Data from market research firm Forrester, shows that iTunes revenue dropped 65% in the first half of 2006. Monthly iTune transactions dropped 58% and the average size per purchase was down 17%.

Forrester also pointed out that a purchase of two songs probably has little margin when the $1.98 fee is cut by credit card and other transaction cost.

The data undermines the impression that iTunes continues to gain momentum after selling 1.5 billion music tracks over the life of the online store.

It also raises the question of how much current content comes from ripped CDs. The music industry might not like that

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.