iPhone-Free Apple Post

The shiny new phone has rightly been getting lots of attention, so much so that a couple of other bits of news got a bit overlooked. So I’ll try not to mention the iWord in this post…

One key piece of news was Apple TV, and the second was the performance of the iTunes Music Store.

iTMS hit another milestone in January: over 200 million songs downloaded. Remember, just a few weeks ago there were claims that Apple’s sales were declining. I said back then, wait and see, the fourth quarter will be really big. And it was. I remember saying a similar thing to a couple of journalists who thought Apple was in terminal decline after the first two quarters of sales last yr. Of course the 3rd quarter iPod sales numbers came in strong, and it looks like Q4 has been a bumper quarter too.

But it’s the trend in the music downloads numbers that interests me. Apple’s music sales growth has traditionally been more impressive for its scale than growth dynamics i.e. additions have been steady rather than stellar and iPod / iTMS buyer conversion ratios have been relatively modest. But the 200 million number suggests a significant increase in monthly download numbers over the period. Between July ‘04 and Feb ’06 the normalized monthly download rate was just under 72 million. Now that is 100 million, and if steady rates of growth are assumed then that would be approximately 4.5 million extra downloads to the monthly tally every month. But of course we know there is strong seasonality with significant drops in summer, so everything points to a very string fourth quarter.

So all in all, iTMS is doing well and has positive momentum. Seasonality is in many ways a reflection of the maturation of the sector i.e. it is becoming impacted by the same factors as the overall music industry.

In much the same way that you shouldn’t make a call on a cricket game until both teams have batted once, Apple’s download numbers need to be taken in the context of the year, not the quarter.