Apple Denies i Tunes Sales Slump

Apple has rejected a report that music sales through its iTunes Store have slumped by 65 per cent since January.

Spokeswoman Natalie Kerris said that the figure, from research firm Forrester, 'is simply incorrect'; sales are up 75 per cent on 2005 and Apple, with six per cent of the market, is now the country's fourth largest music retailer.

Apple's share price fell by 2.9 per cent yesterday following the publication of Forrester's findings which were based on an analysis of 2,791 US debit and credit card transactions between April 2004 and June 2006.

Forrester also warned that to read too much into the figure would be premature.
'With only two years of full data, it is too soon to tell if this decline was seasonal or if buyers were reaching their saturation level for digital music,' Forrester analyst Josh Bernoff said. 'During the previous year, iTunes revenue fell after the holidays but rose significantly in May.'
Bernoff added that as Apple is known to make very little profit on iTunes sales, any fall in revenues will not have an impact on the company's overall financial performance.
'Only Apple knows just how much profit there is at the end of the day on a $1.98 credit card transaction for two songs, but with transaction costs, hosting costs, and the wholesale price of the songs, there's not much margin left,' he said.

Apple has always maintained that from its own point of view the iTunes Store's main role is to sell iPods, and there is certainly no sign of a shortfall there: analysts expect Apple to exceed the 14 million sales it managed in this quarter last year.

Bernoff said that it is the record industry, not Apple, that should be concerned by any fall in digital music sales, which have clearly failed to curtail unauthorised methods of music distribution, such as p2p sharing and the copying of friends' CDs. He said that record labels need to find other sources of revenue from downloads, such as ringtones and DRM-free MP3 sales.

Simon Aughton (Computer Buyer)