Sales Up Over Christmas, But Down Year-Over-Year

-- Digital sales were up slightly Christmas week 2010 but showed the same signs of a slowdown that has been evident throughout much of the year. Digital track sales were down 2% from the same week in 2009 -- 44 million to 44.8 million, according to Nielsen SoundScan. Digital album sales were up 9%. That means total digital track sales from both albums and single tracks were up 2.4%, assuming 11 tracks per album.

But the year-over-year comparison might actually be better. Christmas 2009 was on a Friday while the holiday fell on a Saturday this year. That means there was one more day after Christmas than this year (a SoundScan week runs Monday to Sunday). An additional day of gift-card sales could make a difference. We'll find out next week.

Don't expect much, though. Given the slowdown in digital sales growth, there is no reason to believe that either tracks or digital albums would wildly exceed the paces they have set in the previous eleven and a half months. Year-to-date, track sales are up just 1% over last year and digital album sales are up 13%.

iPad Not the Magazine Industry's Savior

-- When the iPad launched earlier this year, it was heralded as the savior of magazines. Before the close of 2010, circulation numbers show that magazines may need to find another savior.

Circulation numbers revealed by Women's Wear Daily show the initial strong numbers for iPad magazine sales slowed mightily later in the year. While Wired's first iPad issue sold over 100,000 units, sales in subsequent months dropped to around 31,000 and then to the low 20,000s in October and November. It's a trend seen in other publications. Men's Health averaged digital sales of about 2,800 in the spring but sold 2,000 in both September and October. Glamour, GQ and Vanity Fair all dropped from their initial sales numbers.

What makes these downward sales trends even more alarming is the fact that more iPads were in the market later in the year than when magazines first started putting out iPad-focused content. As consumers bought more iPads, they also bought fewer digital magazines.

There could be a number of good explanations for the sales declines. Quality is at the top of the list. Wired's first iPad edition, for example, was widely criticized for being little more than a PDF that failed to take advantage of the iPad's ability to handle multimedia content. Publishers will certainly improve upon quality as time passes.

A likely explanation is the shiny new toy syndrome. Consumers may have rushed out to buy iPad magazines simply out of curiosity. Once they tried them, many consumers reverted went back to the ample free content accessible on the iPad's web browser. And therein lays a serious roadblock for monetizing content on tablet devices: Any premium content will have to compete with an incredible amount of free content. That goes for magazines as well as music. The iPad -- and tablet devices in general -- has great potential to offer music fans an experience that can't be matched by smaller portable devices. Digital albums and music-focused video games, for example, could be much more vibrant experiences on a tablet. But will consumers forego free (and legal) content and pay for premium content?

( WWD)

Why Apple Should Buy Netflix

-- Apple should buy Netflix, says tech analyst Brian Marshall of Gleacher & Co. Apple's $51 billion in cash puts the acquisition within financial reach. Marshall estimates that Netflix has ten times Apple's market share of the TV show and movie rental business. And Netflix has approximately 150,000 titles to Apple's 15,000.

While Apple could afford it, the company would have to determine if Netflix is currently overvalued. It's a belief held by many equity analysts who think Netflix will not be able to maintain its growth and constrain its licensing costs well into the future. And Apple would have to weigh the likelihood that it could build a better competing service rather than buy the top competitor. Most importantly, however, would be assessing the value Netflix would bring to Apple's existing lines of business. Just like iTunes exists to help sell portable devices and personal computers, folding Netflix into the Apple family would need to bring more value to ownership of Apple products.

( San Jose Business Journal)