Forrester can't stand up for falling down over iTunes

Besieged by hedge fund managers and anxious Apple stockholders, research outfit Forrester today sought to distance itself from reporting of its research into digital download sales at Apple's iTunes Store.

It's standing by its figures - it just wishes the spin was different. And it's added some new spin of its own.

On Monday, Forrester published a study of 27 months of data gleaned from credit card transactions at the iTunes store. It's a fascinating survey, based on empirical data, into usage habits that we'd only been able to gauge anecdotally.

The figures revealed enormous growth up to January 2006 - but bad news for the next six months. Sales had fallen 65 per cent, a much larger drop than the seasonal fall (39 per cent) of 2005. These mirror Neilsen Soundscan data which show three quarters of flat and declining sales at digital download sites across the board: confirming the trend isn't just a problem for Apple.

"Where's the good news?" Josh Bernoff asked us rhetorically, in an interview on Monday.

There was much else of interest in Forrester's valuable study - in contrast to Apple's own spin, which focusses on the millions and billions of downloads - it reveals that the public's appetite for shopping such digital download sites is tepid and spasmodic. There's no stickiness here that will help the music business offset falling CD sales.

But in the next two days, Apple's stock declined by 3 per cent - causing managers at the brittle financial pyramid schemes called "hedge funds" to call Forrester in distress. Bernoff says representatives of the mainstream press (which rarely loses an opportunity to laud Apple) also contacted him, also in a state of consternation.

It's a testament to the ignorance of Wall Street's gamblers, and the collective herd mentality of the business press, that Forrester's research should cause such a panic. Apple's dazzling growth in recent years has been earned from selling portable music hardware - not digital downloads. The company readily admits the iTunes Store contributes next to nothing to the bottom line. And so long as people want portable digital music, and Apple continues to make the most attractive portable digital music player, and the public can transfer music they've bought elsewhere onto that player - Apple's growth should continue. But rationality rarely enters the equation, when the American press discusses its darling.

Bernoff didn't contact us in response to our story, but instead mounted his blog to castigate "press credibility" ... particularly of "an outfit called The Register."

We'd been downgraded!

Forrester says it wants the spin today to focus on other aspects of its research other than the 65 per cent drop. It can't quite agree on the spin - "growth has slowed" says researcher Remy Fiorentino while Josh Bernoff says sales have "levelled".

Bernoff is correct when he urges caution: we reported his warning not to extrapolate from a few quarters in our reporting - and put the 'collapse' in inverted commas. A 'collapse' it is indeed - few businesses can afford to ignore a 65 per cent in sales - but when married to the Neilsen data, we suggested that this brief era in the history of digital music may be drawing to a close - and the next one beginning.

It's a pity today that beseiged by parties who have vested interests, and their own agendas, Forrester wants to downplay the implications of its valuable work - and instead it finds itself doing crisis management on behalf of Apple. ®