Around April 2008 Apple Inc. (NASDAQ:AAPL) passed Wal-Mart as the #1 music retailer in the U.S. Now Apple controls 25% of all music sales through iTunes. Compact discs have 65% of all music sales. The remain 10% is other digital music sources.
In the first half of 2009, Apple had a 69% share of all digital music sales and Amazon.com had about 8%. ”The growth of legal digital music downloads, and Apple’s success in holding that market, has increased iTunes’s overall strength in the retail music category,” stated NPD Group entertainment industry analyst Russ Crupnick.
In terms of the CD market share, Wal-Mart has about 20% of the total market while Amazon.com and Target has about 10% each. Best Buy has 16% of the CD market share.
“Many people are surprised that the CD is still the dominant music delivery format, given the attention to digital music and the shrinking retail footprint for physical products,” added Crupnick. “But with digital music sales growing at 15 to 20 percent, and CDs falling by an equal proportion, digital music sales will nearly equal CD sales by the end of 2010.”
Microsoft CEO Steve Ballmer once again reflected upon what he thinks of the cost of Apple hardware. Back in January 2007, Steve Ballmer laughed off the iPhone and then started talking about the Microsoft strategy.
“Right now we’re selling millions and millions and millions of phone a year, Apple is selling zero phones a year. In six months they’ll have the most expensive phone by far ever in the marketplace and… let’s see.. you know… what’s the expression? Let’s see how the competition goes,” stated Ballmer in 2007. Today Apple has sold over 30 million iPhones and iPod Touch units.
At the McGraw-Hill Media Summit New York conference this past Thursday, Ballmer was interviewed over a webcast by BusinessWeek’s Stephen Adler. Ballmer offered a reason why Mac sales dropped about 16% in February. The stats were put together by NPD Group.
“The economy is helpful. Paying an extra $500 for a computer in this environment — same piece of hardware — paying $500 more to get a logo on it? I think that’s a more challenging proposition for the average person than it used to be,” stated Ballmer.
I agree with Ballmer to a certain extent. Low cost netbooks seem to be selling by the millions right now and people are not as willing to buy Macs. Right now Apple has enough money to charge as much as they want for Macs. When iPhones and iPod Touch sales slow down, then maybe it would make sense to lower the cost of Macs. As long as the prices stay high, the people that are willing to pay a premium will do so. When they want to lower their standards to a lower income demographic, they will do so.
