Monday, February 27, 2006

Forrester: One billion iTunes downloads: What It Means

Josh Bernoff at Forrester Research posts at the Devices, Media, And The Future Of Everything blog about his thoughts on Apple announcing the billionth iTunes download. here are some of his thoughts:

  • This is huge -- but it isn't as big as it looks. While Apple has sold over 30 million iPods, the vast majority of America does not use an iPod, and even fewer are buying significant music. Only a few million American consumers are regular iTunes buyers -- they're just buying a whole lotta downloads. The same is almost certainly true globally. Apple's real challenge is to expand the music buying experience to a much larger slice of the online population.
  • That's over $900 million in revenues. (Since many songs are downloaded in whole albums for $9.99, not every track costs $0.99). By itself, Apple now represents more than 3% of the US music business. The music industry has successfully escaped the monoculture rut (nearly all money from CDs). In the process, it created an incredibly powerful partner who calls the shots. As other industries -- especially TV -- embrace alternate distribution, you'll see them spread their bets around so no one company has them by the you-know-whats.
  • The device makes the experience. There's no reason that other music stores shouldn't be as successful as iTunes -- except that the iPod is so much better, and continues to remain so much better, than other music devices. iPod has transcended product status and is now a part of the culture.
  • Piracy's main strength is that it's free. Its main weakness is not that it's illegal -- it's that pirate software can't easily generate revenue without becoming a target of lawsuits. Legal experiences, like iTunes, can plow revenues into R&D and improvements. As you look at Blu-Ray or HD-DVD, satellite and cable, and online video streaming, the key question becomes -- how good is the experience? Great experiences generate fortunes, even in the face of piracy.