Apple's iTunes Store Becomes No. 1 in Music Sales

With new online music retailers springing up to challenge its Net dominance, Apple's iTunes Store moved the goalposts again Thursday. It announced its store has overtaken even Wal-Mart as the number-one music retailer in the U.S. -- online or off.

The new designation is based on data during January and February from the NPD Group, a market-research firm. NPD's MusicWatch survey compiles unit purchases in a given week.

Physical CD Sales Drop

According to news reports, Apple now has 19 percent of the market and Wal-Mart, including both its online and brick-and-mortar sales, has 15 percent. Best Buy took third with 13 percent, and Amazon, which has launched a music store to compete with Apple, is fourth at six percent. Target, also with six percent, is fifth, followed by FYE/Coconuts, Borders, Barnes & Noble, Circuit City, and Rhapsody.

Apple's move to the top of both the real and virtual worlds of music retailing is a milestone not only for the Cupertino, Calif.-based company, but also for the industry. Physical CD sales have been plummeting as the industry tries to adjust to the new digital reality. In fact, NPD reports that nearly half of all teens in the U.S. didn't buy even one physical CD in 2007, up from 38 percent in 2006.

But it's not just the real-vs-virtual ratio that is radically changing the music industry. There was a 10 percent decline in overall music spending in 2007.

Michael Gartenberg, an analyst with industry research firm JupiterResearch, said the new position for the iTunes Store "demonstrates the remarkable shift that has taken place in the music industry." He noted that this shift not only means an increasing role for online distribution, but the "reinvention of the single."

Four Billion Songs

The new claim to fame for Apple's store comes as it faces new competition. Apple said its iTunes Store, which launched less than five years ago, has sold more than four billion songs, has 50 million customers, and has "the world's largest music catalog" with more than six million songs.

One potential new competitor launched Thursday as social-networking site MySpace joined with three of the four biggest music companies, Sony BMG, Universal Music Group and Warner Music, to create what MySpace described as a "fully integrated 360-degree global music solution."

In addition to music sales, there will socializing tools, ad-supported audio and video streaming, a mobile storefront, concert tickets, artist T-shirts, and integration with MySpace's millions of artist profile and user pages.

And recently Earth's biggest store -- Amazon -- got bigger, as it launched Amazon MP3, with music downloads free of digital-rights management and more than two million songs. Those downloads are generally priced lower than songs from the iTunes Store.