Does it matter that nobody’s buying from iTunes?
According to Forrester analyst Josh Bernoff, sales at the iTunes Music Store have dropped 65% since January, and the average transaction size has dropped 17%. Seems pretty bad, but does it really matter? Not to Apple. The company makes a pittance from iTunes; the profits are in the iPod (iTMS is important for Apple as a selling point for iPods, but not as a major source of revenue). But it certainly matters to the record industry, which needs to get more consumers shopping online if they want to make up for the continued decline in CD sales. And it certainly matters to everyone else operating an online music store, from the PlaysForSure groups to Microsoft. After all, if the average iPod owner is only spending about $9 a year on iTunes (according to Forrester), paying $15 a month for a PFS subscription doesn’t seem like such a great deal. Sure, I think PFS is great (or, rather, Rhapsody is great; the others all have serious usability problems), but that doesn’t mean these services are resonating with the great unwashed. The real question raised by the Forrester study is, where are people getting all the music that they’re loading onto their iPods? Especially the teenagers. Oldsters like me may have hundreds of CDs that they’re ripping, but what about the kids? When I was a teenager, I made weekly forays to records stores like Sounds on St. Marks Place, where I could get used records for as little as a buck, and new ones for about $5. If today’s kids are anything like I was, they should be buying the equivalent of at least one or two albums a month. Since they’re not buying CDs, and they’re not buying from iTunes, the obvious answer is that they’re still pirating a lot of music. Which is actually good news, since it shows that the record industry’s obsession with DRM hasn’t paid off. CD sales are down 20% over five years, and if the average consumer is only spending $9 a year online, that certainly isn’t going to pick up the slack. If the record industry wants to improve those numbers, it’s time to stop spending on suing grandmothers and start selling DRM-free music. Yes, DRM-free music will be pirated. But that train left the station a long time ago, and if the industry wants to catch up, it’s time to stop treating customers like criminals, and let them buy, keep and play music any way they want to, just like they did (however reluctantly) back in the days of vinyl.
