Slower Growth At #2 iTunes Music Store. Now What?

Who sells the most music in the U.S? Wal-Mart. Apple’s iTunes Store is now #2. But not #2 with a bullet. Things have changed.

iTunes Store sales growth appears to have slowed to a crawl. Even as Apple adds more television shows and movie rentals, the question lingers-- now what?

Precise performance numbers are difficult to obtain from the overly secretive Apple, but one number is as clear as it gets. Sales growth of music downloads at Apple seems to have come to a grinding halt.

MacDailyNews has a great list and graphic which highlights various milestones in the almost five years iTunes Store has been selling music. Clearly, iTunes Store is a big success for Apple and heady competition for retails stores that sell CDs and DVDs.

From late April 2003, not quite five years ago, to July 2005, almost two and a half years later, iTunes Store hit 500-million songs sold. At about 99-cents each, round it out to an even half billion dollars in revenue. As iPod sales skyrocketed among the unwashed masses of Windows PC users, iTunes Store music sales took off.

From 500-million songs in mid-July of 2005, it took Apple only seven months to sell another 500-million songs to hit the impressive number of 1-billion songs sold.

That was near the end of February, 2006, just two years ago. What about since then?

11 months later, iTunes Store hit 2-billion songs sold, another 1-billion in less than a year. Then something happened. Competition? Saturation? Whatever it was, the sales growth rate for music downloaded from iTunes Store appeared to slow, while iPod sales continued to grow.

From January of last year to the end of July, about seven months, iTunes Store sold yet another billion songs. Seven months. A billion songs. From August 2007 to the end of February, iTunes Store sold another billion songs. Seven months. A billion songs.

The growth rate for music downloads from the iTunes Store has stopped at a billion songs in seven months, stretching back 14 months. Even sustaining the rate of about 1.5-billion songs a year makes for a substantial and lucrative business for Apple. Only Wal-Mart sells more music in the U.S., while Apple’s iTunes Store numbers include a couple of dozen countries.

Still, the growth rate has stopped. Why? Competition? Coke, Wal-Mart, Microsoft, Virgin, Sony, and everyone else in the music or music distribution business has attempted to poke a hole in Apple’s rapidly rising music balloon with little success.

Amazon’s recent efforts with DRM-free music downloads for iPods, Windows and Mac users, may account for some of the slowdown, though it’s hard to believe the company has had that much success and not announced any numbers.

What’s going on? iTunes Store has the largest selection of music titles, the easiest buying system, and the ubiquity of the iPod ecosystem to help drive sales. iPod sales have reached the slow growth mode, too. With fewer new iPod users, there may be some impact on iTunes Store’s growth rate, now at a flatline since mid-2007.

Apple continues to trumpet the positive numbers, while scrambling to figure out how to keep the money machine moving into the stratosphere.

The iPod maker claims the iTunes Store has 50-million customers. Apple has sold over 150-million iPods since 1981 (our family of two has three, but purchased seven through the years).

Researcher The NPD Group claims that nearly half the teenagers in the US do not buy CDs, opting for downloaded music instead (though no data was given as to legal vs. illegal downloads, or CD swapping). NPD says the fastest growing group on online music buyers is aged 36 to 50.

Clearly, something in the past year has impacted the sales growth rate at iTunes Store for music downloads. A slumping economy might be one component in a string of causes, including competition, saturation.

Whatever it is, Apple, while putting on a game face in front of a slumping stock, cannot be happy with the status quo, or, rather, the stagnant quo. iTunes Store music sales are flat for the online leader.

The folks at Mac360 have a few domains for sale. If you've ever dreamed of setting up and running your own site about Apple, the Mac, iPods or the iPhone, this is a great way to get started. Click here for the basic details, and click AppleScene, iPhoneKillerTips, or ChatterMac for a more complete list.