The narrowing of Apple (AAPL) profit margins is one of the factors that has led to a huge decline in share price, as seen in a stock chart. Most of the focus by investors has been on the iPhone segment, where revenue growth has slowed, product innovation has become more incremental and competition is increasingly fierce.
And given that more than half of Apple revenues come from iPhones, that focus is warranted. But as Bloomberg Businessweek points out in a smart article, the ITunes store is losing some of its dominance in the music business and faces big challenges in other content areas. iTunes chalked up 30% revenue growth in the second fiscal quarter, ended March 30, second only to the 40% year-over-year gain in iPad sales. iPhone sales rose just 3%.
The magazine article cites declining market share in music, and a move away from buying music per-song among young people, with increasing favor given to broad access services such as Pandora (NYSE:P) and Spotify. Amazon (AMZN), too, is gaining music market share. While iTunes is still growing, the shift in consumer behavior could dramatically change the business. "The concept of buying music at 99 cents a long is becoming irrelevant," Ted Cohen, a recording industry consultant, told the magazine.
With its market share in digital music still at 63%, according to BusinessWeek, down from a high of 69%, Apple remains a target for competitors. As it does in phones, tablets and high-end laptops. It’s tough being at the top.
From the editors of YCharts. We can be reached at email@example.com.
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