Apple\'s music business

Apple's music business posted very strong growth during the March quarter, netting the company about 50 percent of its total revenue and helping Apple post its second best quarterly earnings. The company's iPod continued to gain marketshare, despite slower sales, primarly due to seasonality and lower average selling prices. Apple said its 'Other music revenue' increased 125 percent year-over-year, providing a strong boost to its music business; the company argued that its iPod numbers, which dropped sequentially by about 40 percent in terms of both units and revenues, were actually inline with the projected 30 percent seasonality dropoff expected in the post-holiday quarter for consumer electronics. The company noted that the December quarter had 14 weeks, while the March quarter only had 13, which contributed to the larger-than-expected apparent sales dropoff.

In the March quarter, Apple shipped about 8.5 million iPods compared with 5.3 million in the year-ago quarter and a record 14.1 million in the longer, December-holiday quarter. Cumulatively, Apple shipped an astounding 50 million iPods since the product launch.

Overall, the 79-percent growth in Apple's music business was driven by strong sales from the iTunes Music Store, sales of the iPod Hi-Fi, and "very solid demand" for other iPod accessories. Apple's other music product revenue was $485 million during the March qurater, up 125 percent from the year-ago quarter.

iTunes, iPod marketshare increase

iTunes owns about 87 percent of the U.S. market for legal music downloads, according to yesterday's conference call. The company also noted that it has expanded its content to 2.9 million music tracks, 60,000 podcasts, 9,000 music videos, and 70 television shows from a variety of providers.

Meanwhile, despite a dropoff in iPod sales, NPD Techworld numbers for March show that Apple's share of the MP3 player market has increased. The company garnered 78 percent of the market in March, up from from 71 percent in December. In addition, the iPod ecosystem continues to thrive with over 2,000 iPod accessories available. Apple also noted that there is increasing interest from the automotovie industry and estimates that 40 percent of new cars sold in US this year will feature direct iPod integration.

Apple looks to Europe, Asia for iPod growth

Apple also said that the iPod is the top selling MP3 player by a wide margin in several international countries, including the UK, Japan, Australia, and Canada. The Cupertino-based company told investors that it holds 40 percent marketshare in the U.K., 54 percent in Japan, 45 percent in Canada, and 58 percent in Australia.

"In the rest of Europe and Asia, we do not enjoy the same level of marketshare," Apple CFO Peter Oppenheimer told investors and analysts. "We view this as an opportunity and are optimistic about further market penetration potential globally and our ability to grow international marketshare."

"If you look outside the international countries, such as Italy and Spain, China and Korea, market share is much less than in the U.K., Japan, Canada, and Australia. We are focused on increasing that share by increasing our local advertising and points of distribution," Oppenheimer said.

The company cited data that showed a large potential for greater penetration of MP3 players in the consumer electronics market. Oppenheimer, citing Forester Research data, said that U.S. household MP3 player penetration was less than one-quarter of that of digital still cameras as of the end of 2005, indicating that the company did not see an end to its burgeoning iPod sales.

by MacNN Staff