The world is going to end…

According to Forrester or is it? Interesting media to blog conversation taking place this week on the back of Forrester’s report released earlier this week claiming music downloads (specifically on iTunes) had plummeted since January 2006 (down 65% on last year).  As you can imagine this type of research and figure was going to cause headlines and it did, the Register wrote up a piece after interviewing the analyst Josh Bernoff in which he evidently asked rhetorically “Where’s the good news?”. Now the Register these days has more readers than i can think of numbers so when they write people read and within days Apples stock had plummeted by 3% and hedge fund managers were besieging Forrester. Correctly in the original article el Reg did reference the ‘collapse’ in inverted commas, as the research was based on a sample of credit card transactions and obviously Apple would not disclose this information, but still 65% is hell of a drop. It’s all a bit of a mess really – why the hell this type of report would lead to such a drop in stock is bewildering as Andrew says it far better than I could:

It’s a testament to the ignorance of Wall Street’s gamblers, and the collective herd mentality of the business press, that Forrester’s research should cause such a panic. Apple’s dazzling growth in recent years has been earned from selling portable music hardware – not digital downloads. The company readily admits the iTunes Store contributes next to nothing to the bottom line. And so long as people want portable digital music, and Apple continues to make the most attractive portable digital music player, and the public can transfer music they’ve bought elsewhere onto that player – Apple’s growth should continue. But rationality rarely enters the equation, when the American press discusses its darling.

Forrester has come back via the power of the blog to standby its report I think the headline summarizes its view:  iTunes sales are NOT plummeting! Press credibility, on the other hand . . .Still confused? I am – smoke and fire and all that jazz…

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3 responses to “The world is going to end…

  1. Well said – it is confusing. Andrew is right that the whole things says more about the Kremlinology attempts of the media/analyst/wall street complex in the States. A 3% fall on the basis of one research note rather than a pattern is insane. I must confess I have never bought anything on the iTunes store (I was tempted by an exclusive Pixies track though) but am an enthusiastic user of a totally rammed iPod as I have never felt that a low bit rate single track was a good buy, as I can get a DRM-free uncompressed CD for as little as £2.50 depending on the title (look at all those Amazon marketplace links). These purchases must be marginal – no way will people buy thousands of pounds worth of files to fill up a £200 device. Maybe growth is saturating, maybe the novelty factor is gone but for now interested parties should just hold on. One research note about a marginal part of Apple’s business means little on its own…

  2. I have to say I have ‘lazily’, succumbed to iTunes. Lazy is the word for it. But as you said I’d never have filled my 20G iPOD with iTunes a mix of uploading my existing CD collection and then dabbling in the whole Kazaa/Soulseek p2p free love thang for a number of years got me to a point where I was bursting at the seems with music.

    In fact I’ve had a draft post that I never issued before but think I’ll share for the sake of this conversation. It is about a trend I’m seeing, all be it at Forrester levels i.e. speaking to a few people (I do jest) – that people are now really confident with the music download model and are actually prepared to start paying to own digital content for a better experience/quality – whilst it might not mean they’re all using iTunes and perhaps opting to go from black to gray (allofmp3 for example) there is now this huge market of people that are excited about music and now perhaps prepared to pay…

    The post:

    I wonder how many people are now actually buying music again after getting ‘back’ into music as a result of trying to fill their ‘huge’ iPods by downloading and sharing music using p2p tools such as Kazaa, Napster, Soulseek (all known for illegal music sharing) etc… Has ‘illegal’ file sharing actually started to breed new music consumers, those that are now confident to pay and download their music? Has access to free (or illegal) music acted as a great ‘word of mouth’ medium i.e. getting new music out there, building awareness, whilst also demonstrating, and subtly proving, a new retail model.

    I think ‘free’ (of which I really mean illegal) music has probably helped to get far more people interested (who otherwise perhaps wouldn’t have) in music, creating new consumers – and as people grow in confidence with this new content model they are now maturing into ‘responsible’ consumers. I know as I’m one of them – I can’t be alone surely.
    As record companies now start to drown p2p sites with broken files people will realise the value of the convenience actually getting what you want when you want it by paying for a download from iTunes as opposed to downloading numerous broken files on Kazaa. In the long run these sites which have supposedly cost the record companies billions may in fact have been a blessing in disguise, creating a larger and more musically literate market…

    Just a thought.

  3. Great abortive post. The old school P2P scene regularised a lot of behaviour that is now helpful to those smart enough to do the online thing. It is also true that in my case at least it really made me appreciate and buy more music than ever before. It is interesting to see that Sony bought Grouper so they could watch what people were doing and learn from the punters rather than just sue it for copyright dodgy-ness. Those file logs of Grokster et al could well have been worth more for market data than a load of names to sue…

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