The Average iTunes User Purchases $12 Worth of Music a Year

If this was writing on the wall before, it’s now a giant, pornographic mural on the largest billboard in town. According to research just published by Asymco analyst Horace Dediu, the average iTunes user now spends just $12 on music, a year, down from $42 five years ago.

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Other categories like software and books are also declining, which makes sense given an iTunes registered user base that is ballooning towards 600 million worldwide.  Sounds like that would naturally drive the average down, except for the inconvenient truth that apps are still increasing quite comfortably.

Which means: not only is there more stuff for ‘music fans’ to buy, they’re buying more of that other stuff.

Enter the streaming vanguard led by Spotify, which is now poised to surpass download revenues as early as this year.  Here, the per-user riddle gets complicated: Spotify most recently reported 6 million paying subscribers, with 24 million total active users.

Assuming subscribers are all paying $120 a year (at the highest $10/month rate), that puts Spotify’s per-user spend at $30 a year, almost triple that of iTunes.

Except, there’s one gigantic problem here.  According to research recently released by industry analyst Mark Mulligan, roughly 70 percent of Spotify registered users are completely inactive, abandoned accounts.  Which makes the per-user numbers look something like this:

Spotify, revenue per user (per year).

Registered Users = Paying + Active + Inactive

Paying Subscribers (6 million): $120 a year

Active Users (24 million): $30 a year

Registered Users (80 million): $9 a year.

17 Responses

  1. GGG

    Quick, music industry, apps are on the rise! They are clearly taking away money from records! We must sue app developers so people buy CDs again!

    • HHH

      Dear GGG,

      you know, if people stopped listening to music and went to enjoy other media instead (!) then fine, let the music industry die a slow and painful death.

      But that’s unfortunately not the truth. The truth is, that people are listening to music more than ever. They’re just not really paying any mentionable amount for it, or worse, they’re consuming it on platforms that enrich themselves by surrounding the music with advertisement and don’t pay the artists, composers, labels and publishing anything.

      That’s a huge difference and often overlooked in this heated debate.

      • GGG

        No, what’s often overlooked is that popularizing streaming to the point of normalizing it like CD buying was in the 90s will lead to profitable recordings again. Banker money or even 90s money? Probably not, but livable money when combined with all other avenues of rev. We have tried for over a decade to convince people to buy music again and it obviously didn’t work, or hasn’t worked yet. So why, when we find a way that actually CAN make money, regardless of how shitty that money currently is, do so many people want to demonize it? Grow the concept, don’t trash it. It’s a potentially very viable revenue stream.

        • ZMN

          No, no. “HHH” was right.

          What you’ve written here isn’t a “no.” It’s an “I’m going to ignore your point and talk about something else instead.”

          This is why I hate comments sections.

  2. DUDE

    About the apps thing, smartphones/apps are a pretty new technological development, so there is probably more room for growth there than there is in other media. iTunes didnt even sell apps until 2008, so we’re growing a market from literally nothing… I dont think it makes much sense to compare that market to something as well-established as music, or even digital music if we’re splitting hairs like that

    I know its always tempting for you guys to dog other media but I really don’t think that’s got much to do with this… my first impulse would be to blame factors like an expanding user base (which you mentioned in the article) or an overall ecomonic decline shrinking people’s budgets for entertainment and media (which happened right around the same time iTunes revenues per user started to drop off, in 2008)

    Its not the first time I’ve said this on here but CONTEXT, dude

    • Paul Resnikoff

      But DUDE,

      Apps are selling more than music (per user, and overall). Granted, some of those are music-oriented apps, but apps are clearly increasing while music is decreasing. Which means, apps are one category that is crowding music.

      • Casey

        Of course. Music now has to compete with apps for sales. Some of the biggest spenders are teens and teens only have so much money to spend on their iTunes account. The more things iTunes has, the more divided it will become. Previously when you bought or received an iTunes store giftcard you had $15 or so to spend on music. Then you had tv shows. Now you have full movies and apps. But you still only have $15.

      • DUDE

        Right Im not saying app sales are not cannibalizing music AT ALL, but blaming the drop in music sales from $42 to $12 primarily on that, rather than on an overall decline in entertainment spending and iTunes expanding its audience to include people who might not have bought as much music to begin with, seems not right given the context

  3. FarePlay

    The real problem: None of these streaming models have presented a business plan, i.e. financial forecasts, that demonstrate a “realistic” path to profitability.

    I believe Spotify has projected that with 80 million paid premium subscribers they can be profitable. They have 5 million. Pandora has something like 80 million total subscribers and 2.5 million paying customers.

    So, we destroy a once healthy industry by arguing that streaming is the future and feed the VC, Wall Street “investors” into financing businesses that make no financial sense, just so a few indivduals can become obscenely wealthy?

    Copyright cannot be some arbitrary compensation model. For artists to receive an equitable stake It must take into account the alternative streams of income that technology destroys.

    • Visitor

      Copyright is not a compensation model. It a way to control access to works.

    • Visitor

      And if you want some kind of law that promotes the develop of works, thats what it is. It’s not copyright. Copyright is copyright, that is, the right to copy. When you have a copyright over a work, you have a right to copy that works. That’s why it is called copy right, copyright. Yadda yadda. Lets not overload the term to mean anything and everything..

    • GGG

      Maybe if more of the industry actually embraced streaming a bit more, we could find ways to turn more of the public on to it. Instead half of you sit around and just bitch that people don’t buy music anymore. Streaming has been the only legit solution proposed in over a decade. Is it the best? Who knows! If I had a better solution I’d be putting into motion right now. But yelling that people should just be nice and buy music again is not a solution. And quite frankly, the fact so many adults think it is is pretty embarassing…

  4. Henry Chatfield

    Any idea how Mark Mulligan calculated those numbers? I’m just interested because the numbers seem so variable it would be difficult to get any accurate calculation.

    • Champion

      Even with these overly-pessimistic Mulligan “zombie” numbers that are impossible to verify, the difference is only $3.

      And LOL at the 10x difference in Spotify’s favor between the average Premium customer and the average iTunes customer.

      It’s getting harder and harder to vilify streaming. I think it’s impressive that Paul was able to figure out a way to do it in this article, and I look forward to future distortions!

      Although I do have to applaud his salient observation that people have more entertainment options than ever before.

  5. Yves Villeneuve

    Half of these paying Spotify subscribers only pay $60 per year.

    Total active subscribers is more like 8 million (6 million paying + 2 million ad supported) as per common anecdotal reports from indie labels.

    I find it strange that NPD group has found no growth in USA downloaders(45 million) yet there is revenue and units growth in downloads as reported by the RIAA in 2012, meaning American downloaders are increasingly spending more on downloads.

    Important to note that, unless I’m mistaken, NPD Group does research on behalf of RIAA therefore their numbers could be fudged to give preferential treatment to streaming totals. Wonder why the RIAA does not include the number of downloaders in its annual reports, like it does for streaming subsciber? Could it be the RIAA is also trying to skew the picture? I think so. Until I see a balanced annual RIAA report I see them more trying to manipulate the music market. Don’t know if their actions to skew the picture is legal.

    • BC

      This appears to just be showing iTunes numbers right? Maybe the numbers make more sense if you take in to account other download platforms (Amazon mp3, etc.).

  6. Is it true?

    Can’t believe that there are still people that pay for recorded music, when they can listen to and download millions of tracks for free and legally.