Apple passes Amazon to become the #3 US music retailer

Things must seem pretty rosy in Cupertino -- just a week before the mega-hyped launch of you-know-what, market research group NPD's quarterly survey shows Apple has passed Amazon to become the third biggest music retailer in the US. This isn't the biggest of surprises, since Steve himself predicted that the iTunes Store would overtake Amazon at the Showtime event back in September, but the leap to #3 is a little unexpected, since Apple also outpaced Target last quarter. iTunes is now rocking a 10% market share, just behind Wal-Mart at 16% and Best Buy at 14%, and while we don't expect to see it pass those two giants anytime soon, we'd bet that uptick in DRM-free sales has got the iTMS crew at Apple licking their chops.

[carlos @ Jun 23rd 2007 8:27AM]

How long until Apple is #3 in cell phone sales. :-)

[telepheedian @ Jun 23rd 2007 8:46AM]

The iPhone will fail due to the fact that they pretty much totally ignored enterprise tools.

[Hawkman @ Jun 23rd 2007 9:09AM]

@ telepheedian - ha, yeah, because your company buys you $500 phones, but you'd never buy something cool for yourself... That's how it works. And I'm even gonna let it slide that the iPhone does support business tools, so long as your company is using open standards and isn't Microsoft's bitch.

The iPhone will live or die on consumer sales. Everyone knows that. Apple knows that. And if it takes off, employees will demand that their business supports it, because there's no technical reason, or even monetary reason why it shouldn't be supported. It's just lazy IT departments who find it easier to stick with proprietary tools than convert to better, open standards.

[Gadget Chick @ Jun 23rd 2007 12:22PM]

telepheedian, who ever said the iPhone was even aimed at enterprise? last time i checked this was product for consumers...

[humpty @ Jun 23rd 2007 8:53AM]

How are they doing the comparison given that you have to buy full CDs at retail vs. piece meal online.

[Hawkman @ Jun 23rd 2007 9:12AM]

I've always wondered that. Perhaps they assign an arbitrary ten tracks per album and do it by track sales? Or simply count albums? Or count number of individual purchases?

Whichever way, seems like the numbers are going to be unfair to either digital or physical sales.

[Hawkman @ Jun 23rd 2007 9:12AM]

I've always wondered that. Perhaps they assign an arbitrary ten tracks per album and do it by track sales? Or simply count albums? Or count number of individual purchases?

Whichever way, seems like the numbers are going to be unfair to either digital or physical sales.

[tom @ Jun 23rd 2007 12:27PM]

it might just be straight dollar sales

[carlos @ Jun 23rd 2007 9:06AM]

"The iPhone will fail due to the fact that they pretty much totally ignored enterprise tools."

How do you know what the iPhone rev2 or rev3 will support? They could add 3G and enterprise support in the next rev and people will drop Blackberries and other hand helds in droves. I work in IT and all of our high level execs are asking for iPhones.

People predicted that the iPod was over priced and would utterly fail. Look at the iPod now.

[cc @ Jun 23rd 2007 9:18AM]

This graph is a perfect example of the publisher leaving out potentially useful information to no good end. Why not include how much the sales actually were, so we can see what part of the gains are from Apple's increases and what are from Amazon's decreases. Are we looking at a shift to downloadable music purchases, or just a complete decline of CD sales?

telepheedian: I'm an enterprise user and therefore probably won't buy the iPhone without true Exchange Support. However, I disagree with you, as most people are not like us. Like 5% of Americans or less (that's a guess) care about Exchange access or even know what it means. And that's even less worldwide.

[Ryan @ Jun 23rd 2007 9:41AM]

Hahaha I love all the people who say the iphone will fail. It makes for a good laugh. The iphone will be exactly like the ipod. HUGE sales, tons of add ons and every generation will get that much better. This thing is gonna blow the doors wide open on the cell phone market. You should be thanking apple for opening up suched a closed, crappy market. PEOPLE WHY PAY VERIZON, AT&T and every other carrier for their closed phones?!?! What is wrong with you! OMG i wish the apple iphone came years ago! Im gonna like it when im walking around with my iphone watchin my movies, playing my music, making my calls and texting people all while looking good and having an awesome secure, easy to use phone. Go ahead keep using your little windows smartphones running god knows what version of that crappy "mobile" windows OS haha. Eventually you all will want an iphone. My friends all hated ipods when they first came out because they were a "lame" apple product haha. Now look at them they each have 2 of them by now haha. Same will happen with the iphone you just dont know it yet haha.

[Constable Odo @ Jun 23rd 2007 12:20PM]

Most humans as they get older fear new ideas or things they don't really understand. I suppose that's why witches got burned at the stake or why zealots couldn't believe the Earth was round or not the center of the universe. As you say, it will probably just take time to convert users to newer technology. I dare not use the word ignorance but maybe misinformed would be more suitable. I was really slow to move from OS9 to OSX for about a whole year, but once I changed I never went back and now I barely remember that antiquated OS.

I don't use a cellphone so if I begin to use an iPhone I can't gripe about the change. I'm only certain if it works as advertised, there's very little not to like. The iPhone is probably far from perfect, but it sure looks like it would be great to use. We'll see a a week or so if the average user goes bonkers over it. It won't suit everyone, but it should outsell every smartphone currently manufactured in a very short time.

[ShaleX @ Jun 23rd 2007 6:23PM]

Dude, iPhone is closed. It's locked to AT&T's network. iPhone is different from iPod. The iPhone is overpriced, and tied to one provider. And god only knows how bad AT&T is going to rape that monopoly. I already have a $70 a month cell phone bill, and that's with limited internet abilities. Imagine what AT&T is going to want to keep this thing up.

[Ryan Sands @ Jun 23rd 2007 7:20PM]

Constable your completly right that people fear what they dont understand. Take ShaleX for example...the iphone is clearly no different from the ipod. Apple came in with the ipod to a market that didnt have a single good mp3 player and bam! blew the doors wide open. Its going to do the same thing with the iphone. Come out with a product when all other phones currently on the market are piles of crap. Just watch and learn. This thing will sell like hotcakes and every single one of your friends and family will want one. EVERYONE will be carrying around an iphone.

[Steve @ Jun 23rd 2007 9:41AM]

Why isn't bestbuy.com included with Best Buy?

[Chuckles McGee @ Jun 23rd 2007 10:39AM]

People still buy CDs?

[Marcus @ Jun 23rd 2007 12:58PM]

Yes, having a high quality physical medium is very convenient,

I buy them because:

1. CD Quality is slightly overrated, but when ripped at a rate of 256kbs or above it is noticeably better then 128kbs.
2. CD's last about 100 years compared to the 15 years of a hard drive and DRM limits the life of protected music to about 15 years as well
3. Nostalgia
4. Collecting is Fun!

[Joey Geraci @ Jun 23rd 2007 11:28AM]

I don't understand that chart. Apple is supposedly right below Best Buy and Walmart, yet they are confined to the digital piece of the pie, which is much smaller than the physical slice of the pie, where Walmart and Best Buy reside. So in reality, Apple much be much lower than any of the physical retailers in that list, as the digital music market itself is so much smaller compared to the physical market.

Call me confused.

[deslock @ Jun 23rd 2007 4:41PM]

> Joey Geraci @ Jun 23rd 2007 11:28AM
>
> I don't understand that chart. Apple is supposedly right below
> Best Buy and Walmart, yet they are confined to the digital piece
> of the pie, which is much smaller than the physical slice of the
> pie, where Walmart and Best Buy reside. So in reality, Apple much
> be much lower than any of the physical retailers in that list, as
> the digital music market itself is so much smaller compared to
> the physical market.
>
> Call me confused.

What's confusing? According to the chart, 13.8% of music sales are digital and 86.2% are physical. If Apple has 9.8% of overall sales, that means they have 71% of digital sales (9.8/13.8).

[Hiro11 @ Jun 23rd 2007 11:30AM]

I love Apple, but you've got to know absolutely nothing about digital music to buy tracks from iTunes. The same price (is some cases more) as a full-price CD for 128 bit, lossy, DRM-anchored, proprietary-formatted tracks without any extras? Yes it's convenient if you own an iPod, but it sounds like shit compared to a CD and you're buying into Apple's closed architecture. It makes even less sense when you realize that they're competing with (illegal) free, totally unencumbered tracks. The only people who buy tracks from iTunes simply don't know any better. Kudos to Apple for their warrented success, but iTunes is a case of thriving on consumer ignorance.

[Bhaal @ Jun 23rd 2007 12:00PM]

Surely everyone's competing with illegal goods and the reason you can't include them in any valid comparison is because they're well, illegal. If a couple of thieves flog the 32" plasma they stole the other week for $200 while it's sold retail at $500 is that a case of the retailer thriving on consumer ignorance?

Also I think you're giving too much emphasis on the lower bitrate (this is not equivalent to quality) compared to CDs and the closed DRM structure of some of Apple's tracks while placing too little value on convenience and the typical consumer who buys from itunes.

128 kbps is not half the quality of 256kbps, it's half the bittrate but as you increase the bittrate you get pieces of sound which you can't hear or are irrelevant to the overall quality of the file. A CD might have over ten times the bittrate of a typical itunes file, the average consumer is going to be abel to notice a marginal difference in quality if they can at all. This is more than outweighed by the increased opportunities to buy from itunes over brick and mortar stores, the ability to pick individual tracks, the increased selection/guarantee they're not going to go out of stock. These are all benefits to the consumer and in some cases significant ones. Most people don't care about DRM to the extent of not buying songs for it, they're unlikely to be affected by the restrictions, ever.

Plus you also assume that someone who has an ipod,m can sync it with their computer and can buy from the itunes store somehow doesn't know about CDs. That's obviously a silly thing to base your argument on, if anything they're going to be well aware that they can buy CDs and rip it to their computer, it'll probably be how they put most of their music on the ipod. But when they think of a song and want to buy it on the spur of the moment they turn to itunes and not they physical stores. Similarly most social networking sites have links to the itunes store on their music listening apps (case in point: facebook). This makes it very easy to find music your friends like, click on the link and be able to buy it within seconds. It's just not the same to fastidiously write down the album title, drive to the store, only to find out they haven't got it in stock til next Tuesday.

[Constable Odo @ Jun 23rd 2007 12:04PM]

You're right. iTunes is most likely for extreme impulse buyers. A buck a song is much cheaper than a whole CD worth of songs.

There are a lot of people around that are ignorant and those whose ears don't work very well. I grew up in the time of vinyl records and audio cassettes and as long as the music was cranked up, it really didn't matter that the audio wasn't perfect. People smoke and buy lottery tickets. I'm sure more money is wasted doing those useless things than buying iTunes music.

I've never bought a song from iTunes and probably never will. Too many other ways to get high-quality music for free.

[scum1 @ Jun 23rd 2007 1:15PM]

If I like something(after sampling for free) then I buy the cd. I can rip the cd for my phone, my mp3 player, my external hard drive for work, my hard drive on my lap top, my desk top pc, my daughters mp3 player, my wifes mp3 player ect. I can even(gasp!)play the cd in my car or home cd player. I am unrestricted in what I can do with my cd. I would never buy DRM songs. I know a lot of people just buy singles from Itunes. They are probably missing out on a lot of good songs and just buying what they hear on the radio or whats cool at the moment. Of course 80% of all people are idiots so what do you expect. All those people buying songs with drm are clueless mostly.