News from the Apple's iTunes Music Store: the one billionth iTunes song was purchased and downloaded this week. And I like how Apple recognized the lucky downloader of the tune: Apple will establish a scholarship to Juilliard School of Music in the winner's name. That in addition to a new 20" iMac, a gaggle of iPods and a music card packed with enough cash for 10,000 new songs from iTunes.

The International Federation of the Phonographic Industry (aka the "IFPI") notes in their Digital Music Report for 2006 that sales of music via the internet and mobile phones was wildly successful worldwide last year: in 2005, such sales added US$1.1 billion to record company revenues (up from US$380 million in 2004). This rise comes at a time when various reports note that record companies are seeing a decline in CD sales (down 8% last year), even though overall music purchases (encompassing albums, singles, music video and digital downloads), were up 22.7% over 2004... and passed the major billion unit milestone. 

The IFPI notes in their report that...

  • Globally, there are now more than 335 legal download sites, up from 50 two years ago, with new music services available for the first time in 2005 in Argentina and China.
  • Online song catalogs doubled, with more than two million tracks and 165,000 albums now available on the major services.

Although major analysts estimate that the CAGR  for US online digital music sales will be 50-90%, I wouldn't be surprised to see these numbers be trashed when you take into account the new ways that consumers will enjoy music: not just through the now-traditional rip-your-own or pay-for-download (the MSN Music or iTunes idea that you purchase an individual song or album), but the way I have exponentially increased my own library through my music subscription service. (I noted earlier this week that I finally joined the Rhapsody To Go crowd.) MTV's new Urge will reportedly also offer a music subscription option, featuring an online library of more than 2 million tracks. (PR available here.)

From the emarketer report:

"Widespread broadband access and the growing popularity of digital audio players have been important drivers for the online music sector," said Mr. Macklin. "By the end of 2005 there will be over 41 million broadband households in the US and an almost equal number of digital audio players in the market. iTunes and iPods go hand in hand — two peas in an iPod, one could say — and with the recent phenomenon of podcasting and the growing popularity of satellite radio, on-demand audio entertainment has moved to the next level."

Music stored on computers rose by more than 20% year over year (as of last march), but free streaming music grew by more than 35%. With the new subscription packages that allow customers to download as much music as their PC hard drives and devices can hold (in addition to the number of subscription-compatible players), people may start to change how they "buy" music, just as I'm sure subscription DVD services (like Netflix and Blockbuster, which we use) increased the number of movie rentals per month. As consumer broadband installations increase, I believe that there will be a greater than proportionate increase in online music sales.  

I would venture to guess that we will see a significant increase when the analysts run the numbers this March, with significant increases: I'll go out on a limb and estimate that we'll see a 25% increase YOY (a significant rise over the previous YOY period) of music stored on computers. And that the next billion tunes will chalk up at a faster pace than the first billion... but iTunes may have to play the game of "follow the leader" and offer subscription services of their own in order to get there.

Until then, I wonder if Apple will follow the tradition from the fast food market, launching a road-side sign outside One Infinite Loop announcing "More than one billion served."

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