Why iTunes Sales Are Declining as iOS App Store Sales Grow
The revenue of Apple’s (NASDAQ:AAPL) iOS App Store has continually increased, and now has caught up to the revenue from the iTunes Store. As Mashable reports, Jackdaw Research found that iTunes users spend as much on apps as they do on music. A category Jackdaw’s chief analyst, Jan Dawson, identifies as a key growth area for Apple is called “iTunes, Software, and Services.” The category is comprised of content and apps sold on iTunes, software like Final Cut X, and services like iCloud and AppleCare.
While iTunes revenue, comprised of sales of music and movies, accounts for the largest percentage of the category, Jackdaw’s report shows that sales of music and movies have declined while app sales have increased dramatically. The average amount of money that users spend on apps each year is also increasing, and in the fourth-quarter of 2013, the average amount of money spent on content was about the same as the amount spent on apps.
As Mashable’s Christina Warren notes that the report reveals the huge potential for app sales to grow in the future: “Apps revenues in Q1 2014 is basically where digital content revenues were in Q3 2010. That kind of sharp shift shows huge potential for growth, even if content revenues continue to drop.”
AppleInsider reported in May that the App Store’s revenue was on track to surpass iTunes sales of music and movies by the fourth-quarter of this year. In the fourth-quarter of 2013, iTunes revenue represented 59 percent of Apple’s online services revenue, and App Store sales represented 41 percent. In the first-quarter of 2014, that balance had shifted slightly, with iTunes revenue at 57 percent and App Store revenue at 43 percent. At the time, Morgan Stanley (NYSE:MS) analyst Katy Huberty projected that iTunes’ share would decline to 47 percent in the fourth-quarter of the year, leaving the App Store with 53 percent of online services revenue.