iPhone apps more popular than music downloads: 1 Billion downloaded in 9 months. What gives?

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Based on what Wikipedia says I am estimating that iTunes has maybe sold a total of 6.8 Billion songs since April 28, 2003 - i.e. exactly 6 years ago. Now Apple just announced that over 1 Billion iPhone & iPod apps were downloaded around the world (a good list of the top 20 free & paid apps is at Ben Tao's blog), during the past 9 months, already. Why is that? Why is music apparently less popular than software gadgets?  Here is my 2 cents:

• The music on iTunes is always paid-for while apps are sometimes free and sometimes paid (and at different price points), and are therefore an easier sell. Try and buy is still the best way to get hooked - and iTunes does not even allow me to listen to the full track before I need to shell out my dollar! In any case, the fact that some apps are entirely free can serve as a good reminder that for the creators there are many other, equally attractive forms of remuneration than just getting immediate cash. App developers certainly seem to have many other reasons than just getting paid 'by the unit', such as creating a stronger 'Pull' for their other offerings or providing the app to get a wider audiece for their skills - and the same argument could certainly be employed for music I would reckon. Why not start with the stream-on-demand, then offer the download for free or for a very low price - but then upsell the fans to a much larger fan package, similar to what Depeche Mode is now doing with their Season Pass. The ever-resourceful Techcrunch, btw, estimates app store revenues to be $777 Million for 2009 - I would be even more optimistic than that, though, because I expect much higher sales of iPhones and iPod after the next version comes out in June, featuring the build-in FM transmitter that can send the music wirelessly to your car stereo (radio execs... are you ready for that?)
• The music on iTunes is both too cheap and too expensive (depending on how you look it it), but there's nothing that fits the "free stuff + premium" package that people like so much these days (such as for my favorite, Instapaper) which is how most people get hooked on the good stuff. In this world, Freemium Rules, indeed.
• Most apps are really cheap and it's easy to part with a few dollars for something that may have real value for me - especially if one of my peers has just recommended it. I have purchased at least 40 apps, and I can tell you that the barrier to purchase an app is much lower than the barrier to buying songs at $1 / Euro 1. And yes, sure, unlike music the apps can't be gotten for free anywhere else (apart from what can be done with jailbroken iphones I guess) and that certainly is a factor - but even if they could be 'pirated', I would venture to say that I would still pay for them on iTunes, because it's LIQUID, quick, convenient, low-cost and no big deal. If the music industry can achieve the same (and not just on iTunes!), than you'll see those numbers go up, for sure. Liquid and friction-less are the keywords here - and that, to me, as you may have guessed, means the digital music flat rate.
• Mobile phone apps are about ME, about my personalized style and experience. The apps give me the power to select what I like, try it and love it or hate it. See a guy's apps and you can get a feel for who he is (yes... that goes for women, too, but unlike guys you probably don't see them comparing iPhone apps over a drink;). If we can make music -and other content- more personal, more customized, too, my hunch is that would help boost the sales, as well.

So, Music Industry, here is my recipe:

Lower Price Points + Freemium + Customizing + Value-Value-Value = Revenue Growth

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• Apple's App Store: 1 Billion Served (techcrunch.com)
• How Apple is squeezing out more profit than ever (guardian.co.uk)
• THIS is the Future of Content: Attention Revenues first, copies second! (mediafuturist.com)
• Getting Attention: The Future of Artists & Audiences (Part 4) (blip.tv)

Comments

[Suzanne Lainson]

1.

One of the big reasons people want music for free is that they are acquiring it in bulk. They want a lot of music to fill up their iPods.

iPhone apps and ringtones can be sold at a higher price than a song because people are thinking in terms of buying just a few rather than thousands.

So what they are thinking in comparing applications and/or ringtones to songs is the total expenditure they plan to make. They can't afford to pay $1 a song for all the songs they plan to acquire. But they can pay $3 per application because they will be buying relatively few of them.

[Patrik Lindberg]

2.

Interesting viewpoints, and yes, I agree that the music industry is using too many limits when promoting music, generally not offering enough opportunities to try music out on a larger scale. And Apps pricing is very competitive and easily lures people into trying out new stuff.

BUT... comparing the numbers of music SOLD with Apps DOWNLOADED regardless of if those are paid for or not, does not seem justified to me.

[Gerd Leonhard]

3.

You have a point, of course, in terms of numbers and paid / unpaid - but I was trying to refer more to the ATTENTION that apps are getting, compared to the Attention that music is getting

[Devil's Advocate]

4.

Thanks Gerd, I'm a fan of your writing. To play devil's advocate, a few thoughts:

Free music on iTunes: they do offer free downloads on featured artists of the week. I'd be curious to know how much this has helped sales for that particular artist.

You can download podcasts for free on iTunes. I wonder how those numbers compare? Even if the numbers are very high, are downloads of, say, The New York Times podcasts really translating into much revenue? You would know better than I would, though I admit I am doubtful.

Built in FM Transmitter: as you know, people already use external ones with ipods in their car, and this has not yet killed radio. (Though not to say that traditional radio isn't dying. It is, and what a blessing.) These devices did not get a very clear signal though. It would take a reliable connection before this would have much impact.

iPhone Apps: Once people start file-sharing iPhone apps, wouldn't sales will be affected? It would be interesting to compare app downloads to music downloads, with the music downloads number including estimated file-sharing numbers. My guess is the result would suggest music is still more popular.

I find it interesting that, with the rapid decline of print journalism, few people accuse the newspaper industry of failing to be forward looking in terms of revenue streams. (In fact, most of what I hear appears to be self-righteous nostalgia.) Yet the music industry is treated as a villain. Granted, the newspaper industry isn't suing it's own customers like the RIAA. We all know the RIAA is so far off base on that one. But I often wonder if this loss of profit isn't as much due to blindness and/or blunders by newspaper execs, record execs, and other media execs; but rather an indicator that there just isn't a clear profit model yet (other than Amazon or Google Ad Sense-style aggregation) when you take into account the exponentially growing and splintering world of media content.

Just putting the thoughts out there. Keep up the good writing!

[Gerd Leonhard]

5.

Thanks for your comments, Devil's Advocate. Good stuff. My thoughts: 1) free itunes tracks / podcasts: the problem here is that we lack the methods and metrics for tracking how much revenue is egged on by the free stuff. I believe that free podcasts and other free content get the users hooked on a content creator or provider and therefore drastically increase Trust and Attention which usually engenders very high conversion rates IF and when a good product is being offered - the gaming industry has shown this very nicely, with conversion rates from 5-45%. 2) The new FM transmitter in the iPod and iPhone: yes, correct, the quality can be quite bad if you live in an urban area with lots of stations. However, transmitting a song directly from your iPod or Phone (Nokia offers that in some models, too), is a LOT easier than hooking up all the gadgets separately so I think there will be some steep competition for terrestrial radio as a result - but I would agree that it's far from perfect. 3) Sharing apps: of course the success of the Apple appstore can be attributed to the fact that they literally control it all - i.e. no-one can snag the apps outside of their iTunes walled garden. I personally think this is one of the big exceptions that proves the rule: open platforms will be more successful UNLESS you can afford to stay closed, be exclusive, high-priced or somehow 'special' - and Apple can indeed do that. So can Nintendo and the XBox I guess. But this won't work in the long run I believe.
4) As to news vs music: words and text-content is different, and has always been 'shared' and remixed so those companies know that they are not selling 'copies of words' - therefore they are acting less idiotic when it's time to reinvent (this is my quick answer;) Cheers!!!!! PS: be sure to check out my videos at www.gerdtube.net