Is iTunes Signalling An Apple Slowdown?
The iTunes Store was launched at the end of April in 2003, a couple years after the iTunes music program was released on Apple devices to get music onto Apple’s then-new iPods. By May of 2003, 1 million songs had been download on iTunes. By the following December, that number reached 25 million. In February 2006, total downloads reached 1 billion, and 7 years later, they hit 25 billion.
It’s no overstatement to say that the iTunes store has enjoyed some wild success. According to NPD group, about 80 percent of song purchases in the last quarter of 2012 were made through iTunes. Apple may be a bit more modest, claiming only 63 percent of the paid music download market. But, iTunes has expanded into movies and TV shows, and Apple has performed similarly in terms of market share for those areas as well.
There’s been a lot of worry that Apple’s growth is finally slowing down, and might not be rocketing straight up through the atmosphere anymore. The stock falling from over $700 a share to less than $400 was one of the major hints of that possibility. Many feel that the company lost its innovative edge with the loss of Steve Jobs, and innovation has been a key buzzword for Apple. Losing “innovation” for Apple would be comparable to McDonald’s (NYSE:MCD) or another fast food restaurant losing “fast.”…
One key to the success of iTunes was the success of the devices that played its music — iPods, iPhones, and iPads. While strength in iPad sales might be helpful, weakening iPod and iPhone sales could be pulling down on iTunes revenue.
For the past 2 quarters, the iTunes store has seen increased sales compared to the year-earlier quarter. The store brought in about $2.4 billion in Apple’s fiscal second quarter this year, with slightly over $2 billion for the two preceding quarters. However, the rate of growth for iTunes revenue is lower than it was 1 1/2 years ago. In fourth quarter of 2011 and the following quarter, iTunes revenue growth was at about 50 percent from the same period a year earlier, whereas Apple’s two most recent quarters saw iTunes revenue come in at less than 30 percent above their year-earlier quarters. For the last 5 quarters, year-over-year growth averaged below 35 percent.
Although its still seeing growth, its appearing more and more like Apple might have a very different future from how it’s been in the past 10 years.