Apple’s iTunes Could Be Hit by Falling Digital Music Sales

Source: Apple.comWill Apple’s (NASDAQ:AAPL) iTunes take a hit from the overall decline in digital music sales? For the first time since Apple launched its iTunes Music Store in 2003, digital music downloads decreased in the U.S., reports Billboard.

According to Nielsen SoundScan’s data via Billboard, digital track sales decreased 5.7 percent during 2013, from 1.34 billion units to 1.26 billion units. Meanwhile, digital album sales dropped 0.1 percent, from 117.7 million units to 117.6 million units.

Although digital album sales recorded an overall decline, Apple’s iTunes actually boosted its share of the U.S. album market in 2013, growing to 40.6 percent. According to data from global information company NPD Group, Apple held 63 percent of the market for paid music downloads in the fourth quarter of 2012, not long after the company celebrated the tenth anniversary of its iTunes Store last April.

According to Billboard, many industry executives believe that the digital music sales decline may be due to the growing popularity of subscription and ad-supported music streaming services. However, for companies that have invested in both markets, the growth of music streaming may counter the recent declines seen in digital track sales. Fortunately, Apple is one of those companies.

Apple launched its iTunes Radio music streaming service as part of the iOS 7 operating system update that was released in September, 2013. By October 28, Apple CFO Peter Oppenheimer reported that, “the number of unique listeners who have tried iTunes Radio is now 20 million and growing.”

Although Apple’s iTunes Radio may be cannibalizing its own digital music download sales, it is also likely taking listeners from competing music streaming services. During Pandora’s (NYSE:P) fiscal third quarter earnings call last November, CEO Brian McAndrews noted that the company saw a 2.6 percent decline in active listeners in the U.S. soon after Apple launched iTunes Radio in September.

Regardless of the decline in digital music track sales in the U.S., Apple’s overall iTunes business is still expected to see significant growth through 2014. Oppenheimer noted that total iTunes revenue from software and services saw 22 percent year-over-year growth in fiscal 2013.

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