Is iTunes Profitable?
12.07.06 - 04:32am
Forrester Research, in a study of 2,700 transactions on the US iTunes store, suggest that for every iPod sold only 20 iTunes tracks are actually purchased. Josh Bernoff, vice president of Forrester research, writes that “With half of all transactions costing $3 or less . . . transaction fees threaten to make iTunes unprofitable.”
The Forrester study also noted that after 18 months of strong growth, the number of transactions has been steadily declining since January of this year. Whether iTunes can possibly make a profit even while being the leader in digital music sales is the question. While Apple controls 80% of the market share of digital music players this is not necessarily equating into high sales of music from their iTunes store. According to Bernoff most consumers “…aren’t sold on the value of digital music.”
“The comparatively modest iTunes numbers suggest that consumers are still spending the bulk of their music budget $14-at-a-time on shiny discs. 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,” writes Bernoff.
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