iOS app downloads challenge music listening as dominant iTunes activity

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Listening to digital music files remains the leading consumer activity across Apple's (NASDAQ:AAPL) iTunes platform, but free iOS application downloads are narrowing the gap, according to a new NPD Group report.

Sixty-seven million U.S. consumers use iTunes, up from 50 million in 2010, NPD Group reports. Forty-one percent of consumers listen to music files, down from 54 percent in 2011, and 29 percent purchase digital songs, unchanged from two years ago. Thirty-five percent are installing free iOS applications, jumping from 28 percent in 2011, and 18 percent have purchased premium apps, increasing from 16 percent two years earlier. Nine percent of iTunes shoppers buy full-length digital albums, up from 8 percent in 2011.

"Even though apps are a growing part of the iTunes experience, one in four respondents reported using iTunes to sample music, so the discovery component that is so key to selling music is still strong," said NPD Senior Vice President of Industry Analysis Russ Crupnick. "It will be interesting to see the extent to which music re-establishes dominance when iTunes Radio launches later this year."

Almost all iPhone, iPod touch and iPad owners download apps from iTunes, NPD notes. Ninety-five percent of iOS users install free apps, increasing 1 percentage point over 2012--the average volume of free apps downloaded has also grown over the last 12 months from 32 free apps to 35 this year. Premium app buyers slipped from 72 percent to 69 percent, but average iOS users paid to download eight apps in 2013, unchanged year-over-year.

Games represent 81 percent of free iOS app downloads, trailed by social networking (70 percent), utilities (55 percent), and music (54 percent).

"It's interesting to see what consumers aren't rushing to purchase on iTunes," Crupnick said. "When given $25 to spend, over 90 percent of respondents reported that they would not buy a newspaper or magazine, only 12 percent would buy a book and just 15 percent would buy a movie. While that situation speaks to the draw of music and games, it's also an opportunity to widen the categories that iTunes could promote."

Apple posted record iTunes billings of $4.3 billion in its fiscal third quarter. "The quarter's iTunes billings translated to quarterly revenue of $2.4 billion, up 29 percent from the year-ago quarter with strong growth in revenue in both content and apps," Apple Chief Financial Officer Peter Oppenheimer said last month during the company's quarterly earnings call. "The continued strong iTunes sales combined with other software and service revenue resulted in total quarterly revenue of $4 billion from iTunes software and services."

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