Inside iTunes' Decline

Forrester Research delivered some shocking news recently. Apple iTunes' sales are off 65% since January and the average size of transactions is down 17%. This sounds like the decline and fall of iTunes, but it really isn't. It's the continued decline of the record business because the entire downloading sector is down and the old CD business continues to erode. Just visit any Apple store during the Christmas holidays and you'll know how many iPods are flying out of the store. The concept of iPods is not going away. The concept of selling music to the next generation is. Digital Rights Management that prevents easy use and transfer of downloaded songs is hurting. The high price of downloads is also hurting -- and yes, I said the high price of downloads. Perhaps 99 cents a song sounds fair, but they'll be no boom in legal music downloading until the price gets as low as 30-50 cents. Labels would then be in cardiac arrest. I guess they'd rather die a slow death at 99 cents or higher. Maybe ther stuck on pricing issues but the labels have not exactly been promoting online sales. In my opinion they are reluctantly embracing it while they covet ideas of someday replacing Apple's 99 cent price model with variable pricing. The labels should be careful what they wish for. If they don't start accepting downloading as the new music delivery system, they will be blamed for both presiding over the demise of the CD (their fault -- too expensive) and the decline of legal music downloading (their fault -- too pricey). iTunes isn't the problem. The record industry is.