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Analyst: iTunes Could Have "Notable Impact" on Fiscal 05, 06
by , 1:20 PM EST, February 22nd, 2005
iTunes downloads could move from being merely a driver of iPod sales to having a "notable impact" on Apple Computer's bottom line in fiscal 2005 and 2006, a Wall Street analyst predicted Tuesday.
Piper Jaffray analyst Gene Munster said in a research note obtained by The Mac Observer that downloads for fiscal 2005 could reach 513 million, and one billion in fiscal 2006, and that these sales would be meaningful to Apple's bottom line.
At the heart of these predictions is Piper Jaffray research that showed iPod owners were averaging 6.6 downloads from Apple's iTunes Music Store.
"If we apply this 6.6x ratio to our cumulative iPod- installed base estimates through CY05 and lower the ratio to 6.0x in CY06," wrote Mr. Munster, "iTunes downloads for CY05 would be at 513m vs. our current estimate of 387m, with CY06 iTunes downloads of 1.0b vs. our current estimate of 542m."
While Mr. Munster specified that iTunes sales wouldn't have as big an effect in 2005, he said that iTunes could contribute between four and seven cents per share in profit in 2006, depending on operating margins for the online music service.
The research note reiterated Piper Jaffray's "Outperform" rating for Apple's stock, as well as a 12-month price target of US$100.
*In the interest of full disclosure, the author holds a small share in APPL stock that was not an influence in the creation of this article.
If you are interested in Apple's stock, join our forum members in the Apple Finance Boards, a moderated forum for Apple Investors and people who are interested in Apple's financial dealings. For other stories regarding Apple's stock activity, visit our updated Apple Stock Watch Special Report.
Observer Comments
Tue Feb 22, 2005 2:48 pm Subject: iLemmings Will Have To Rebuy Songs With Higher Bitrate
Tue Feb 22, 2005 2:50 pm Subject: Re: iLemmings Will Have To Rebuy Songs With Higher Bitrate
QuoteRealityCheck wrote:
Can't wait until iTunes increases its lame 128 kbps bitrate for songs and the Apple disciples have to shell out again to rebuy the songs they thought they already owned. Get ready for an extra large gulp of Kool-Aid.
Why? WHY can't you wait? You never tell us the important part.
Tue Feb 22, 2005 3:25 pm Subject: Re: More RC FUD - You Own iTMS Purchases
QuoteAnonymous wrote:
OK I'll bite. What part of the iTMS Terms of Sale say that you don't own the music that you just purchased?
The Reality Check ammendment. It's at the bottom. In very, very small type.
I don't get it either. Usually RC links to some sort of mis-leading article taken out of context to "prove" his points, but for this particular idea he's never offered anything. And he keeps bringing it up again and again. I mean, he never gets anything right, but I'm also curious as to why he keeps returning to this one so much. Usually he moves on to something new eventually.
QuoteSmall White Car wrote:QuoteAnonymous wrote:
OK I'll bite. What part of the iTMS Terms of Sale say that you don't own the music that you just purchased?
The Reality Check ammendment. It's at the bottom. In very, very small type.
I don't get it either. Usually RC links to some sort of mis-leading article taken out of context to "prove" his points, but for this particular idea he's never offered anything. And he keeps bringing it up again and again. I mean, he never gets anything right, but I'm also curious as to why he keeps returning to this one so much. Usually he moves on to something new eventually.
It's his own personal version of the "Megahertz Myth". 128 kbps is less than 160 or 192 or whatever kbps, so it is OBVIOUSLY inferior. What he fails to account for is the difference in AAC encoding vs MP3 vs WMA or whatever. Same way you cannot do a flat comparison between PowerPC and Intel X86 chips soley on processor clock-speeds.
Mace, as far as analysts go, I am much too easy on them.
I'd give them the same treatment I reserve for "Windows Security Specialists", but then I'd never get a chance to clean my skinning knives.....
Tue Feb 22, 2005 3:51 pm Subject: RC's having a hard time
Close to 5 million iPods sold last quarter, Mac sales up almost 25% and now comes the iPod shuffle and Mac min - both with strong sales and backorders. All he has left to hold onto is a stripped down Longhorn that will be out some time in the future. Reality is turning into a bounced check for him these days.
Tue Feb 22, 2005 4:10 pm Subject: Check The iTunes Fine Print
Tue Feb 22, 2005 4:12 pm Subject: Re: Check The iTunes Fine Print
QuoteRealityCheck wrote:
Nothing in the agreement prevents Apple from charging iLemmings for higher bitrate versions of the same songs already purchased.
Very true. But how do you deduce that you would be FORCED to buy new versions? Many people threw out their VHS tapes for DVDs, but no one was forced to do so.
I don't see this situation being any different. I, for one, can't tell the difference and would not re-buy my music again, and I can't find anything that indicates I would have to.
Tue Feb 22, 2005 6:16 pm Subject: Pot to Kettle....
QuoteRealityCheck wrote:
Here's part of the iTunes agreement you must have missed:
"Apple reserves the right to change the terms and conditions of sale at the iTunes Music Store at any time. Customers are encouraged to review the Sales Policies on a periodic basis for modifications."
Apple's already changed the rules once by reducing the number of burns. Apple could reduce the number of burns to zero if the RIAA asked. Nothing in the agreement prevents Apple from charging iLemmings for higher bitrate versions of the same songs already purchased.
You mean sort of like this?
QuoteNapster reserves the right at any time and from time to time to modify or discontinue, temporarily or permanently, the Service (or any part thereof) with or without notice to you, without any liability to you or to any third party.
Or this?
Quote
Right to Change Prices. All prices for products within the Service are subject to change by Napster at any time.
Or this?
Quote
Loss of Rights by Napster. Napster may at any time lose the right to make certain Tracks and/or Materials available. In such event, you will no longer be able to obtain these Tracks and/or Materials or to utilize the "Sync/Restore" function for Purchased Tracks.
At least with iTunes, if they lose the rights to something I already purchased, I still get to keep it.
RC is an ass - I used to think he had a point once in a while, but lately he's blown his cover - I see a 15 year old kid with no social skills and no friends who lives on his computer, who mistakenly confuses his warped version of "technological literacy" with intelligence, who no doubt works himself into a frenzy with first-person shooter gamez that he pirated and Bawls energy drinks.
QuoteRealityCheck wrote:
Can't wait until iTunes increases its lame 128 kbps bitrate for songs and the Apple disciples have to shell out again to rebuy the songs they thought they already owned. Get ready for an extra large gulp of Kool-Aid.
What's this have to do with ANYTHING in the story??
QuoteRealityCheck wrote:
Here's part of the iTunes agreement you must have missed:
"Apple reserves the right to change the terms and conditions of sale at the iTunes Music Store at any time. Customers are encouraged to review the Sales Policies on a periodic basis for modifications."
Apple's already changed the rules once by reducing the number of burns. Apple could reduce the number of burns to zero if the RIAA asked. Nothing in the agreement prevents Apple from charging iLemmings for higher bitrate versions of the same songs already purchased.
And why would I be "forced" to buy a higher bitrate version in the future? And why does 128 kbps AAC actually sound fairly good to the untrained ear? Why would audiophiles who want CD-quality sound shop at an online music store in the first place, considering all music stores/subscription services use compressed (read: not lossless) formats? Why not come back with a reasonable post? I swear it's like talking to a brick wall--except the brick wall is more reasonable.
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