iOS users downloading 17.6 million apps/day. Songs, not so much.

Thirty days after the launch of the iTunes App Store, Apple announced that 60 million apps were downloaded in the first month of operations generating sales of $30 million. “This thing’s going to crest a half a billion, soon,” Jobs said adding that it may be a “$1 billion marketplace at some point in time.”

Mr. Jobs was being modest.

To see how modest we have the following data:

If the current download rate is maintained (17 million apps/day) and if the pricing of $0.29/app is preserved, then $1.8 billion will have been spent on iOS apps this year.

With the rate of downloads increasing as steeply as it is, $2 billion in sales is not unlikely in the third year of the store. Twice what Jobs was predicting for “some point in time”.

The other line in the graph is the iTunes music download rate. I’ve written about it before and pointed out that the point of inflection in the download rate coincided with the increase in price for songs from $0.99 to $1.29. Not much more to say here except that the trend continues and music downloads continue to slow.

As far as Apple is concerned, the slowdown in iTMS is more than offset by the increase in iTAS. As far as the music industry is concerned, I don’t think CD sales are increasing. Does anyone know?

  • Pat Smellie

    Here a link to recent analysis on album sales. Down 12% in 2010.

  • The NYTimes posted a jaw-dropping graphic on song sales, broken-down by format, last August. I don't know but can speculate that the numbers look just as bad today.

    • I wonder when sales reach near zero if they'll still call it an industry. From a shareholder's perspective (net present value of future free cash flows) it's already worth zero. It's also interesting if a value-less industry will still have the clout to write and enforce the law.

  • I have 11000 songs in iTunes but I haven't purchased any music lately because the none of the latest "hits" interest me. I'm consuming music mainly from Pandora these days. Back to the radio format for me, with a twist. Not a paid endorsement for Pandora.

    • RattyUK

      This is also a problem for me. There is an album however that came out last week that I would love to purchase – available in the UK store but not available in the US store yet. Hopefully Tuesday should solve that. Pandora and Spotify are both great with Spotify having the edge. Pandora's lack of control is similar to radio so not a big thing there. Ironically if you are into music videos MySpaces' iPad app (music romeo?) is an interesting approach to Pandora but with music videos. A bit like MTV used to be before it became a reality tv station.

  • rd

    So another interesting question would be
    why is google trying to get into
    Music streaming. What value are
    they bringing to the party.
    One guess would be ad driven streaming radio
    to fill out their ecosystem and compete with iTunes.

    • I gave up trying to figure out why Google gets into some of their businesses. I don't think they have a process for deciding. There is probably little to no accountability for failure. R&D resources are fungible and most risk is taken by partners. Rather like Microsoft actually.

      • rd

        I think Google real modus operandi is
        AD distribution so Corporations are
        egging Google into everything so Corporation
        can reach the young just like they do with TV.
        Everything else is a distraction.
        That is why Apple getting into AD business
        is so good for premium ad business. It is only
        a matter of time iAD shows up in AppleTV.

  • yowsers

    The music execs absolutely will not want to admit the connection between the drop in digital sales coinciding with the price raise, even though that's simply illustrative of Business School 101 price/sales analysis.

    It's one thing for them to be wrong, it's entirely another thing for them to be wrong to Mr. Jobs. My guess is they'll publicly stick with that pricing scheme even if it kills them. Most likely they'll quietly back off from the actual $1.29 pricing eventually.

    One shakeout we'll likely see in the future is for ebook prices to plummet. It won't come from the established presses. I expect we'll see new and established authors publishing direct to iBooks and Kindle, and they will price it much lower than $9.99.

    I downloaded the first year of Deadwood vids not too long ago. I wanted to study episode structure from a good series. 13 episodes came up for $1.99/episode, or you could buy all for $28-something. Just what you'd expect to see. But since I was looking at it from a writer's perspective, I didn't see 13 videos, I saw the equivalent of 13 scripts, or 13 books in a series, laid out and priced like tracks in an album.

    That got me thinking. Instead of book sequels, what about thinking of book episodes? Instead of 3 or 4 books of 300pgs or 450pgs, what if we used a shorter format of 150pgs, restructured a story more like an HBO series, and put out 4-6 book episodes at a lower price point (like $.99, or $1.49)?

    The point I'm getting at is that digital publications will likely become a derivative and new "form" from their print counterparts, driven in part by the digital device's form factor. This isn't predicting the death of the novel, more like its long term supplantation (if that's a word…) And that new digital work will restructure pricing. That's been obvious for some time, but perhaps not fully examined for books as far as a written form, and how that changed written form impacts pricing.

    I'm not sure the exact form digital written works would need to take — something shorter and harder-hitting than what we typically expect from a written book. Most novel writers don't have the structuring skills of a TV/movie writer (ask most novelists or book writers what "beats" are, or how to structure and construct scenes, sequences and acts and you'll likely get a blank look and a fumbling reply). I expect solid structure will be a key element in successful digital works, so the TV/movie writers having those skills will have an edge in deciding the new forms.

    Will it be a string of novellas? Episodes? A return of the old fashioned serials? In 5 years time we'll likely see these emerge over old fashioned novels, and the price point to drop under $1.99 ea. Times are about to get yet more disruptive for the publishing industry.

    • Tom

      When Charles Dickens was writing, he published thru a literary MAGAZINE. Carrying two or three chatpers at a time, the magazine was shipped across the pond to the colonies. New Englanders camped out on the docks for the inbound ship carrying the next installation of the novel Mr. Dickens was writing. Quite exciting. Only as one was finished was it bound, printed, and sold as a book. Publishing houses grew from being author driven to editor driven this way.

  • Halex

    Didn't the tiered prices star in April 2009? The inflection seems to take place September, I reckon.

    • There was a strong dip in early 09, but perhaps there was some seasonality into the summer. The data I use is not complete month-to-month but depends on what Apple reports and they report irregularly. The turning point is perhaps artificially precise.

  • yet another steve

    Jobs didn't say 99 cents to screw them… he understands consumers.

    Logically it's only 30 cents and yet $1.29 makes me hesitate. It's not that $1.29 is too much money it's that it kills the impulse. Then I start thinking… do I really want this song? And if it takes too much thought the path of least resistance is to get back to work without making a purchase.

    It's not the money, it's psychologically breaking the impulse.

    At 99 cents I once bought a song I wanted to listen to because the CD was at the other end of the house.

    The labels don't understand that technology is what is hitting them. And that SJ is actually their best friend. And come on, no one has ever accused Apple of unnecessarily cheap pricing. They're experts at getting premiums out of consumers and they'd do the same for songs if the demand dynamics were there.

  • MGordom

    What I find interesting as well is the TV companies (by that I mean ABC and CBS) are going in the opposite direction of lowering their pricing on tV episodes.

    I also wonder if the music companies are more worried about Apple power than what they really should be concerned about: that people would rather find new music on-line (in some cases illegally) becauseh it's not available legally. I hear about interesting "mixtapes" that can only be found online and illegally; in fact artists themselves encourage their listeners to get their music this way.

    I think it would be better to sell it on iTunes (or other download services) and that would encourage other artists.

  • Concerning the possibility of serializing books. You can see that happening now in the podcast world, where authors are podcasting novels and short stories in serialized form, usually an episode about every two weeks.

    • rd

      Japan is way ahead in that
      a girl was writing using TXT messaging.
      She has a huge following.
      American News covered it few years back.

  • Yowsers,
    Great great points and future insight. Thank You.

    Something I've been wondering is how does the story telling "medium" evolve now? We're all sitting at the most powerful creation stations that have ever been created – do "books" evolve into multi-media experiences? I think it's inevitable!

    I know my kids do things – having grown up on computers – that I'm just not able to do. They are fluent across software and programs etc that I can only dream of. They create things I can only wonder at… so do their (worldwide) friends. Written stories with images, music, video all embedded to create the "mood."

    So what multimedia/novella/episodic masterpieces are coming? I'm excited to see it and the old guard (management boneheads of TV, movie, book publishers, etc) will be caught playing defence (aka napping…) – again.

    • yowsers

      Some random thoughts about what evolves next for content:

      Storytelling ability wins above all else. The great storytellers of 1, 2 or 3 millennia ago would be good to great storytellers today. The form would be different, of course, and so would their chance of success and immortality. Bad storytellers remain just that, and technology can't help you with a badly told story (compare Star Wars…uh…IV, V & VI vs I, II and III — it's been a decade and I'm still not used to that revisionist numbering.)

      Remember the 90's and the intense buzz around "multimedia" and "virtual reality"? They were ahead of their time. The S/W and H/W weren't quite there, and we were all limited in our understanding by the (then) current state of art of tech S/W+H/W.

      We still are limited by our current understanding (or that's how it feels to me).

      We don't use the terms "multimedia" or "virtual reality" much anymore. Startups and media companies need new marketing terms for attracting V/C cash, for one thing. I suppose you could coin the terms "Multimedia 2.0" and "Virtual Reality 2.0" to account for the new S/W+H/W iterations that we're now experiencing. Maybe version 3.0 is when it all comes together and works (typical…)

      More importantly, I think we'll see DIY 2.0 (do-it-yourself, in case you forgot that buzz word, too.) I see that increasingly play out in music, books, comics, graphic novels, and performance. To a lesser extent it happens in film, too. More content producers (to use a blanket term) from all those industries are realizing that unless they're in the top 5% or 10%, the labels / presses / studios provide little or no support while taking all the proceeds from sales.

      "Who needs them," they ask, "when we have to do all the development and marketing work, and pay for it, too?" It's a good question that the labels / presses / studios have lame answers for (and when the answers don't work, they make threats.)

      What replaces it? DIY. Or find a friend or someone whose work you admire and ask them to contribute for a fee or a cut of proceeds. Barter is often used, too. I may write a book or script, and I may be able to slap together artwork that is pretty good, but will not have professional polish to it. So it may have its own DIY appeal and be good enough for what I need. Or I can toss that work to an up-and-coming talent who is hungry for work and exposure. What do I need a label / press / studio to do that for me? These are project-based ad hoc artist collectives.

      I expect that it is out of these ad hoc artist collectives that we'll see whatever comes next. The corporations will figure out a way of consolidating it, but a number of those corporations will emerge from the ad hoc artist collectives, and not necessarily from the established ones. It reminds me of that stat that says most great family wealth is squandered by the 4th or 5th generation (good thing, that, since it keeps most of us honest, eventually). That seems to hold true for corporations, too. With a few notable exceptions, the Fortune 500 firms from 1920, or1950 or 1960 are not here today.

      One of the nearly insurmountable challenges in figuring out "what's next" is "thinking outside the box". That is a cliche by now. By definition, most of us can't think outside the box. If we *could* think it, it's probably not outside the box, is it? (shades of Ecclesiastes here)

      From what I've seen, those who think outside the box generally don't know they're doing so, or, if they do, couldn't care less. These are the eccentrics and the obsessive, mal-adjusted ones among us.

      I'm sure we've all seen posers who try to adopt the "I'll be weird and pretend I don't care what you all think" in order to give off the I'm-a-thinking-outside-the-box vibe. You can spot them 100 yards off because they try too hard.

      The way to make money on thinking outside the box is to become a corporate trainer! Be sure to use a lot of cute perception puzzles in evangelizing "thinking outside the box".

      Most likely it will be an amalgamation (or "mashup" as the kids say today) of old, current and new stuff reconfigured in a slightly different way. Someone (forgot who) said that creativity isn't actually thinking of something new, the majority of the time it's recombining stuff we already have. The change in times and context gives it new meaning.

      How's that for a nebulous stab at an answer?

  • AdamC

    Congrats guys, the first blog I come across where there is no bashing whatsoever, keep it up.

    A pleasure to read the comments too,

    • Second that.
      Either Horace is good at filtering out the usual trolling, or possibly the subject matter (being based primarily on hard data) is difficult for the usual suspects to argue against.

      This is how I imagine the comments might be on Daring Fireball if @gruber provided the facility – but then I'm probably being way too optimistic!

      • I've only had to delete about 3 messages out of 1433 submitted. I think you're right that sites that traffic in opinion attract opinions which quickly degenerate into insult. Conversely, sites that traffic in data and analysis attract reasoned debate. One can only hope.

        The tone of discussion has been self-goverened.

  • iOSWeekly

    I do think that putting the prices up was a mistake, and obviously caused less sales, but the figures aren't that terrible: sure the volume of sales dropped by 20%, but the price per track went up by 30% – it's possible the music studios are actually making more money with the lower sales…

    But yes, the trend doesn't look good.

    • arjun

      If a crude first order analysis were applied to those figures:
      100 songs sold for $0.99 = $99 in revenue
      80 songs sold for $1.29 = $103.20 in revenue.

      Which means that all that hoopla for 4% increase in revenue?

      Real questions for the labels:
      1> Who knows if the sales wouldn't have increased by 4% just like that?
      2> Not all songs are $1.29, so in reality the crude analysis above actually overstates the benefit (if there is any) of raising prices. These guys don't understand that digital downloads are a costless product beyond a quickly reached point, volume should be your goal.

      • iOSweekly

        Another way to look at it: According to the chart unit sales are still up 50% over 2008 levels, so people are still buying plenty more music, at a higher price, than they were 2 years ago…

        …at least on itunes. in real brick and mortar stores? not so much.

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  • Iphoned

    Horace – your chart shows about $310m revenue/month for iTunes or I suppose about $1.2b a year.

    Yet Apples earning releases report about $1.2b a quarter in "other music related products and services" which they clarify as " iTunes Store sales, iPod services, and Apple-branded and third-party iPod accessories".

    I assume that's mostly iTunes downloads, and thus about $5b+ a year revenue.
    So that's 4x your estimate.


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