NEW YORK – Apple Computer Inc. (AAPL) said Monday it has sold 50 million songs over the Internet in the 11 months since it launched its iTunes (search) Music Store, putting it at least halfway toward its goal for the year.
Apple, which charges 99 cents a song, said it is currently selling 2.5 million songs per week, which would translate into 130 million songs per year, or about $130 million in annual revenue.
It's still not clear if Apple will meet its goal of 100 million songs downloaded during the first year of the new service. At the current rate, Apple will likely sell about 18 million more songs before the April 28 deadline, putting it at the 68 million mark.
But the Cupertino, Calif.-based company said that the 50 million songs excluded an undisclosed number of songs redeemed through a PepsiCo. Inc. (PEP) promotion to give away 100 million free songs. Not all of the songs given away are expected to actually be downloaded, or redeemed.
Rob Schoeben, vice president of applications marketing at Apple, declined to predict how many songs iTunes customers will have downloaded for its one-year anniversary in April but said that it has continued to steadily increase. For instance, the download rate was about 1.5 million songs per week in December.
"We're not predicting where we'll be on April 28 but the numbers are very strong," Schoeben said.
While the sale of songs is a positive for the company and the industry, analysts noted it is actually the music store's effect on Apple's iPod (search) digital music player, more than the service itself, that has helped the company's revenues and earnings.
The company sold 730,000 iPods in the December quarter and in February said it had 100,000 orders for its new iPod mini.
Apple, known for its Macintosh computers, launched its iTunes music store for Mac users in April 2003. It expanded the service to personal computer users running Microsoft Corp.'s (MSFT)Windows operating system -- a pool vastly larger than users running Apple's own operating system -- in October 2003.
Downloads of iTunes songs do not translate directly to the bottom line because of the costs of paying royalties to musicians and music companies, analysts have said. In 2003, Apple had revenues of $6.21 billion and earned 20 cents per share.
First Albany Corp. analyst Joel Wagonfeld said in a recent research note that he does not expect the store to be profitable for 12 to 18 months.
The primary financial benefit of the music store for Apple is its ability to drive sales of the iPod digital music player, said Tim Bajarin, an analyst at Creative Strategies, a high-tech research consulting company.
In the fourth quarter, the iPod digital music player accounted for about 13 percent of overall sales.
"It's a razor-razorblade scenario," Bajarin said, in which the songs are the low-cost razors and the iPods represent the lucrative blades. "In Apple's case, the blades drive the selling of the razors."
That's important because the iPods are highly profitable for the company and sell for $249 to $500. "Running the store at break-even or even at a minimal loss, is a no-brainer," he said.
Apple shares fell $1.17, or nearly 4.3 percent, to $26.39 Monday on the Nasdaq.