It took 7 days to sell the first million.
It took 9 days to sell the second million.
It's taken 14 days to sell the third million.
Sales aren't increasing. Sales are decreasing, most likely due to a combination of a smallish music catalog and limited availability. The downturn suggests that people are finding less and less music at the site that they are willing to pay for.
Now let's go out on a limb and predict that June 11th is the earliest that Apple will announce the sale of the 4 millionth song. That's giving the company some slack, since the data points to an increasing number of days between each million, but no matter. Sales have got to reach a definite floor eventually, right? That's what the sales execs at iTunes are telling themselves, at least.
If a million songs every two weeks turns out to be the sales minimum at iTunes, then we have a excellent idea of that company's gross revenue. At most, it will be somewhere close to $2.5 million a month. Not bad, but no great shakes, either, and that $2.5 million assumes that every song is purchased at the full 99 cent price, rather than the less expensive $9.99 per cd.
Apple's business plan is obvious; sell lots of songs, and make a few pennies off each sale. I don't know exactly what Apple earns per song, but let's be wildly, dancing around nude in the streets crazy optimistic and assume that Apple earns a quarter each time someone downloads a song rather than the much more likely nickel or lower. Three million songs in the first month of business gives Steve Jobs a less than whopping $750,000 to cover salaries, insurance and operational expenses with. That might be enough, barely. Odds are total monies going to Apple are more like $150,000, which means that despite the glowing press iTunes is getting, it is losing money hand over fist.
Article comments
1 - Phillip Winn
Leaving aside the idiocy of thinking that Apple's future is dependent on some incredible success with the iTMS, I still think your troll post is missing the bigger picture.
People are interested in this story who don't own a Mac, have no intentions of every owning a Mac, and wouldn't care immediately if Apple went out of business tomorrow. The story is big news because it's a big step in the right direction. For the first time, the music industry is actually giving people music on terms that most people are happy with, and with some idea that the music is theirs to keep.
That's big news - or have you not been paying attention since 1999?
Apple's interests are also obvious. I visited my local Apple store last night and watched someone walk out the door with a full computer setup and an iPod. He had been on the fence about buying a Mac, but the iTMS/iPod combo convinced him to switch. I'm sure more of those are happening as well. Apple isn't necessarily looking for a 1:1 payoff in cash per quarter, but is looking to establish themselves as the place to go for music. They seem to be doing a pretty good job of that.
If you want a losing proposition, I think that creating iTunes for Windows is a no-win scenario for Apple. When they deliver that, then I'll agree with you that Apple has misstepped. Until then, they've sold 3 million songs in 30 days, which is more than any of their competitors have managed to do in several years of trying. More, they've shown the industry that downloads with very light restrictions are the way to draw consumers. I'd be happier with no restrictions, but Apple has managed to make it feel like no restrictions, and that's the best we're ever likely to see legally, from anyone.
I've already pointed out in another post how $.79 tracks are no bargain for most people with a $9.95 monthly convenience fee tacked on, and I think that Microsoft has a long row to hoe trying to secure licensing agreements with the labels, so while I'll be quite happy to see other services and companies pop up to offer more choices, and while I expect it to happen, I'd hardly call Apple beset on any sides at this point.
Also, if you've done any reading on the subject at all, you'll know that iTMS tracks are not so easily released onto Kazaa. They must either be burned to CD and re-ripped (with a loss in quality, obviously) or captured with some audio hijack program. Non-trivial, at any rate.
I've been hearing "Apple is doomed" for years and years and years, and I'm bored with it. If you're jealous because you don't own a Mac, I'm sorry. Visit an Apple store and see why people like it so much.
2 - Greg Hagin
Has there been any more explanation from Apple as to why some artists are available one week and not the next? Also the "partial album" stuff has gotta go...I think that iTMS seems great but have been unwilling to "pull the trigger" and buy anything yet cause I cant find the less mainstream stuff that I dont already own (Eminem, "New" Eagles---please.) I might buy a Whiskeytown album tonight, but with most of the stuff I read about on Blogcritics I can sample some tracks on Limewire and then have to visit the local indie store, which is probably still a good thing to do!
3 - bigwig
Heh. I do own a Mac; bought it at the Apple store down the street.
And I was talking about the future of ITunes, not Apple. Jobs will abandon it if it turns out to be a dog, no matter how glowing the press.
Paradigm shifters tend to forget that it won't matter how many records iTunes sets if it doesn't make money, and the company has yet to prove it can do that.
4 - Brian Flemming
NY times estimates that iTunes is currently available to only 1% of computer users (those who have a Mac, a recent OS X version, and iTunes 4). Of that 1%, only a fraction have a broadband connection.
And Apple still sold 3 million songs.
Also, estimates in the press suggest Apple gets 35 cents per song.
5 - Steve Rhodes
I doubt Apple will abandon the itunes store. Yes, at some point Apple may partner with a company or sell the store.
But as Philip says, this is about more than making money. It is about creating a market (and showing the competition how it should be done in the process).
It is hard to comment too much (except the price point is still too hight) without hands on experience.
I'll get to play around with it next week when I visit my parents who have some high end macs and a cable modem connection.
6 - Phillip Winn
Yes, bigwig, but you're still missing the point. How much of a profit center is/was IE for MS? Some technologies must pay for themselves or die. Others are enabling technologies, developed and maintained just to get people in the door - or to keep them from walking out. I believe that iTMS is one of those features. Even as a money-loser, it is worth millions in PR. You said it yourself, the press is going crazy over this.
Fortunately for Steve, this particular bit of PR also advances the state of online music sales, and happens to make some money, too. Apparently around $100,000,000 so far, if reports of $.35/song are correct!
I can't see Apple selling the iTMS under any circumstances. It's now like a web browser - a minimum requirement.