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Effect Of Decreasing iPhone 5 Sales On Digital Music Sales

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Yes, whilst you may have been reading all the hype that iPhone 5 sales broke records, the reality is actually quite the opposite. Firstly the 5 million units sold over the opening weekend has been quite a bit below a number of respected analysts’ projections of 6 – 10 million units for the opening weekend. This also indicates that sales might be slowing at Apple.

If you examine the chart below opening weekend sales for between the 3GS and 4 models grew by 70 percent over the respective opening weekends. Between the 4 and 4S models it grew and amazing 135% over the opening weekends. Now that is what TMV calls serious growth. However, as the chart below details, opening weekend iPhone 5 sales grew by only 25 percent. That is massive deceleration in anyone’s book.

If we dig a little deeper, we find more bad news that compounds the above problem for Apple even further. Apple sold the iPhone 5 model in 9 countries, whereas it sold the 4S model in 7 countries. This means Apple sold fewer iPhone 5 models per country than with the 4S. That is not only deceleration but also actual shrinkage in sales folks.

The critical question in respect of the music business is this: If iPhone sales are actually shrinking then by how much will this correlate to decreased al-la-carte downloads from the iTunes store? It also means that people using iTunes as their choice of digital music store may also be shrinking. iTunes is the only Apple product that works and can be synced between mobile and desktop across the OSX and Windows desktop platforms.

In TMV’s view this is a critical issue that the music business as a whole need to consider, as being wedded to the Apple “digital music monopoly” may indeed be coming back to bite the proverbial butt of the industry.

Android smart-phone handsets already have a 53 percent and growing market share, whereas Apple’s iOS market share has actually dropped from 21 percent to below 17 percent.

Is it just that senior industry executives have fallen into the same reactionary habits of their predecessors?  Or could it be that by actively facilitating and setting up iTunes to become a monopoly, record labels and publishers have become so dependent on a sinking ship for a massive section of their income? Therefore, by drinking from the teat of Apple is as bad as the addiction to CD margins was for these same executives?

Only time will tell, but the charts above do detail clear as day, that it is time the music business’s reliance on a monopoly player is questioned and plan b’s are actively examined. Make no mistake it will not be a quick sinking ship, but sales speak louder than words and it will be those music companies that forge a new path away from reliance on Apple that will be the profitable music businesses in the medium-term.

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