Forrester Researcher Triggers Avalanche of ITunes Negative Press

By Scott M. Fulton, III | Published December 14, 2006, 1:56 PM

Just in time for general press sources, including USA Today and Reuters, to run with the story that iTunes sales in the first six months of 2006 "collapsed," based on a very small piece of information from a Forrester report, the author of that report announced on his personal blog yesterday that iTunes sales "are not collapsing," calling such dire conclusions "misinformation," and stating they could not have been rationally drawn from the report's data alone.

Forrester researcher Josh Bernoff then went on to chastise certain press sources for "diving in" and highlighting only one finding of the report: specifically, that iTunes sales may have been dropping by a monthly rate of 17%, or 65% on an annual basis.

After having received calls from major newspapers as well as hedge fund managers - who often invest in "collapsing" stocks in hopes of future rises - Bernoff wrote, "At this point I was trying to get people off the '65% drop' idea and onto some of the more interesting ideas in the report, with mixed success...Now, you can't unring the bell."

Bernoff's report for Forrester surveyed roughly 2,800 credit card purchases since last January to determine some facts about the buying habits of iPod owners with regard to iTunes music. As the abstract of that report states, one of its conclusions was this: "Since the introduction of the iTunes Music Store, Apple has been steadily selling just 20 iTunes tracks for each iPod sold, suggesting that even at $0.99, most consumers still aren't sold on the value of digital music."

A New York Times story published Monday zeroed in on Bernoff's citation that the ratio of iTunes songs sold per every iPod sold has crept up steadily, from 20:1 to 23:1 (though the Times actually said 22:1). The implication here could be that fewer iPod owners are making more of the iTunes song purchases - but that's just one possible implication. In a blog posting last week, Bernoff extrapolated some conclusions from these findings: "What's the explanation? It's either: 1) people are buying at a low but steady rate, but replace their iPod every few years - which would imply that iPod user market is growing more slowly than it appears, or 2) people buy about 20 songs and then get tired and don't buy any more."

The wave of resulting reports in the press prompted analyst bloggers to question Bernoff's conclusion that iTunes sales may be tapering off, though his response yesterday argues that this wasn't the conclusion he drew in the first place. This prompted The Register's Andrew Orlowski, who had earlier characterized Bernoff's conclusions as indications of a sales "collapse" - and whose publication Bernoff singled out for criticism - to accuse Bernoff and Forrester of attempting to "downplay the implications of its valuable work...instead it finds itself doing crisis management on behalf of Apple."

While the public dispute continued over who didn't say what and when they didn't say it, a Piper Jaffray report published yesterday estimates that sales of iTunes songs for the first nine months of 2006 rose by 78% on an annual basis.

Bernoff's statement yesterday more than implied that if coverage of his report stuck to the conclusions he claimed it drew, and avoided the conclusions he's certain it didn't - the "65% drop idea" set aside - the story would have been too subtle to be newsworthy.