iTunes Sales Surging?

There has been a great amount of controversy over how well the iTunes Store, formerly called the iTunes Music Store, has been performing. Last week a research organization issued a report based on credit card invoices that stated that sales of music, television, and movies
over at the iTunes store were falling dramatically, but now Apple and two other research organizations actually believe iTunes is not only not dropping, but increasing dramatically.

Initially, Nielsen's Soundscan division did a study which stated that for the last three consecutive quarters that digital-music sales have been down a great deal for all online services. Fuel was added to the fire when in December a company called Forrester Research decided to see if they could determine how this slump affected the iTunes store. So they conducted an analysis of a large amount of credit card transactions to determine how well the iTunes store was performing. What they found was rather interesting.

Forrester's report was particularly devastating to Apple. The report started that since January of 2006 revenue had fallen by 65 percent on a monthly basis, and that the size of each transaction shrunk by 17 percent. This news caused Apple's stock price to drop nearly two dollars or by about 1.8%, but the story does not end there.

A company called comScore Networks, which is a research firm with a lot of experience in these types of studies, stated that the revenue from Apple's digital music service actually rose by 84 percent during the first three quarters of this year, whereas last year increase was 67 percent for those three quarters. comScore's report also stated that the size of the transactions were up a total of 10 percent.

Gian Fulgoni, chairman of comScore networks, made a statement to Market Watch about their findings. He stated, "As Mark Twain might have said, the rumors of iTunes' death have been greatly exaggerated. In contrast to a recent research report indicating that iTunes sales have declined by 65 percent, comScore data show that iTunes sales actually grew 84 percent during the first three quarters of 2006 versus year ago."
The company's analysis is based on the behavior of one million US consumers who gave comScore permission to look at their financial transactions, and the sales data from iTunes was part of a total of over 8 million transactions observed by comScore.

So what's with the disparity? Many have criticized Forrester's research because it did not rely on a big enough of a sample size, creating the possibility for error. Apple has also stated that Forrester's research is "simply wrong," and that iTunes sales are
fine.