iTunes 5 - Napster 1: 1st week sales figures

by Rich Menta, 11/7/03

For those handicapping the iTunes v. everyone else battle - as if it is really that big a deal, but Americans do like a good contest - the first weeks figures are in. The results show that Apple's online service reigns over all, selling five times more music than the runner up Napster.

For many that should not come as a surprise, after all Apple was the first to successfully prove that there was ample consumer demand for paid digital music files. Still, a few columnists gave Napster the edge based on name recognition alone.

The Rio Karma is listed on Amazon.

Name and logo is about the only thing today's Napster shares with the free service that shook the music world. Sold to Roxio after court costs and negative rulings decimated the original Napster, the new Napster looks to do what the original always attempted to do, but could never get the licensing from the record industry - sell music.

And selling music is what the new Napster is doing. Despite being eclipsed by Apple's competing service for the top spot, the numbers for Napster were pretty respectable. Napster sold 300,000 songs compared to iTunes 1.5 million.

Napster's numbers look even better when you take into consideration that iTunes has been pumping huge dollars into their marketing campaign. I am writing this with Will and Grace playing on my set in the background and during the last commercial break a 30 second spot for iTunes came on. Outside of the Super Bowl, ad time during Must-See-TV Thursday is about as expensive as you can get for prime time.

Figures are unavailable for the other services, but it's safe to say that combined over 2 million songs were sold this week. The big winners? The record industry of course.

History has repeated itself if you think about it.

Two decades ago the movie industry tried to outlaw VCRs as detrimental to their business and came one vote away in the Supreme Court from doing just that. Instead technology won and the video market proved to be the boon to the industry (as the industry analysts always claimed), eventually bringing in more revenue than the theaters themselves.

The record industry cries no one will buy music if they can get it for free online. If that were true then why are Apple and Napster successful? There is so much promise here that every week another company tosses its hat into the digital download arena. Most recently MTV announced it would launch a music download service by the middle of next year.

Best of all the record industry makes pure profit in this scenario, because the only thing they have to supply for their cut (and it is a HUGE cut) is permission. There is no risk on their part. Well, there is if they get too unflexible with terms and pricing where most of these new services are set up to eventually fail. Then everyone goes back to the free P2P services.

Personally, I think the prices are too high and the margins too slim to support all of these contenders for long, especially if Apple and Napster dominate the market. $10 an album may sound very good, but only because CDs have skyrocketed to the $17-$20 range. Drop to $0.25 a single and then you offer a tiered pricing system where users can still collect a significant library of music without stretching the wallet.

Do that and online music will soar past CDs like $3.00 video rentals allowed VHS and DVD recordings to draw in more money that the $8.00 per person Googleplex.

People still go to the movies, in fact this summer season set yet another record for revenue. People will still buy store bought music, whether in the form of CDs or if the future switches to formats much higher in quality than digital downloads like DVD Audio and SACD.

But, that's my opinion. The fact that songs are selling decently at the present iTunes price point supports the opposing opinion that the pricing is already right for the market.

Within the coming weeks we hope to have figures on all the pay download services.

Other MP3 stories:
Online singles are booming
CDs and the Scarcity Principle

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