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Online Music Services Make Slim Profits

Point Topic reports, 2005 was a big year for the online delivery of music. By October 2005, Apple�s iTunes service had sold 600 million tracks worldwide, and Apple had shipped over 30 million iPod music players by the end of the year. International music industry body the IFPI estimated that downloads accounted for around 6 percent of total music sales in the first half of 2005.

Music hardware is an important part of Apple�s business. Its 2005 accounts show that shipments of iPods generated more revenue than desktop Mac computers (although not as much as desktops and notebooks combined). But whilst iPods and MP3 players may be generating significant revenue, it is less clear how profitable many of the online music services are.

Music publishers and copyright holders (usually record companies) take the great majority proportion of the $0.99 that iTunes charges for each music track. The same proportions probably hold for the other music sites. That does not leave much for the providers of music sites. Apple will only say that its site operated at �above break even� for the first quarter of its 2006 reporting year (reported on 18 January 2006). Coming from the overwhelming market leader in most territories, this statement shows that online music is not an easy place to make money.

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