Apple iTunes Dominates Market but Amazon Gaining: NPD Group

Apple is slowly losing music share as streaming services—found to encourage downloads—increase. Thus the rumors of a pending "iRadio."

The Apple iTunes Store, which will celebrate its 10th birthday April 28, continues to lead the market in digital music downloads. But it also continues to lose shares to rivals—a fact helping to fuel rumors of an upcoming Apple "iRadio" streaming music service.

Apple controlled a 63 percent share of the download market during the fourth quarter of 2012—down from 68 percent in 2011—NPD Group reported April 16. AmazonMP3, in second place, controlled a 22 percent share of the market, up from 15 percent a year ago.

During the quarter, 80 percent of digital music buyers downloaded their songs or albums from Apple's iTunes store. And last year, 44 million Americans bought at least one song or album download. But that number has remained stagnant over the last three years, while music-streaming options have increased.

"Since the launch of Apple's iTunes store, digital music downloads have become the dominant revenue source for the recorded music industry and iTunes continues to be the dominant retailer," Russ Crupnick, senior vice president of industry analysis at NPD, said in a statement.

"There's a belief that consumers don't need to buy music because of streaming options," Crupnick continued, "when in fact streamers are much more likely than the average music consumer to buy music downloads."

Thirty-eight percent of the U.S. consumers surveyed said that they believe it's "important" to own music, and 30 percent said that listening to albums is important.

NPD added that "many" music streamers attributed their purchases of downloads to songs they'd discovered through streaming services. Add that to the fact that streaming services like Amazon's are gradually nicking users from Apple, and an Apple streaming service seems more likely.

In March, Reuters reported that Beats Electronics' "Project Daisy" streaming-music service might be Apple's partner of choice, as Apple CEO Tim Cook had met with Beats CEO Jimmy Iovine days before Beats announced the creation of Daisy.

Daisy has received $60 million in funding from investors including Warner Music owner Len Blavatnik.

On April 11, The Verge reported that Apple was close to signing its first Internet radio licensing agreement with a major record label.

"Universal Music Group, the largest of the major record companies, has reached the final stages of the negotiations and Warner Music is close behind," The Verge reported, citing sources with knowledge of the negotiations.

The New York Post reported March 7 that despite Apple's $137 billion cash pile, it had been negotiating with record labels to pay 6 cents per 100 songs streamed. Pandora, the service that would be most affected by an iRadio-type offering, pays 12 cents per 100 songs.

Spotify, sources told the Post, pays 35 cents per 100 songs streamed.

Music label insiders, the report added, said they believe that Apple should pay at least the rate seen by the Copyright Royalty Board—about 21 cents per 100 songs streamed—but Apple has argued that it deserves a deal, given the enormous user base that would access to such a service.

Among those guessing when such a service might debut, Morgan Stanley analyst Katy Huberty has told investors that she expects it to be introduced at Apple's Worldwide Developer Conference, which will run June 11 through 15 in San Francisco.

Follow Michelle Maisto on Twitter.