Global music download stats spill beans on subscriptions

Better business in a la carte sales - if you're Apple

Analysis More than 180m songs were downloaded legally during the first half of 2005 throughout the world, IFPI, the international federation of recording companies revealed this week.

Over the last few weeks, separate figures for the US and the UK have been published, and the IFPI numbers allow us to put them in a global context.

For example, the US accounts for more than 88 per cent of the market, despite the fact that 63 per cent of online music suppliers, 190 out of 300, are based in Europe.

Apple's iTunes is the clear leader in the market. It recently announced that it had sold 500m downloads. In January this year, it said it had sold 230m songs to date. Apple's numbers don't correspond precisely to the period the IFPI numbers cover, but it's clear the majority of those 180m songs were downloaded from iTunes, or IFPI is underestimating somewhat.

IFPI also noted that 2.2m music fans are now signed up to subscription services such as those offered by Napster, Rhapsody, Yahoo, Virgin, MusicNet et al, up from 1.5m at the end of 2004.

Again, these figures are estimations, but they suggest the subscription market is not achieving the penetration the business models' proponents might have hoped for. There's no indication how many songs subscribers have actually grabbed out of their unlimited-download opportunity.

Looking at potential revenues, however, the subscription model doesn't seem too badly off. With subscriptions ranging from $10-15 a month, those 2.2m subscribers represent six months' revenue that can be no more than $198m, assuming all 2.2m came on stream in January and they all pay a $15 subscription.

We estimate the figure is actually somewhere between $111m and $169.5m, allowing for a steady growth from 1.5m through H1 2005. The lower figure assumes 100 per cent take-up of the $10-a-month offering, the higher number similarly all-encompassing support for the $15 monthly subscription.

By comparison, those 180m songs will have yielded $178.2m, at $0.99 a pop. Some songs cost less, others - particularly those in Europe - more.

So during the first half of the year, subscription services yielded 62-95 per cent of the revenue of single-track downloads. However, while Apple took the vast majority of that download revenue, the subs were shared out among more than a handful of major players.

Our back-of-an-envelope estimates for iTunes suggest significant growth for single-track download numbers going forward - the Apple service should hit the 1bn song mark at the end of the year. Apple hasn't revealed the number of iPods it has shipped in each quarter since it launched the player, but from the data it has provided, we can say that it has shipped around 21.26m of the devices since Q1 FY2002, when the first one was sold - ten times the number of people currently subscribing to music services.

Some 700,000 people worldwide started music subscriptions in H1 2005, according to IFPI. In that time, Apple sold almost 11.5m iPods. Every iPod owner is a potential iTunes customer, though not every iTunes customer owns an iPod, of course.

While Apple sticks with single-track downloads over subscriptions, and with the hardware market titled in its favour, for now at least, its revenue from downloads is going to increase rather more than its subscription-centric rivals' sales are. That could change if users migrate in big numbers to subscriptions, but the IFPI figures gives no hint of that. Yahoo's aggressive pricing will, in part, counter the revenue growth provided by new subscribers, particularly if other subscription services lower their own prices. Napster, for one, has said that it will retain its higher price-point. ®

Related stories

Apple iTunes sells half a billion songs
US legal music downloads up 187%
Motorola 'to debut' iTunes phone at UK's V Festival
Students refuse to buy a single song from Napster
Napster vows to maintain premium pricing
Napster's Q4 loss swells as costs surge
Yahoo! declares! digital! music! price! war!

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