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May 29, 2003

iTunes Music Store Sales Decline, Again

It took 7 days to sell the first million.

It took 9 days to sell the second million.

It's taken 14 days to sell the third million.

Sales aren't increasing. Sales are decreasing, most likely due to a combination of a smallish music catalog and limited availability. The downturn suggests that people are finding less and less music at the site that they are willing to pay for.

Now let's go out on a limb and predict that June 11th is the earliest that Apple will announce the sale of the 4 millionth song. That's giving the company some slack, since the data points to an increasing number of days between each million, but no matter. Sales have got to reach a definite floor eventually, right? That's what the sales execs at iTunes are telling themselves, at least.

If a million songs every two weeks turns out to be the sales minimum at iTunes, then we have a excellent idea of that company's gross revenue. At most, it will be somewhere close to $2.5 million a month. Not bad, but no great shakes, either, and that $2.5 million assumes that every song is purchased at the full 99 cent price, rather than the less expensive $9.99 per cd.

Apple's business plan is obvious; sell lots of songs, and make a few pennies off each sale. I don't know exactly what Apple earns per song, but let's be wildly, dancing around nude in the streets crazy optimistic and assume that Apple is earning a quarter each time someone downloads a song rather than the much more likely nickel or lower. Three million songs in the first month of business gives Steve Jobs a less than whopping $750,000 to cover salaries, insurance and operational expenses with. That might be enough, barely. Odds are total monies going to Apple are more like $150,000, which means that despite the glowing press iTunes is getting, it is losing money hand over fist.

Does the glowing ITunes coverage remind you of anything, say the media during the Great Bubble of '99? This is not to say that iTunes will fail. But right now the company is making less and less money every day, not more and more, despite massive and mostly positive media coverage. The only way to turn the trend around is to increase the customer base by selling to Windows users, a move that at the earliest is not expected before 2004.

Meanwhile every song bought via iTunes is potential Kazaa fodder, Listen.com has lowered its price per song to just 79 cents, and the Microsoft behemoth is turning its attention towards the downloadable music market. Less than 2 months after it debuted, iTunes is beset on multiple fronts. The company's future is anything but assured.

Posted by Bigwig at May 29, 2003 12:22 PM | TrackBack
Postscript:
First time visitor to House Hraka? Wondering if everything we produce could possibly be as brilliant/stupid/evil/pedantic/insipid/inspired as the post you just read? Check out the Hraka Essentials, the (mostly) reader-selected guide to Hraka's best posts, and decide for yourself.
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