assumptions about 25 Million users DL 3 M songs per day or 1 Billion per year. That means each user DL about 40 songs per year.
In Dec 05 ~ 30M iPods had been sold and ~ 750M songs sold. With ~20M users and 2M songs per day, than means ~ 35 songs per year.
So more than likely sales per person isn’t increasing that much, although Apple are getting more users to use the service.
This could mean that growth of iTS will come from mainly new users rather than increased sales per person.
I have 28 iTMS tracks and no iPod. Do I count?
DogGone:
Your point??
Boy, do i mess with the numbers!!!
I have spent over $300 on iTunes, just to be ready to down load to my wifes 30gb iPod and my daughters shuffle, upon xmas day!!
Howe. Right you are!
A nice job.
However, here is one point wehere I may agree with Bernoff:
“So when I read yesterday’s New York Times quick article claiming that iPods aren’t driving iTunes sales,”
Sure, there is a correlation between iPod sales and iTS sales. That does not mean one is driving the other. I believe that iPod owners that wish to buy songs by download from stores that use DRM (not all do), then they choose iTS. That is different than saying the iPod drives the sales, which implies that one buys downloads because they have an iPod. An iPod might affect which store one buys from, but that is different than saying that it causes one to buy downloads. This disconnect is supported by the fact that the majority of tracks on iPods are from CDs.
Analysts need to really get it through their heads that just because you can sync an iPod to iTunes and use the iTunes stores, does not mean that they are intrinsically related.
i have over 1,000 itunes tracks and no ipod. my 17″ powerbook works just fine as a big ipod that also lets me write code, surf the web, keep track of contacts, maintain a calendar, write documents. and an extra battery for good measure.
New technology essentially always follows a logistic curve (“S” shaped or ‘sigmoid’). As the market penetration increases, a point is reached at which the sales rate begins to decrease. In economics, this is called the ‘point of diminshing returns,” meaning that more input produces a smaller increase in output. This is an extremly well known phenomenon that these “analysts” can’t seem to fathom — or more likely — don’t want to acknowledge so they can look back later and claim to be “the first” to predict iPod sales are slowing.
They are definitely “maroons.”
Boy, do i mess with the numbers!!!
I have spent over $300 on iTunes,
You and me both, HotinPlaya. I’ve got over $500 in iTunes tracks representing about half of my music collection.
Macaroons, actually. Otherwise known as coconut-heads.
Apple’s iPod + iTunes has inspired the biggest renaissance in music appreciation since the 60’s. You’d think that would be enough for some people!
Well, I guess that’s it for Apple then. iPod sales have leveled off, iTMS sales are falling, and AAPL finished the day almost 3 points down. Yep, guess this is finally it for Apple, [again] they’re on their way out, at least their music services are. By next week iPods will be selling on eBay for $5.00 – Better sell my iPods and my investments real fast. Oh my gosh how could l have forgotten the Zune. Well that’s definitely it, especially when you combine rumors that MS is going to septuple their advertising budget for El Zune. Holy crap, Apple is a gonner.
(Apologies to Zune Tang)
Has anyone considered the fact that the same person may also have multiple iPods? So you buy a song once and put in on two or three iPods, thus the ratio of songs purchased to iPods sold gets skewed. That doesn’t mean iTunes is failing because you’re not selling more songs per number of iPods.
Many of the latest iPods being sold are probably the new shuffles and are 2nd iPods for a lot of people.
Dave,
My point is that it has been assumed (at least in the media) that people will switch from buying CDs to buying songs on line just because they have an iPod.
What seems clear is that the majority of music on iPods come from existing CD collections, CD purchases or to some extent from pirating.
Therefore my conclusion is that the average iPod user will occasionally buy from iTS but only at the rate of 30-40 songs per year (2-3 albums). This rate will probably increase over the coming years as people get used to buying online and more songs are available.
In the short term Apple’s music-related growth is therefore likely to continue to be from iPod sales rather than iTS sales. At some point though iTS will really ramp up. The revenue potential is huge if customers like some above really start buying 500 songs per year.
The problem with ALL analysts is that anything they say goes against a long term position in a stock. Millions of dollars are made everday by brokerage firms and other speculative companies who are betting that a stock-or currencies-will rise or fall a penny. You make .01 on 10,000,000 shares, and you do it two or three times a day, and average being right 55-60% of the time, and you’ll end up with a $1,000,000-$5,000,000 bonus at the end of the year. If they can get institutions to sell or buy on a recommendation, their firm rakes in the money.
When an analyst takes a position, all that analyst is saying is that at that moment, and only at that moment, there is some positive or negative trend that wasn’t evident an hour before. That trend may change the next day or the next week, and then there is an additional pontification from the “experts”.
I think too many peoplein this forum take all this constant speculation on Apple’s fortunes way to seriously. For the vast majority of people it is meaningless background noise. If iTunes sales go UP 1/10 of a per cent, there’ll be another analyst that’ll come out with a “buy”. Notice all the target prices close to $100 in the last few days.
And remember another point as well. Analysts. whether private or institutional, and the institutions themselves, are in competition with each other. It is far more cut-throat than even newspapers often are. Their jobs, promotions, opportunities for consulting and gigs at competing firms, and the firms’ own stock prices, are dependent on spotting, and reporting on the latest “trend” even if it’s generaaly meaningless. Most of the time it’s not as important to be right; as it is to be right more often than wrong.
I guess you can tell: I’m a cynic.
DogGone:
OK…
Your point seems to be a set of caveat riddled assumptions which do not contribute to the debate. Go back and look at your original post.
Here is a summary:
It doesn’t seem that……
It also doesn’t seem like…….
What we need to know is…..
I think it is safe to assume…..
Let’s also assume that……
So more than likely……
This could mean that…..
It would appear you possess a firm grasp of useless, speculative blather.
Let’s see–2700 songs in my iTunes, 475 of which I have purchased from iTMS over the past three or four years. My guess is that this ratio is pretty typical. Plus, I’m over 40, so I don’t own an iPod, but my kids have 3.
Allchin (is that a weird name or what?) gets busted saying he’d rather have a Mac, and this shit comes out the next day..
Hmmmmm…