iTunes at 10 Years: Still No. 1 Music Download Site

16 Apr, 2013 By: Erik Gruenwedel

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Digital media sellthrough platform began selling TV shows and movies in 2005 and 2006, respectively

Apple’s iTunes store continues to dominate the music download business as it approaches its 10th anniversary on April 28. Eight out of 10 digital music buyers downloaded tracks and albums from iTunes in Q4 2012, capturing 63% of the download market share in 2012, followed by Amazon at 22%, according to new data from The NPD Group.

iTunes also ushered in the transactional video-on-demand and digital sellthrough of TV programs beginning in 2005 with five ABC TV and Disney Channel programs — selling about 1 million videos a week, according to Apple. On Sept. 12, 2006, iTunes began offering 75 movies from Walt Disney Studios, Pixar, Touchstone and Miramax — including many the same day they were available on DVD.

New releases were priced at $12.99 when pre-ordered and during their first week of availability, and $14.99 thereafter, with library titles available for $9.99. The price points have not changed much despite the influx of competing platforms such as CinemaNow, Vudu and Fox’s DigitalHD, among others.

Interestingly, rental and sellthrough prices for TV shows have increased as the market for on-demand viewing escalates.

At the time, Disney CEO Bob Iger heralded the iTunes distribution deal as “breaking new ground” for Walt Disney Studios. Six years later, Iger reiterated those comments when announcing an exclusive pay-TV license agreement with Netflix for movies and TV shows beginning in 2017.

Meanwhile, 44 million Americans bought at least one song track or album download in 2012. That number has remained relatively stable throughout the past three years, despite the rapid growth of Pandora and other music-streaming options.

NPD estimated that average per-buyer spending on music downloads increased 6% year-over-year, due largely to increases in music purchasing by teens, along with an increase in the number of consumers purchasing both single song tracks and full albums.

"Since the launch of Apple's iTunes store, digital music downloads have become the dominant revenue source for the recorded music industry and iTunes continues to be the dominant retailer," said Russ Crupnick, SVP of industry analysis at NPD. "There's a belief that consumers don't need to buy music because of streaming options, when in fact streamers are much more likely than the average consumer to buy music downloads."

One-third (38%) of U.S. consumers surveyed reported that it is still important to own music, and 30% believe that listening to albums is important. Among consumers who listened to music on Pandora and other free music-streaming services, 41% reported that owning music was important to them; in fact, many free streamers attributed buying more downloads to their discovery on a radio or via an on-demand service.

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