Chicago (IL) - In January, Apple's iTunes Store sold more music in the US than retail giant Wal-Mart, setting a milestone in the digital music market.
We have been listening to iTunes sales numbers, record achievements and about its 70%+ market share in the digital music download market for years. Now it appears that iTunes ready to take on the largest traditional music retailers. According to emails that were distributed among Apple employees and documents that were leaked to Ars Technica, this threat is very real for Wal-Mart, Best-Buy and Target: Market research firm NPD ranked iTunes as the largest music retailer in the U.S. in January of this year.
According to the data published, iTunes posted a 19% market share in January, based on the amount of music sold during that month (NPD applies a based on a 12-track CD equivalency for music track downloads). Wal-Mart was listed in second place with 15%, followed by Best Buy (13%), Amazon (6%), Target (5%), FYE/Coconuts (4%), Borders (3%), Circuit City (3%), Barnes & Noble (2%) and Real's Rhapsody music store holding barely 1%. Other music sales account for 29% the remaining. Total physical music sales accounted for 70.9% percent whereas paid downloads took over almost a third (29.1%) of all the music sold in the U.S. in January.
The data becomes even more significant for Apple, if we consider the fact that iTunes as a digital-only retailer held higher share of the market in January than Wal-Mart, which combines physical CD sales through its brick-and-mortar stores with digital downloads through WalMart.com. The numbers also bring up an interesting question about a recent USA Today report that raised eyebrows by claiming Amazon.com has become second biggest digital music retailer in the U.S: It prompted eMusic CEO David Pakman to step forward in the paper to say that story was based on reports from the Big Four executives, not market data. "Let's get one thing straight: outside of iTunes, no one sells more music digitally than eMusic, and we don't plan on giving up that title anytime soon," wrote Pakman in his blog. He also added, referring to Amazon: "In terms of digital music, we're still on top, and will continue to be so. If we ever decide to start selling blenders, we'll be sure to give them a call."
Put into perspective, Apple’s iTunes lead may be much more substantial than we thought. If eMusic really sells more downloads than Amazon and eMusic isn’t listed in NPD’s charts, then Amazon’s digital download numbers could be less significant than generally believed.
That said, iTunes’ #1 position in January and subsequent drop to #2 in February is most likely a result of the gift card business. Despite this fact, the company apparently has found a recipe how to get to the top and Apple is likely to use this tool again as soon as it can. There is no question that iTunes' brief January success is a serious blow to the physical distribution focused around the high-margin CD. That business model is in constant decline, much to the horror of the music industry executives who often blame it on the piracy and peer-to-peer networks.