ON LINKING iPODs AND iTUNES

CAUSE AND EFFECT

In an article sub-titled "Drilling Down", this New York Times piece covers a Forrester survey that tries to make the point that "Sales of iPod and iTunes Not Much in Sync".  Here's the crux of their argument:

"Apple’s ubiquitous iPod and its iTunes music store were intended to be a kind of perpetual motion machine, with iPods helping to sell iTunes and iTunes helping to sell iPods...

At any given point, the cumulative number of songs sold by the iTunes store has generally been about 20 times the cumulative number of iPods sold, according to Forrester Research, the technology consulting firm. That ratio has recently crept up to roughly 22 to 1, as 1.5 billion songs have been sold. The figures were compiled from public statements by Apple.

The numbers suggest that iPods are not driving iTunes sales as much as early supporters may have expected."

There may be another reason for the "slip" in the 20 to one ratio though.

With 67 million iPods 1.5 billion iTunes songs sold as of September this year, the piece calculates that there are now 22 iTunes songs sold for every iPod sold vs. the historical 20 to one ratio.

But we need to keep in mind that many an iPod user now has more than one iPod.  More than likely this  user has a hard disk based iPod, along with a flash memory based iPod like the Nano  and/or the Shuffle.

This  means that the same library of songs,  from iTunes are not, are spread out over more than one iPod for that user.  His/her rate of song acquisition may stay the same, yet the ratio between songs and iPods will naturally widen.

I don't have access to the breakdown of the various types of iPods.  But if you assume for the sake of discussion, that Flash-based iPods were 15% of the total, then one could adjust the 1.5 billion songs down to 1.275 billion "iPod equalized" songs.  Dividing the new number by 67 million units, brings us back roughly to the 20 to 1 ratio.

So this theory may offer another explanation for the statistical trend cited by the New York Times.  Just a thought.

Comments

[Yaser Anwar]

NYT needs to realize no relationship works "exactly" as planned. There are always deviations from estimates, after all they are just that, estimates.

By 2010 The Street expects there to be 150 million iPods, if the number comes close to that we will have plenty of iTunes songs being downloaded.

Right now, as always, so many companies are trying to take a bite out of AAPL [read: Napster, Y! Music] not to mention the plethora of torrent downloads which are absolutely free. Like any trend, there will be ups and downs.

As a general thought- With the steady climb of AAPL's stock, analysts will keep coming out with reports trying to underpin their growth- their analysis and thesis, in my view are misguided as AAPL never gives any guidance whatsoever.

Just my two cents. Take care and hope you had a good weekend!

[ap]

Good observation. I know a few people with two or three iPods and they use them for various purposes--exercise, extra disk space, etc.

Apple's doing a great job with improving its hardware (maybe too often at times), but I think they're woefully ignoring the software side right now. Why? Well, let's use Fred Wilson's favorite word--de-portalization. Apple hasn't been taking advantage of social networks which are increasingly becoming more abundant and can be successful in the music realm, as illustrated by Lastfm. iTunes, in general, could also be better designed to improve functionality. This is important, because iPods aren't always going to drive music sales--the French, for instance, are trying to legislate iTunes to work for all music devices, which could be bad for the iPod. Even without French legislation, it's important for iTunes to stay competitive: it is most likely the centerpiece of Apple's upcoming strategy to dominate media through the living room (through iTV).