This column was originally published on RealMoney on Jan. 13 at 2 p.m. EST. It's being republished as a bonus for TheStreet.com readers.
For nearly three years, I've been writing that there are so many ways to win with
and that iTunes will displace
as the largest retailer of music on the planet. It looks like this will happen before the end of 2006. While Wall Street's having a cow over Apple's recent 20% top-line upside preannouncement and the news that it shipped 14 million iPods, the real story for Apple is truly, simply, digital downloads.
Eight million video downloads. Three million song downloads a day. Those are the two numbers my mind keeps ricocheting back to. Let's "roll the video" first. Eight million video downloads in the first couple of months they were offered, as the video iPod was just being rolled out. Eight million video downloads, despite the fact that there's hardly any video content available yet on iTunes.
Let's put that number in context. TBS, the cable channel with the biggest audience, averages about 2.5 million viewers a night. A top 10 network television show can grab 15 million viewers an episode. Nearly 60 million people tune in to watch "SpongeBob SquarePants" every week. There are about 110 million households with televisions in the U.S. DVD sales and rentals totaled more than $6 billion in 2005.
What does all this mean? Apple's just barely begun offering video downloads. It's maybe sold 5 million video-enabled iPods thus far. So what happens when Apple's video iPod hits critical mass? Say, when 10 million people have a video iPod? And what happens when Apple offers enough video content on iTunes that it hits critical mass? Say, 5,000 different shows and movies? And what happens when Apple's hardware fully integrates into your living room home theater system?
Do you see where all this is headed? The three won't work together incrementally. We're looking at
growth. And strategically for Apple, we're looking at de facto standardization around its video platform. Oh my.
To view Cody Willard's video take of this column, click here.
Meanwhile, of course, there's that little business of music. Three million song downloads
in the fourth quarter. And that was before those 14 million iPods had been opened under the Christmas tree at the end of the quarter.
And I'd be remiss if I didn't note the shift in attitude among consumers of digital music, including kids around the U.S., who increasingly seem willing to pay for good music when they find it, rather than just stealing the music on piracy networks. It's impossible to quantify, but the attitude shift has started, and Apple, with an 83% market share in legal digital music downloads, is the prime beneficiary.
Finally, of course, there's that other little business of Apple's called computers. With the Intel platform rolled out a full five months ahead of schedule, we're going to see some big market-share gains this year. Even getting to 5% market share for Apple would entail nearly a doubling of its computer sales. Oh my, indeed.
There are just so many ways to win with Apple. I'm sticking with it.
At the time of publication, the firm in which Willard is a partner was long Apple, although positions can change at any time and without notice.
Cody Willard is a partner in a buy-side firm and a contributor to TheStreet.com's RealMoney.
He also produces a premium product for TheStreet.com called
The Telecom Connection and is the founder of Teleconomics.com. The firm in which Willard is a partner may, from time to time, have long or short positions in, or buy or sell the securities, or derivatives thereof, of companies mentioned in his columns.None of the information in this column constitutes, or is intended to constitute, a recommendation by Willard of any particular security or trading strategy or a determination by Willard that any security or trading strategy is suitable for any specific person. Willard appreciates your feedback --
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