Analyzing Apple's Video Sales: OK But Not Stellar
Early in his presentation yesterday, Steve Jobs boasted that Apple has sold 95 million videos through iTunes since Oct. 2005, when they first went on sale. Is that worth bragging about? 95 million videos at $2 each equals $190 million of video revenue over 23 months (of which most goes back to the video producers). But for comparison, Apple sold 200 million songs, at $1 each, in only 19 months after launching music sales in 2003. In other words, on a unit basis, Apple's video sales business is off to a much slower start than its music business enjoyed.
We've plotted both music and video unit sales at the store in their first two years. Conclusion: Apple video sales started fast but have slowed, while Apple music sales accelerated in the first two years after launch. More importantly, two years after Apple got into digital music, it had the market sewn up. But today video remains up for grabs.
It makes sense that Apple music sales started comparatively slowly: When Jobs opened up the iTunes store in April 2003, the product only worked on a Mac, and iTunes was not the dominant media player. On the other hand, Jobs made sure he had all of the major music labels signed on before he launched. Meanwhile when Jobs launched video sales nearly two years ago, iTunes had a huge base. But Jobs had only one major studio/TV network signed on -- Disney/ABC.
Since then Apple has brought most of Hollywood aboard, but the relationship has been tenuous -- see the recent dustup with NBC over pricing and other terms. Meanwhile video sales are a tiny portion of iTunes sales -- "Music dominates iTunes" Jobs told USA Today yesterday -- and at the rate they're growing, they'll stay that way for a while. If the studios want to negotiate a new deal with Jobs, now is a good time to do it.
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Thanks for the comments. I'm not sure I'd draw any conclusions from the data above except the one I've already made - that iTunes video has yet to take off yet. It may be, for instance, that video is the opposite of music, and that people prefer to stream shows instead of downloading them. But too early to tell yet, which is why there's plenty of jockeying right now.
And Nate, for what it's worth, there are many, many people in the music industry who'd take exception to your assertion that iTunes saved their industry.
iTunes music disrupted the music industry differently than iTunes video is/will.
iTunes music in some ways SAVED the music industry and made people believe that people would actually pay for music. You wouldn't see Amie Street around, for example, if it wasn't for iTunes music.
iTunes video will change things in a different way. Again it will have a lot to do with convergence (the AppleTV does have a chance, I believe) -- but its hurdles are vastly different. With today's bandwidth, pirating a 700MB file is more difficult than grabbing a 3MB song from Kazaa, so the studios are going to feel a little more pompous about controlling their content and pricing. With faster Internet connections I imagine this will change and iTunes video will come back into the fold.
But what do I know.
All ipods play music.
Not all ipods play video.
Video is sure to grow now that nearly all devices (especially the best-selling nano) are video capable moving forward.