Analyst denies 'plummeting iTunes sales' claim

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Analyst denies 'plummeting iTunes sales' claim

ITunes is not in trouble, it just isn't selling many songs.

Forrester Research analyst Josh Bernoff has responded to media reports quoting him as saying that iTunes sales had fallen by 58 percent. 

Sales from Apple's iTunes stores may be levelling off, but they are not plummeting, said Bernoff. 

The disputed report was published last week and painted a dim picture for Apple's iTunes store. 

Consumers on average purchased only 20 songs per iPod from iTunes, and the figure only slowly grew to 23 in the past months. The findings were based on publicly reported sales data for Apple's iPod and the iTunes store.

Bernoff suggested that people were either buying new iPods to replace their existing units more often than previously thought, or that they simply got "tired" of the iTunes store and stopped buying altogether.

"This accounts for a little tarnish on the incredible iTunes success story," Bernoff wrote on a company blog last week. 

Several media reports, however, were attracted to a far more dramatic figure in the report suggesting that overall iTunes sales over the first six months of 2006 had plummeted by 58 percent. The news caused a three percent drop in Apple's stock price.

The data indicating the 58 percent drop was based on credit card records for 5,580 US households, 181 of which logged purchases in Apple's iTunes store.

The original report warned about the limited sample size, and that the first month of the reporting period included the holiday shopping season.

"With the number of transactions we counted it is simply not possible to draw this conclusion," Bernoff wrote in a new posting on Wednesday. 

"Apple is not in trouble. It makes its money mostly from iPods, and iTunes is just a way to make that experience better.

"It's the music industry that has to worry, since the US$1bn a year or so from iTunes globally does not nearly make up for even the drop in CD sales in the US, which are now down US$2.5bn from where they were."

Bernoff also criticised Apple for its refusal to share data with analysts. "Their unwillingness to comment on the record or off about anything they're working on or any industry results beyond the basic statistics fuels speculation, pro and con, from their supporters and detractors," he said.
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