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Five years, 5 billion downloads

By / June 20, 2008

Apple iTunes sales over time, according to company press releases.

Chris Gaylord

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Here’s another big download record this week. Apple announced yesterday that iTunes sold its 5 billionth song. The five-year-old MP3 store took a while to get going, but as of February has become the biggest music retailer in the US – even surpassing Wal-Mart.

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Fortune framed it well: “This represents a significant acceleration in music sales. It took Apple (AAPL) nearly three years to sell its first billion songs (Feb 23, 2006), ten months to sell its second billion (Jan. 6, 2007), seven months to sell its third (July 31, 2007) and fourth billion (Feb. 27, 2008), and only three and a half months to sell its fifth (June 19, 2008).”

Put another way: Over the past two years, the music store has sold an average of 4.7 million songs per day – or 54 songs a second.

But we've known for a long time that iTunes was a major player in the music business; after all, its closest digital-music competitor, Amazon, only pulls in a tenth of that volume. What's unexpected is Apple's other nice round number: There are now 50,000 movies rented or sold over iTunes every day. Apple has been shoving its way into this market since 2005, trying to push aside DVD sales and Netflix. It signed deals with all the major movie companies, increased the screen size on all iPods (though they're still pretty tiny), and released a new and less expensive AppleTV settop box that fixed several of the problems with its original model.

Back to music for a second. At 99¢ a song, does that means iTunes has raked in about $5 billion on music alone? Not quite. A lot of that money went to the music labels and performers, but it's hard to tell how much. Apple has never disclosed the iTunes profit margin – some guess between 10 and 30 percent. Between October and March, the company pulled in $1.6 billion from "music related products and services," according to recent SEC filings. But that number includes both iTunes sales (music, movies, TV shows, etc.) and iPod accessories (armbands, speakers, car adapters, etc.). The iPods themselves pulled in $5.8 billion during the same 6 months.

That's enough MP3 players to ensure that iTunes will chug along for a good time to come.

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