Few iPod Owners Are Big iTunes Buyers
I think an article by Josh Bernoff with Remy Fiorentino at Forrester talking about the challenges that iTunes faces speaks volumes for the difficulty of establishing a winning business model in the music download sector.
iTunes is the clear leader but according to this article they are facing some significant challenges - here is an excerpt from the document
EXECUTIVE SUMMARY
Forrester’s recent analysis of more than 2,700 US iTunes debit and credit card transactions reveals that 3% of online households made an iTunes purchase in the past year. Apple’s iTunes proves that $0.99 micropayments for digital music can lead to substantial revenue; buyers spent an average of $35 at iTunes over the past year. With half of all transactions costing $3 or less, though, transaction fees threaten to make iTunes unprofitable. Since the introduction of the iTunes Music Store, Apple has been steadily selling just 20 iTunes tracks for each iPod sold, suggesting that even at $0.99, most consumers still aren’t sold on the value of digital music.
Monthly iTunes Revenue Increased Steadily In 2004 And 2005
More Than 3% Of Online Households Bought iTunes In The Past Year
Most Households Bought iTunes On Three Or Fewer Occasions
Most iTunes Purchases Cost Less Than $3.00
Most iTunes-Buying Households Spent Less Than $20 Last Year
Apple Sells 20 iTunes Per iPod Shipped
iTunes Revenue Is Dominated By A Large Number Of Small Transactions
Apple Sells Just 20 iTunes Tracks For Every iPod Shipped
WHAT IT MEANS
Digital Music Is A Tough Market — Even For The Clear Leader!