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Apple's iTunes: We're No. 2!

Itunes_7Apple boasted today that it has surpassed Best Buy to become the second-largest music retailer in the U.S.. It trails only Wal-Mart, which, like Best Buy, does most of its sales in a very different market (packaged CDs). That's not a knock on Apple, which chose the part of the music market that actually has a future. Granted, Wal-Mart has an online music store, but it's not in Apple's league in terms of sales or mindshare.

The major record companies have a testy relationship with Apple, so its rise through the ranks of music retailers hardly comes as welcome news. But what should really disturb them is the other data included in the release. Sales at the iTunes Store passed the 4 billion milestone about seven months after they hit 3 billion. Similarly, it took the store about seven months to sell the previous billion tracks. It's safe to assume that the store has more customers now (over 50 million, according to the latest release) than it did seven months ago. That means customers are buying less on average than they used to. And the not-so-pleasant implication is that digital sales have been growing mainly because of new customers coming into the fold, not because the average customer is buying more songs year over year. At some point you run out of new customers, and then what?

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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