Apple’s iTunes Store widens its already-dominant lead in music services market

Excerpts from Ipsos’ TEMPO Digital Music Brandscape study show that Apple’s iTunes continues to strengthen its position as the dominant fee-based digital music destination, widening its lead over other services. Other key findings include the decline of social networking site MySpace and further decline in past six month CD purchasing.

The fourth annual TEMPO Digital Music Brandscape study is an in-depth examination of fee-based online music brands, and is part of TEMPO, an Ipsos quarterly study of digital music behaviors.

Key findings from the Brandscape study include:
• Total awareness increased across the board in 2007, with 82% of all US Downloaders – both fee-based users and filesharers – now aware of iTunes and 76% aware of Napster.
– iTunes, in particular, gained in both aided and unaided awareness, with well over one-third (38%) of Downloaders now thinking of the brand on a top-of-mind basis.
– Awareness increased significantly for most brands, but, for many, usage did not. Past 30 day usage decreased for Walmart.com and Rhapsody, and remained stagnant for most music services. The clear winner in 2007 was iTunes, whose recent usage increased significantly (24% past 30 day usage among total US Downloaders, up from 18% in 2006).
– Perhaps the most significant development this year, however, was the decline of MySpace.com. Contrary to last year’s encouraging developments, 2007 saw MySpace’s perception ratings decline across a number of attributes as awareness increased. Moreover, the service is no longer as closely associated with allowing users to exchange ideas and recommendations.

“It has become clear that iTunes’ saliency has now reached beyond that of being ‘just’ the top brand presence to being the pre-eminent brand in digital music,” states Karl Joyce, Senior Research Manager Ipsos Insight and author of the TEMPO study. “Even more telling than awareness and usage, iTunes favorability clearly demonstrates the value of the brand. While perhaps distressing to some, iTunes’ dominance simply cannot be denied.”

As has been seen in past waves of TEMPO research, strong name recognition has not automatically led to perceptions of leadership within the fee-based digital music community.

An emerging majority (50% of Downloaders aware of more than one site) consider iTunes the best fee-based digital music service (up from 41% in 2006 and 33% in 2005). For comparison, second place Napster is rated “best” by 10% of the Downloader market, a figure that did not change versus 2006, and has yet to eclipse the previous high of 22% in 2005.

iTunes’ 2007 ascendance as ‘best brand’ generally came at the expense of the other top brands, each of which experienced directional declines.

“iTunes’ steady gain as ‘best’ brand over the past three years does denote a threat to other digital music services, particularly due to the persistent lack of inter-operability,” continues Joyce, “While iTunes’ growth in 2006 may have come at the expense of Napster, other brands have begun to feel its impact as well, including other top competitors such as Rhapsody and Yahoo! Music. Moreover, social networking’s hope of overtaking the lead in mainstream digital music acquisition appears to have fallen short.”

Bundled Service Offerings Represent Untapped, Potential Market

In 2007, TEMPO investigated receptivity to music bundles among fee-based Downloaders, and found that multiple-track offerings are the clear winner with nearly two-thirds (64%) of these Downloaders interested in discounted multi-track offerings. Although there is niche appeal for combinations that couple tracks with other content such as ringtones, these offerings are not as well received in market. Beyond multiple track offerings, higher quality tracks without usage restrictions (i.e., Digital Rights Management, or DRM, software) are popular as well. Despite significant interest, very few Downloaders have ever purchased a bundle.

“These findings support the persistence of untapped market opportunities in the digital music space, specifically in that of price-competitive offerings such as discounted bundles,” says Joyce. “Despite iTunes’ dominance, the market continues to offer potential growth and inlets for competing brands. Consumer expectations of digital music services have not changed all that much over the past several years, and one of the attributes that resonates time and again is price. Given the strong interest in discounted bundles, the critical question is not whether they should be offered, but what types of bundled discounts would encourage increased spending by would-be single-track Downloaders without cannibalizing digital album purchase by others.”

Data on music downloading behaviors was gathered from TEMPO: Keeping Pace with Digital Music Behavior, a quarterly shared-cost research study by Ipsos Insight examining the ongoing influence and effects of digital music in the US.

Data for this release were collected between September 10 and 17, 2007, via a web-based representative sample of 1,826 US Downloaders aged 12 and over. With a total sample size of 1,826, one can say with 95% certainty that the results are accurate to within +/- 2.29%.

To learn more about the methodology of TEMPO, please visit http://www.ipsosinsight.com/knowledge/techcomm/products/Tempo.aspx

Source: Ipsos Insight

24 Comments

  1. it occurs….

    The labels are all determined to “hurt” apple to reduce its power. They should be careful what they wish for. In the unlikely event they actually succeed…

    They have their usual arrogant “entitlement” assumption that sales not made through Apple will go other places. It’s a very risky assumption. The demand for PAID music content, I suspect, is highly elastic… quite sensitive to price, convenience and promotion.

    Just as paid digital has not offset the death sprial decline of CDs… Apple sells music on a different order of magnitude than anyone else (digitally)… continue to create doubt about Apple by offering inferior product and terms… For every sale not made through iTunes, some percentage will buy elsewhere. That percentage will be well below 100%.

    It is absurd to try to grow your sales by trying to weaken your fastest growing channel. This is music… no, PAID music… not food or gasoline. People don’t need it at all.

    Undeservedly, consumers and Apple are saving them from their stupidity. But if they actually want to sell more music, they should be working to maximize the iTunes channel…

    And nothing is going to save the CD. It’s in a death spiral… slower sales, so less physical floor space and selection… hurting sales more.

  2. You call this journalism? Like many of you I am disappointed by the suspect omission Zune Marketplace. Apple is up to their old tricks by manipulating the media to unfairly advance their proprietary system—only this time it isn’t their usual vaporware diversion.

    Apple is behaving like a caged animal, terrified by the possibility of Microsoft using their crushing Windows market share position to advance the Zune even further past those dumpy I-Pods. When you can’t compete on quality these shenanigans are what you resort to.

    You know what? I like it that Zune Marketplace doesn’t run on MACs. You MAC losers are missing out on the whole Zune experience that will put I-Tunes out of business. Zune users rule while I-Pod dorks drool.

    Your potential. Our passion.™

  3. Out of curiosity, have you compared an Amazon .mp3 vs. and iTunes .m4p (AAC) song file? Theoretically, a given AAC file should be smaller (or higher in quality) than the same .mp3 file, since .m4p is produced using newer, more efficient compression technology.

    I’ve been meaning to try this…

  4. I just found Amazon too much of a pain in the ass to use. It’s hard to just go in an Browse the selections and artists. The Catalog is shallow and artists are limited and it’s over all usability is just to slow and limiting.
    Amazon is fine if you know exactly what you want and know exactly how to search for it. But, if you just like to browse and look and pick out stuff that is new and interesting no-one beats iTunes for a fast easy just great music store experience.

  5. As for Zune, I assume that sales would have to register on some scale to be counted. Perhaps the Zune Marketplace sales are so small they don’t even matter…

    They certainly don’t matter to millions of iPod owners (about 120 million units sold at last count). How many Zunes have been sold? 10s? 20s?

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