iTunes passes Amazon to become third largest U.S. music retailer

Posted:
in iPod + iTunes + AppleTV edited January 2014
Apple Inc.'s iTunes Store recently cruised by online retailer Amazon.com to become third largest music retailer in the United States, according to a new study from market research firm NPD Group.



For the first quarter of 2007, the digital download service snagged nearly 10 percent (9.8 percent ) of overall retail music sales, placing it ahead of both Amazon.com and Target, which captured 6.7 percent and 6.6 percent, respectively.



Apple trails only industry leader Wal-Mart with 15.8 percent and runner-up Best Buy with 13.8 percent. By comparison, Best Buy's online music store, which is restricted to digital tracks like iTunes, garnered only a 1.1 percent market share.



NPD attributed Apple's gains to stellar iPod sales during the past holiday shopping season.



Upon last check in November of 2005, Apple ranked seventh on the list of leading U.S. music retailers, having then passed Tower Records, Sam Goody and Borders to crack the Top-10 for the first time.



According to NPD, digital music downloads during the first quarter of the year accounted for only 13.8 percent of all music purchases. The remaining 86.2 percent were sold in physical disc format.
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Comments

  • Reply 1 of 25
    filburtfilburt Posts: 398member
    I think DRM-free tracks will help Apple take larger slice at faster rate (assuming more studios join the party).



    With video rental and 720p video with subtitle and 5.1-channel audio, Apple should have no problem taking large slice out of DVD market as well.
  • Reply 2 of 25
    I'd be curious to see how many of the purchases are done using gift cards. I know I've noticed lately that there are a lot more people who casually throw out comments like "Oh, I've been meaning to buy that CD.. I got an iTunes gift card and I've been waiting to find something to use it on."



    It's an easy gift to give, and it's hard to find someone who wouldn't want one.
  • Reply 3 of 25
    dazabritdazabrit Posts: 273member
    I think Apple are going to make a bigger effort with the physical retail. I remember two reports accompanied by patent filings from a 'long' time ago about iPod content being bundled on Blu-Ray discs and cheap 'throw-away' branded iPods. This will be a pretty big step to kicking some real ass accompanied by the 720p/5.1 video subscriptions and DRM-Free music as mentioned above.
  • Reply 4 of 25
    mark2005mark2005 Posts: 1,158member
    Quote:
    Originally Posted by AppleInsider View Post


    Upon last check in November of 2005, Apple ranked seventh on the list of leading U.S. music retailers, having then passed Tower Records, Sam Goody and Borders to crack the Top-10 for the first time.



    Didn't Jobs say at MWSF in January that Apple was fifth? And that Apple was targeting Target?
  • Reply 5 of 25
    davegeedavegee Posts: 2,765member
    Quote:
    Originally Posted by mark2005 View Post


    Didn't Jobs say at MWSF in January that Apple was fifth? And that Apple was targeting Target?



    Sounds (more than) vaguely familiar...



    Dave
  • Reply 6 of 25
    addaboxaddabox Posts: 12,660member
    And remember, these numbers compare Apple selling mostly one track at a time against the big box retailers selling full CDs.



    I think the shifting positions are at least as much a result of collapsing CD sales as it is increasing online sales.
  • Reply 7 of 25
    aisiaisi Posts: 134member
    Quote:
    Originally Posted by mark2005 View Post


    Didn't Jobs say at MWSF in January that Apple was fifth? And that Apple was targeting Target?



    Yep, it went like this.



    - In November of 2005, Apple ranked seventh on the list of leading U.S. music retailers.



    - It's Show Time Special Event Sept 2006: "iTunes is now the fifth largest legal reseller of music in the US. We're on a trajectory to surpass Amazon and become #4 in January."



    - MWSF 2007: "We have now passed Amazon; we sell more music than Amazon and we are now #4. And you can guess who our next target might be."



    - Today, the iTS is the third largest U.S. music retailer.
  • Reply 8 of 25
    tbagginstbaggins Posts: 2,306member
    This is all good for giving Apple a stronger hand in negotiations with the idiot suits at the major labels.



    I remember one of them complaining in an interview, only a year or two back, about how Apple was a "pygmy", and how Apple only controls 2 or 4 percent of music sales or whatever. His point was that the iTunes Store and online distribution in general didn't matter compared to CD sales, so the major labels should feel free to run roughshod over Apple in any negotiations.



    Looking at how sales numbers are trending, if it wasn't obvious then that that guy was an idiot and emblematic of the lack of vision that's been afflicting the music industry, then these numbers ice it.



    Apple/iTS will likely be the #1 seller of music within a couple of years. Wal-Mart and Best Buy don't even care about music that much, CDs are a loss leader for them, basically. It could just as easily be DVDs or video games, far as they're concerned (and already is, in some cases).



    Reality to music industry: Adapt.



    .
  • Reply 9 of 25
    eaieai Posts: 417member
    Quote:
    Originally Posted by TBaggins View Post


    CDs are a loss leader for them, basically. It could just as easily be DVDs or video games, far as they're concerned (and already is, in some cases).



    Reality to music industry: Adapt.



    .



    Its not really that different for Apple - Music is a loss leader for them - they use it to sell iPods... If some new competition came along, Apple could seriously subsidise the music store.
  • Reply 10 of 25
    danboydanboy Posts: 9member
    The further we move up the chart the more content we'll get, and the better the quality will be. I'm freaking stoked.
  • Reply 11 of 25
    dentondenton Posts: 725member
    Quote:
    Originally Posted by eAi View Post


    Its not really that different for Apple - Music is a loss leader for them - they use it to sell iPods... If some new competition came along, Apple could seriously subsidise the music store.



    Apple can't be a loss-leader when they're making money on each song: this was the latest break-down of the costs of each track that Apple sells.



    However, Apple does use the iTS to sell iPods -- no argument there.
  • Reply 12 of 25
    tbagginstbaggins Posts: 2,306member
    Yep, Apple does make a small profit off the iTunes Store. As you say though, the primary goal is to sell more iPods.



    Therefore, its not a loss-leader business, nor is it a business that Apple will just walk away from or heavily deemphasize, any time soon.



    .
  • Reply 13 of 25
    jeffdmjeffdm Posts: 12,946member
    I'm surprised by the poll results, so far, 80% favor the $0.99 version. I didn't think that it would be so decisive
  • Reply 14 of 25
    tbagginstbaggins Posts: 2,306member
    Quote:
    Originally Posted by JeffDM View Post


    I'm surprised by the poll results, so far, 80% favor the $0.99 version. I didn't think that it would be so decisive



    It's about what I would've expected. \



    .
  • Reply 15 of 25
    addaboxaddabox Posts: 12,660member
    Quote:
    Originally Posted by TBaggins View Post


    This is all good for giving Apple a stronger hand in negotiations with the idiot suits at the major labels.



    I remember one of them complaining in an interview, only a year or two back, about how Apple was a "pygmy", and how Apple only controls 2 or 4 percent of music sales or whatever. His point was that the iTunes Store and online distribution in general didn't matter compared to CD sales, so the major labels should feel free to run roughshod over Apple in any negotiations.



    Looking at how sales numbers are trending, if it wasn't obvious then that that guy was an idiot and emblematic of the lack of vision that's been afflicting the music industry, then these numbers ice it.



    Apple/iTS will likely be the #1 seller of music within a couple of years. Wal-Mart and Best Buy don't even care about music that much, CDs are a loss leader for them, basically. It could just as easily be DVDs or video games, far as they're concerned (and already is, in some cases).



    Reality to music industry: Adapt.



    .



    It's also striking to note the difference between the Apple music retail "experience" and the remaining brick and mortar vendors.



    Time was, the speciallty music stores like Tower went out of their way to create a "music lovers" ambience, with instore graphics, extensive catalogues, accessories, albums being played over the store PA, etc.



    Nowadays the CD buying experience at Best Buy or Walmart reduces that to nothing much better than the "cereal buying experience."



    iTunes, on the other hand, has the luxury of maintaining a much more music-centric "place", with all kinds of info, samples, graphics, massive catalogue, easy and cross-linked browsing, etc.



    Of course, that is potentially true of any on-line music store, but its domination of the market allows iTunes to most fully exploit the shift from the Tower and Virgin megastore music shopper world to the online music shopper world.



    The Best Buy and Walmart music shopper world is already dead, they just don't know it yet.
  • Reply 16 of 25
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by addabox View Post


    The Best Buy and Walmart music shopper world is already dead, they just don't know it yet.



    To make that argument fly, I think you would have to explain why a "dead" reatail format still holds about three quarters of all music sales. It sounds anything but convincing to me until the numbers are fiipped around to close to 20%. In fact, the argument almost sounds quixotic, with the only difference being that it will eventually be true, in maybe under a decade, just not now. Keep in mind that Apple took five years to get to where it is now.



    In the retail case, basically the market has spoken, that generally buyers would rather buy discs in a warehouse at loss leader prices than have a good shopping environment with a deep catalogue and pay near or at list price. The Internet world changes that mainly because retail "space" is far cheaper, so you can have decent prices and still offer a deep catalogue with easy sampling in the comfort of your own home.
  • Reply 17 of 25
    addaboxaddabox Posts: 12,660member
    Quote:
    Originally Posted by JeffDM View Post


    To make that argument fly, I think you would have to explain why a "dead" reatail format still holds about three quarters of all music sales. It sounds anything but convincing to me until the numbers are fiipped around to close to 20%. In fact, the argument almost sounds quixotic, with the only difference being that it will eventually be true, in maybe under a decade, just not now. Keep in mind that Apple took five years to get to where it is now.



    In the retail case, basically the market has spoken, that generally buyers would rather buy discs in a warehouse at loss leader prices than have a good shopping environment with a deep catalogue and pay near or at list price. The Internet world changes that mainly because retail "space" is far cheaper, so you can have decent prices and still offer a deep catalogue with easy sampling in the comfort of your own home.





    The trend is plain and it is accelerating. Of course it is not true right now, but the writing is on the wall (hence, "dead but don't know it yet").



    CD sales are dropping precipitously, and the decline is accelerating, so consumers appear to be voting, just not the way you think.



    Meanwhile, online sales continue to explode (not to mention file sharing).



    A decade? Not even close.
  • Reply 18 of 25
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by addabox View Post


    The trend is plain and it is accelerating. Of course it is not true right now, but the writing is on the wall (hence, "dead but don't know it yet").



    "Writing on the wall" is certainly not dead yet. It's not dead until it's dead.



    Quote:

    CD sales are dropping precipitously, and the decline is accelerating, so consumers appear to be voting, just not the way you think.



    With regard to the voting, I think you misunderstood the tense of my analogy.



    Quote:

    A decade? Not even close.



    I'm not convinced of that yet, there is not much, if anything that supports a significantly shorter timeline, such as if you mean to suggest five years or less. I need to play with some numbers, though I don't expect to be able to find nearly enough information to make anything better than a half-assed projection, but I think it would be better than an out of the ass projection. So far, the transition is relatively pokey in comparison to the VHS-DVD transition, which passed 50% in about five years. In the same relative time frame, CDs vs. paid downloads might be 12% at five years now since iTunes Store was opened.
  • Reply 19 of 25
    addaboxaddabox Posts: 12,660member
    "Dead bit doesn't know it yet" generally means something like "subject to irreversible trends that lead to its demise" AKA "the writing is on the wall".



    If the point of contention is around "dead now" vs. "dead shortly" then we have none.



    At any rate, according to this , digital surpasses physical in 3 years.



    Yes, you're right, I mistook your point on the current preference for big box retail over the speciality brick and mortar outfits. The point you were actually making is absolutely correct.
  • Reply 20 of 25
    macgregormacgregor Posts: 1,434member
    Quote:
    Originally Posted by JeffDM View Post


    To make that argument fly, I think you would have to explain why a "dead" reatail format still holds about three quarters of all music sales. It sounds anything but convincing to me until the numbers are fiipped around to close to 20%.



    Think vinyl, cassette tapes, eight tracks .... "dead" is relative. I can see WalMart still having lots of CD's for those not into computers and I see specialty stores thriving with as people are more able to explore music and they want to go beyond the iTunes Store.



    I personally would be sad to see the market get too monotone, even under Apple, but the look of the independent stores that specialize in albums, tapes and CD's ... gives me hope that they will be still strong in the market for decades to come, just as people rediscover phonographs again.



    Quote:
    Originally Posted by JeffDM View Post


    In fact, the argument almost sounds quixotic, with the only difference being that it will eventually be true, in maybe under a decade, just not now. Keep in mind that Apple took five years to get to where it is now.



    Yes, under a decade is a faster shift than we had from vinyl to CD's. That isn't quixotic in the music business, it is seismic.



    Quote:
    Originally Posted by JeffDM View Post


    In the retail case, basically the market has spoken,



    No, the market is speakING. Not past tense. Present tense. And as the market changes, it continues to speak.



    Quote:
    Originally Posted by JeffDM View Post


    that generally buyers would rather buy discs in a warehouse at loss leader prices than have a good shopping environment with a deep catalogue and pay near or at list price. The Internet world changes that mainly because retail "space" is far cheaper, so you can have decent prices and still offer a deep catalogue with easy sampling in the comfort of your own home.



    Yes, that is the advantage of technology. Yet theaters and art museums are still doing well and even expanding in many cities and even smaller towns. Even the WalMart rural shoppers will eventually want more than cheap, they'll want quality and culture and I see technology allowing better music and theater experiences in smaller and smaller markets as long as the big corporations don't put a stop to it. Podcasts and YouTube are showing everyone the diversity of content that can be produced. Hopefully the post-iPod generation will actually start using the iMovie, iDVD software out there and find the desire to become more producers than consumers.



    That is the basis of the optimism behind Jobs' vision of the computer still being the digital hub. Not to over-romanticize it, but I think people will find more inspiration to be creative by exploring iTunes than wandering WalMart and in the end we all want to be inspired and creative.
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