Register's Orlowski Reads Forrester Research, Flips Out

Originally reported by the shrill Andrew Orlowski at the Register, Forrester Research's analysis of nearly 2 million credit and debit card transactions from April 2004 to June 2006 found several interesting things:

• 3% of online households made an iTunes purchase in the past year.


• Apple's iTunes proves that $0.99 micropayments for digital music can lead to substantial revenue.


• Buyers spent an average of $35 at iTunes over the past year.


• With half of all transactions costing $3 or less, though, transaction fees threaten to make iTunes unprofitable.


• Since the introduction of the iTunes Music Store, Apple has been steadily selling just 20 iTunes tracks for each iPod sold, suggesting that even at $0.99, most consumers still aren't sold on the value of digital music.


• Monthly iTunes Revenue Increased Steadily In 2004 And 2005.


• More Than 3% Of Online Households Bought iTunes In The Past Year.
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• Most Households Bought iTunes On Three Or Fewer Occasions.


• Apple Sells 20 iTunes Per iPod Shipped.

Now, Orlowski uses this research as a reason to proclaim that "iTunes sales are collapsing" and then moves on to blame DRM for the loss, ending his article with his pet idea that a "blanket license" may be the salve for the music industry.
However, I disagree.
Forrester tracked only credit and debit card transactions, leaving out the available PayPal accounts and gift cards. How much this changes their figures I don't know, but it seems important to include these to account for more accurate sales numbers. Furthermore, while Orlowski sees a 'collapse' as sales dropped after the holiday season, I see a seasonal variation and therefore little cause for his alarm. While most people aren't using the iTS to fill their iPods, they're still buying the little devices in huge numbers and therefore Apple's plan to use the iTS as a loss-leader to sell iPods is still working.

The most interesting question is what would happen without DRM? With eMusic the second-place winner in the digital download market, there does seem to be a market for unteathered music, even in comparison to Apple's 'velvet lock.' The failure of PlaysForSure shows that the hardware, more than the stores, makes the real difference and Apple understands this market far better than anyone else.