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  • The Numbers Game: Are iTunes Sales Soaring or Falling?

    December 14th, 2006

    You can prove just about anything with numbers, so I find it hard to take statistics too seriously. A case in point is the report the other day that sales at the iTunes store collapsed during the first nine months of 2006.

    Originating from Forrester Research, it was claimed that monthly revenue at iTunes had fallen by a whopping 65%, and that each transaction was 17% less. Now, Apple hasn’t actually revealed any such figures, but Forrester supposedly based its conclusions on an analysis of credit card transactions at the iTunes store over a 27-month period. Whose transactions? Good question.

    Now Apple’s stock dropped 3% as a result, even though nobody is predicting that the sales of the iPod have been impacted. If the figures are true, it would indicate that people may be tiring of legal music downloads for whatever reason. Is that possible?

    However, the waters became muddied real fast, when Apple denied the claim, saying in a published report that “the conclusion that iTunes sales are slowing is simply incorrect.”

    To add insult to injury, another report appeared, this time from investment company Piper Jaffray, which reported that iTunes weekly sales were up 78% from 2005. This particular survey is said to originate from Apple’s own data, revealing sales of 695 million tracks, or 18.5 million per week, for the first nine months of 2006.

    Even if you do consider Apple’s statement as self-serving — or even an outright lie — you still have two diametrically opposed surveys to deal with. Just who is telling the truth here, or is it a matter of simple incompetence?

    Or is the fix in?

    I don’t presume to have all the answers, though it is curious that Forrester’s report appears at a time when iPod sales are likely at their seasonal peak. If it is true, aside from the impact to Apple’s stock price, and perhaps to the music industry that would also be suffering, would consumers decide not to buy music because sales are dipping? If you logged into iTunes and you were deciding whether to buy an album or video, would you stop what you were doing because others evidently had sworn off legal downloads?

    Probably not.

    If you had a new iPod on your holiday shopping list, would that be enough to deter you from your purchase? Would you abandon Apple and choose a Zune or some other digital music device instead?

    Just remember that there have been alleged surveys throughout the year that sales of the iPod itself were going to be less than expected. On each occasion, Apple’s actual financials showed otherwise.

    Are all these overly-conservative — make that pessimistic — portrayals of Apple’s sales picture based on faulty assumptions? Or were they deliberate falsehoods.

    Now if you’re a conspiracy theory addict, you might look at some of those Zune fanboy sites that arose in anticipation of the arrival of Microsoft’s rebadged Toshiba music player. They were supposedly inspired — and perhaps supported — by Microsoft itself in their efforts to boost interest in their most recent effort to create an iPod killer.

    Is it possible that Microsoft would also surreptitiously finance a faulty study of iPod or iTunes sales, to try to tarnish Apple’s reputation? It’s not as if the company has always played fair when it comes to marketing. So if it’s all the result of deception, you could easily speculate about the source.

    In the end, though, it may Forrester’s claim may just be the result of bad numbers and/or sampling techniques and I suppose you could say the same about Piper Jaffray’s results.

    So is the truth out there? Or can we toss both surveys into the trash and hope that Apple’s financials, which are mandated by law to be accurate, will reveal the true picture when they are presented next month?

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    6 Responses to “The Numbers Game: Are iTunes Sales Soaring or Falling?”

    1. Uncle Twitchy says:

      If you read the Forrester follow-up, it would appear, to borrow from Eric Idle, that the news grabbed the wrong end of the stick and beat around the bush with it. FUD at its finest.

    2. MichaelT says:

      96% of statistics are lies.

    3. 96% of statistics are lies.

      Do I need to state the obvious? 🙂


    4. MichaelT says:

      96% of statistics are lies.

      Do I need to state the obvious? 🙂

      No, I’ll do it for you. I was lying anyway. 😉

    5. John Morgan says:

      And if you read the Forrester ‘rebuttal’ the sample used for the study was only 181 users. Not statistically very significant. No methodology was given for how the sample was selected.

      Most likely ‘micro-payments’ are declining in popularity, and Forrester has noticed this. It’s unclear whether ‘sales’ is the number of transactions, or the dollar amount of purchases. I suspect they were looking at the former.

    6. George says:

      If you look at the time period that the 65% collapse occurred during you will see that it began in January and ended in September. So there were more downloads in January than September. Because January comes one week after Christmas, a little common sense (something that most “journalists” do not posses) makes it pretty obvious that in January there were many new iPod owners downloading songs. Most people who are new to iTunes have a tendency to download a bunch of individual songs at first and then their purchase rates tails off. So there would naturally be a drop off in purchases from the just after Christmas time period through September. That is why “year over year” statistics are better. They usually account for seasonal variations.

      But most “news” organizations don’t think this way. They would rather put out attention grabbing “iTunes is doomed” headlines than actually check to see if the facts that they are reporting are correct.

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