Top music seller's store has no door - Los Angeles Times
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`The Nation
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`Top music seller's store has no door
`Apple's iTunes passes Wal—Mart to become N0. 1 in the US. as the digital world alters shopping habits.
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`April 04, 2008 | Michelle Quinn and Dawn C. Chmielewski I Times Staff Writers
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`SAN FRANCISCO — Apple Inc. has surpassed Wal-Mart to become America's No. 1 music store, the first time that a seller of digital
`downloads has ever beaten the big CD retailers.
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`Apple sold more albums in January and February than any other US retailer, market research firm NPD Group said Thursday,
`underscoring how the music industry is on the front edge of a digital media shift that is upending businesses as diverse as bookstores and
`video game makers.
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`US. consumers still buy more CDs than digital downloads, but the gulf is narrowing rapidly. Only five years after launching its iTunes
`digital store, Apple has dominated the fast-growing download market so completely that it jumped ahead of individual CD sellers such as
`Wal-Mart, Best Buy and Target.
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`"It's a major milestone," said Tom Adams, president of consulting firm Adams Media Research. "It is the first instance of an electronic
`venue surpassing a [bricks-and-mortar] retail venue for any kind of media delivery."
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`Many industries are feeling the pain. Bookstores are shutting down, unable to compete with online sales and huge retail chains.
`Newspapers are laying off thousands of employees as advertisers and readers move to the Web.
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`Television networks are making more of their shows available online to reach people at their computers and prevent advertisers from
`abandoning them for other forms of online entertainment. Video game companies and other software makers are selling more of their
`products as downloads rather than CDs.
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`But the music industry has been rocked by the digital transition much harder than TV, movies and other entertainment media. CD burners
`made it possible for anyone to create playlists of favorite songs, hastening the shift from albums to singles. Songs could be downloaded
`faster than movies or TV shows, both legally and illegally. And devices such as Apple's iPod made songs easy to listen to anywhere.
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`"We are thrilled," Eddy Cue, Apple's vice president of iTunes, said in a statement.
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`NPD Group, based in Port Washington, N.Y., did not release figures on how many albums each company sold. It said it counted every 12
`singles sold as one album, and that Apple probably received a boost during the two months by people cashing in iTunes gift cards -- which
`Wal-Mart and other retailers also sell -- received during the holiday season.
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`But NPD Group analyst Russ Crupnick predicted that Apple's music industry power would only continue.
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`"If you look at what is happening to the CD and the growth of the digital side, it's a pattern that is going to hold," he said.
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`Apple launched iTunes in 2003, creating an online business model for a music industry that was struggling with plummeting CD sales and
`online piracy. In addition to selling albums, iTunes offered hundreds of thousands of individual songs for 99 cents each. That was ideal for
`customers who wanted to buy hot singles or old favorites without buying the whole album.
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`Apple doesn't disclose financial results for iTunes. But in the first fiscal quarter ended Dec. 29 it reported $808 million in revenue for a
`category that includes iTunes store sales, a 27% jump from the same quarter the previous year.
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`The Cupertino, Calif., company has pushed into other entertainment markets in the last few years, offering downloads of TV shows and
`movies for sale and rent. It's trying to capitalize on the digital transition that's sweeping through those industries, albeit more slowly than
`the music industry.
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`Like other TV networks, CBS has put many of its shows on the Web and sells them through iTunes and other download stores. Quincy
`Smith, president of CBS Interactive, said he believed that the DVD market wasn't going to vanish any time soon, but he added that the
`network could cater to a different demographic by offering shows through iTunes and Wal-Mart.
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`"I think it's a sign of things to come, if you believe in evolution," Smith said.
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`Consumers already are making the shift. In the first 18 weeks of the fall TV season, Disney-ABC Television Group said viewers watched
`more than 124 million episodes of its shows on the Web -- an increase of 178% over the same period a year earlier.
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`In 2007, 9% of all broadcast and cable network viewers watched TV shows on their computers, up from 6% the previous year, according to
`Convergence Consulting Group. The Toronto-based market research firm predicted that 23% of TV viewers would watch episodes online
`by 2010.
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`http://articleslatimes.com/print/ZOO8/apr/O4/business/fi-itunes4
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`Top music seller's store has no door - Los Angeles Times
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`Page 2 of 2
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`Advertisers haven't flocked to the Web as quickly as viewers. Their spending online last year was only 2%, or $1.4 billion, of the total spent
`on all broadcast and cable TV advertising, Convergence said.
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`That highlights the central challenge facing many media companies -- the switch to digital does not generate the same revenue as
`traditional means.
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`Convergence's president, Brahm Eiley, said TV and movies would move online more slowly than music because the experience of buying,
`downloading and watching video on a computer isn't better than simply turning on the TV.
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`"It's going to be a long time before people give up watching video on TV for their computers," he said.
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`Although Apple has given the music industry a new way to sell songs, it has become so powerful that music companies have sought to help
`create and fortify potential iTunes rivals.
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`The newest of those is MySpace, the social networking site owned by Rupert Murdoch's News Corp. Apple announced its ascension to No. 1
`on the same day that MySpace revealed plans to launch a competing service. MySpace Music will let users sample and download music
`from three of the four major record labels, as well as buy merchandise and concert tickets.
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`michelle.quinn@latimes.com
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`dawn.chmielewski@latimes.com
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`Quinn reported from San Francisco, Chmielewski from Los Angeles.
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