Apple's (Nasdaq: AAPL) iTunes has apparently hit the big time. It now sells enough music to join the top 10 list of music retailers in the third quarter of this year. iTunes leapt all the way into the No. 7 spot, outselling well-known music retailers Borders (NYSE: BGP) and Tower Records. (It can't hurt that Apple's sold 30 million iTunes-friendly iPods to date.)
It's just one quarter, granted, but this is still a thought-provoking statistic. In just a few short years, iTunes has cracked the ranks of retailers with decades of music-selling experience.
Not only did Apple vault ahead of Borders, Tower, and Sam Goody in the quarter, according to the data from NPD, but it shares company with superior sellers such as Wal-Mart (NYSE: WMT), Best Buy (NYSE: BBY), Target (NYSE: TGT), Amazon.com (Nasdaq: AMZN), FYE, and Circuit City (NYSE: CC).
Way back in 2004, I covered Tower's woes -- although it speaks well of the private company's venerable brand that it's still a major force, hanging in the Top 10. And if iTunes vaulted ahead of Borders as well, maybe that's not too surprising -- Borders' sluggishness of late has been well-documented. However, given the popularity of Apple's iPods, it's possible that next year may find iTunes in a much more prominent position on the list. (Well, maybe. A year is a long time, and digital downloading is a hotly coveted market at the moment.)
In hindsight, it should have been easy to see Apple's latest coup coming, given this recent news about the music industry, and the success of downloads while CD sales continue to stagnate. Retailers like Amazon.com got customers accustomed to the convenience of online ordering. iTunes took that a step further, giving instant musical gratification a legal outlet. Of course, the fat lady hasn't sung yet -- legal downloading can only grow as more and more retailers get in on the action. Despite Apple's success thus far, one might wonder whether the moat protecting its service from rivals is really that deep.
For now, though, Apple investors can gloat over iTunes' official entrance into the big time, at least for the third quarter. Given the iPod's presence on many a holiday wish list, the fourth quarter should be good times for Apple as well. The next year should be interesting indeed, as more retailers enter the digital-downloading fray, and we see whether iTunes truly has a sustainable advantage.
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Alyce Lomax
does not own shares of any of the companies mentioned, although downloading albums through iTunes is burning a bit of a hole in her wallet.
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