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How Apps have caused a decline in iTunes music downloads

For the first time since its launch iTunes has seen a decline in Music downloads creating some concern by investors and Apple stock holders, but analyst Horace Dediu has an explanation on why iTunes has seen a decline in downloads and why we shouldn’t worry about it, instead it shows how big of an impact Apps are having on the tech and entertainment industry.

Music Streaming

One of the factors is that we stream more and more music instead of buying it. Previously services like Spotify and Pandora dominated the music streaming market, but this year even Apple launched iTunes Radio, its very own music streaming service which allows users to listen to different “stations” (each station is a type of genre of music) and discover new songs and artists. (learn more about iTunes Radio) iTunes radio can be used for Free all though it does include Ads.

We spend too much time using Apps

Dediu explains that a mayor factor in why iTunes downloads have seen a decline is because Apps are getting more and more popular, something that is undeniable since downloads in the App store have increased 35% year over year and over 50% just during the holiday season. How can apps affect our love to listening to music? Time.

Consumers have a fixed time budget, a more rigid constraint than their spending budget. Competition for a slice of a consumer’s time budget is far tougher than competition for a slice of a consumer’s wallet. So what’s amazing is that apps have successfully grabbed a share of this time budget.”

Over the past few years Apps have become a good way of keeping you busy while bored to becoming “increasingly more addictive and taking over time that used to be spent watching TV.”

Apple hasn’t lost revenue, it has made more

The average price of a song is $0,99 while the average price of an app is $1.39 (source). An increase in App sales and usage also means more ad revenue, Apple’s own ad network iAd is used as to display ads on mobile apps of which Apple gets a small share of the revenue generated by each click or impression, overall Apple has made more revenue and hasn’t lost much since in the App market more money can be made then the Music market.

Here is the chart displaying the App downloads and iTunes music downloads (source)