Are iTunes sales collapsing? Yesterday Reuters reported they are, and quoted a Forrester Research report. Forrester denied it ever said it, and blamed the media for inaccurately reporting. And it may be right. But it's not entirely blameless, either. Apple, as is its wont, didn't say anything -- and that was part of the problem, too, not part of the solution.

Forrester publishes a veritable blizzard of oracular pronouncements on all sorts of subjects, and it works hard to get press coverage of them. I get a weekly email listing recently published reports and offering to send me copies. When I read the Reuters story on InformationWeek.com and Forrester's "we never said that" rebuttal, I thought to myself that it all sounded like another case of somebody who made a mistake blaming the press.

You know the drill: politician or corporation screws up, press reports it, politician or corporation bellows like a wounded bull that the press should never have reported it, because it wasn't really a screw-up until the press made it one, or reporting on screw-ups is unpatriotic, or whatever. So I was perfectly willing to believe it when Reuters reported that "Sales at Apple's online music shop iTunes Music Store plummeted in the first six months of 2006, according to a recent survey. Since January 2006 the number of monthly iTunes transactions has declined 58 percent, while the average size per purcahse declined by 17 percent, leading to a 65-percent overall drop in monthly iTunes revenue, U.S. market research group Forrester said in a survey among North American consumers."

Then I looked up the most recent email from Forrester. The iTunes study was there, but the blurb said only:

"Few iPod Owners Are Big iTunes Buyers - Business View Trends, by Josh Bernoff Forrester's recent analysis of more than 2,700 US iTunes debit and credit card transactions reveals that 3% of online households made an iTunes purchase in the past year. Apple's iTunes proves that $0.99 micropayments for digital music can lead to substantial revenue; buyers spent an average of $35 at iTunes over the past year. With half of all transactions costing $3 or less, though, transaction fees threaten to make iTunes unprofitable. Since the introduction of the iTunes Music Store, Apple has been steadily selling just 20 iTunes tracks for each iPod sold, suggesting that even at $0.99, most consumers still aren't sold on the value of digital music."

Nothing there about the sky falling on iTunes. In fact, the difference between "Few iPod Owners Are Big iTunes Buyers" and "Apple's iTunes Music Sales Collapse" is pretty amazing. There's a line in Reuters' story, though, that may explain the problem. It says, "Forrester analysed 2,791 US iTunes debit and credit card purchases made between April 2004 and June 2006 from the research firm's consumer panel."

2,791 transactions by the members of Forrester's handpicked consumer panel, however large or small that group may be, sounds to me like a vanishingly small sample size. There's a principal of research that says you need a statistically significant sample in order to accurately model actual results. I'm having real trouble with the idea that 2,791 credit card charges give anybody enough data to say anything significant about sales of online music from iTunes.

Josh Bernoff, the Forrester vice president who wrote the iTunes report, managed to both admit the problem and sound a little snarky when he wrote in his blog yesterday, ". . . with the number of transactions we counted it's simply not possible to draw this conclusion . . . as we pointed out in the report. But that point was just too subtle to get into these articles." I can forgive him for that. I'm sure his ear will be blistered for another week or so from the phone call he must have gotten from Apple.

Apple's stock dropped 3 percent as the market reacted to the news -- partially, I suspect, because Apple's refusal to comment looked like an admission that there was a problem. As Bernoff wrote, "Apple is extremely stingy with information about their business and public comment. Their unwillingness to comment on the record or off about anything they're working on or any industry results beyond the basic statistics fuels speculation, pro and con, from their supporters and detractors. In the research business we like facts -- and every other technology company is more open with them. So maybe it's time for Apple to share a bit more. When the real bad news hits -- and it's inevitable, no company gets everything right -- that openness would pay off."

That, at least, is real wisdom, and something a lot of companies would do well to have engraved on a plaque and put up in their executive suites. Nobody lived up to their potential on this one -- not the press, not Forrester, and not Apple.