• by Ross Fadner , March 15, 2004

Apple Monday said that its iTunes Music Store hit a milestone of 50 million songs sold, but the Cupertino, Calif.-based company will land far short of its projected goal of 100 million downloads by April. The 50 million singles sold doesn't include Apple's promotional tie-in with Pepsi to give away 100 million tracks via 300 million soft drink bottles.

Traffic to Apple's iTunes Music Store remains strong, according to data compiled for the MediaDailyNews by Hitwise, Inc. From January 3 through March 13, 2004, iTunes has seen a 129 percent jump in traffic in the United States. Following the announcement of its promotional tie-in with Pepsi, site traffic spiked nearly 250 percent.

The highly publicized promotional offer is likely one of the main drivers of steady traffic to the site, according to the Hitwise data. iTunes is, in fact, the only music site to have received a traffic increase during that time period. MusicMatch had a 31 percent decrease, followed by Kazaa with a 35 percent decrease and Napster, whose total traffic fell 38 percent during the period.

Elsewhere, Roxio today revised its revenue guidance for the first quarter, citing better-than-expected "consumer demand" for its Napster service. Roxio now expects revenue for its Napster division to increase to approximately $5.5 million.

For Apple, traffic is up, but sales are not quite meeting expectations. While the rest of the field has experienced significant decreases in traffic shares, some industry analysts wonder how the relatively young industry of for-pay music downloading services is progressing.

"It depends on your benchmark," says Ross Rubin, director, industry analyst with the NPD Group. "Apple has had the most success on the demand side of the equation," he adds. Rubin notes that Apple has changed the rules of engagement by pushing its popular iPod series of MP3 players in conjunction with the iTunes service.

Lynn Bolger, executive-VP agency development at comScore Networks' comScore Media Metrix, claims that 50 million is a lot--especially for such a young industry. She says Apple has carved out its niche, but she wonders about the rest of the pack. Napster, for example, has only 5 million songs sold. What are the prospects for an ad-supported model as a revenue supplement for these services?

"In time there might be an opportunity for advertising," adds Bolger. "But you need the volume to do that. I don't think [advertising] would be their focus, but I could see the possibility of a hybrid model down the road."

"I think if it's something that could be done in a way that's not intrusive, you could always sell ads: paid search, promotions," adds the NPD Group's Rubin. "The idea at this point is viewership--maybe it is a traffic issue; over time [music services] may be more interested."

To date, Apple has sold 50 million songs, at a rate of 2.5 million per week, or 130 million on an annualized basis, the company said. Napster had 5 million songs sold as of Feb. 23, Roxio says. MusicMatch has the largest user base--at 50 million registered software users as of March 4--the company said. RealNetworks' Rhapsody on March 10 reported 350,000 subscribers as of year-end 2003.