Apple Whistles a Happy 3 Billion iTunes

In the first quarter of the year, Apple's iTunes accounted for a greater amount of all music sales than did Amazon and Target (TGT Quote - Cramer on TGT - Stock Picks), according to market research firm NPD Group.

NPD considered 12 music downloads equivalent to sales of a single CD. This put Apple behind Wal-Mart (WMT Quote - Cramer on WMT - Stock Picks) and Best Buy (BBY Quote - Cramer on BBY - Stock Picks).

Having a robust online music business is critical to keeping Apple rooted to its growth trajectory. In April, the company announced that had sold over 100 million iPods. This implies a wide base of iTunes users who may begin downloading music, movies, TV shows and podcasts to other Apple devices like its iPhone, which Chief Executive Steve Jobs has billed as "the best iPod we've ever made."

After Apple released its third-quarter earnings, analysts roundly cheered the iPod business as a stable leg of growth. But its contribution shows signs of waning. The average selling price of an iPod held steady at $160 from the previous quarter, but has fallen over years as sales of cheaper models outpaced sales of the pricier ones.

Last week, Apple said its third-quarter sales of iPods rose only 5%, although the number of units purchase jumped 21%.

Sales of iPods constituted 29% of revenue in the third-quarter, down from 34% a year earlier.

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