iTunes Market Share Still Dominant After a Decade, Study Says

The iTunes store for music and videos

Jobs added video to the company’s popular iTunes software in 2006. “We’re doing for video what we’ve done for music—we’re making it easy and affordable to purchase and download, play on your computer, and take with you on your iPod. Right out of the gate we’re offering 2,000 music videos, Pixar’s short films and hit primetime TV shows like ‘Desperate Housewives’ and ‘Lost’,” said Jobs.

Apple Inc.'s iTunes continues to dominate with a 63 percent unit share of the U.S. market for digital music downloads.

After nearly a decade since selling its first digital song, Apple Inc.'s iTunes continues to dominate with a 63 percent unit share of the U.S. market for digital music downloads in the fourth quarter, according to estimates released Tuesday by the NPD Group Inc.'s MP3 store remained No. 2 with 22 percent market share, NPD said.

The estimates are based on units, rather than revenue. Because iTunes discounts far less often than rival retailers, its dollar share of the $2.9 billion U.S. download market is likely to be greater than its unit share, though NPD did not provide dollar share figures. In terms of customers, a commanding eight out of 10 digital music buyers downloaded their albums or tracks from iTunes in the fourth quarter.

The NPD "Annual Music Study 2012" report also contained a spot of reassuring news for the music industry. The number of Americans buying digital music downloads has remained stable over the last three years at roughly 44 million people, despite the spread of inexpensive or free streaming alternatives such as Pandora, Spotify and YouTube.

"There's a belief that consumers don't need to buy music because of streaming options," said Russ Crupnick, NPD's senior vice president of industry analysis. "In fact, streamers are much more likely than the average consumer to buy music downloads."

More than one third of the 5,400 U.S. consumers surveyed for the annual music report said that owning music is still important. About 30 percent believed listening to full albums was important. Of those who have listened to streaming music services, 41 percent said owning music was important, and many said they wound up purchasing more music after discovering them on streaming services.

Though digital downloads are perceived to be a maturing market, it is still growing while sales of physical albums continued to decline. Last year, digital download sales grew 8.9 percent to $2.9 billion in the U.S., according to the Recording Industry Assoc. of America. NPD estimated that the average buyer spends six percent more on music downloads in 2012 compared to the prior year. Surprisingly, part of that growth comes from teens buying more music than before. In addition, higher sales of full albums are also contributing to the growth, NPD said.