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iTunes No. 3 Music Retailer

25 Jun, 2007 By: Chris Tribbey

Apple Inc.'s iTunes online service has become the third-largest overall music retailer in the United States, just behind brick-and-mortar stores Wal-Mart and Best Buy, according to a report by the market research firm The NPD Group.

“This is kind of a breakthrough,” said Russ Crupnick, VP of The NPD Group. “There's nothing in video that compares. iTunes video sales are hardly registering.”

Crupnick said year-over-year sales for iTunes are up 50% to 60%, and consumers' move to downloading will continue to grow. “CD sales are struggling. A lot of these retailers are under stress,” he said. “It's fair to say there's a shift to online, both [for] physical [product] and digital.”

NPD arrived at the rankings by adding up the total number of units sold by each company in Q1 of 2007, with 12 downloaded songs equaling one CD sale. This is the highest the online service has reached in terms of unit share, according to NPD. The data does not cover revenue, but only total units sold.

Amazon.com and Target ranked fourth and fifth, respectively, with Cocoanuts/FYE, Borders, Circuit City, B&N and Bestbuy.com rounding out the top 10.

Wal-Mart led all retailers with a 15.8% unit share, NPD reported, with Best Buy holding a 13.8% share. iTunes held a unit share of just less than 10%.

Downloads still accounted for less than 15% of total music sales in the first quarter of this year, according to NPD, but Crupnick said that number will grow.

“I worry about retailers shifting space away from CD,” he said. “It's a self-fulfilling prophecy. They see sales are down, and they react. One-hundred forty million people are buying CDs … [the market is] under stress, but it's still a huge market.”

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