By Scott Martin

Apple Computer’s revenue from iPod digital music players may have brought the Mac maker back from the dead—but the same can’t exactly be said for iTunes.

Apple’s iTunes music store now appears to be suffering sales declines. Revenue has dropped 65 percent in the first half of the year, according to a report from Forrester Research.

“iTunes won’t save the music business—or Apple,” Forrester analyst Josh Bernoff wrote in the report. “Apple’s profits come from manufacturing trendy, well-designed hardware, not by reselling digital audio.”

The researcher reported that Apple sells only 20 iTunes tracks—which go for $0.99—for every one iPod it ships. iPods have been the product that single-handedly revitalized the company. Industry analysts point to a “halo effect” that converts iPod users into Mac buyers.

While the computer maker’s full-year 2006 sales overall totaled $19.3 billion, Apple’s fiscal full-year sales of iPods were $7.67 billion in 2006—40 percent of all of Apple’s sales (see Big Music Takes on Steve Jobs).

Still, the list of Apple imitators promising similar music offerings is growing. The most recent entrant is software giant Microsoft, with its Zune media player and its companion Zune Marketplace music store, which offers millions of songs (see Zune Player Enters iPod Market).

“Zune shouldn’t expect big music sales from converted iTunes users,” Mr. Bernoff wrote

Forrester looked at 2,791 credit card and debit purchases on iTunes in the U.S. between April 2004 and June 2006. The researcher found that in the period between April 2004 and January 2006, revenue increased sevenfold. Music transactions over the period increased from 2 to 17 per 1,000 households. The dollar amount of those transactions also increased, from $3.55 to $6.69.

However, the analyst noted, since January monthly iTunes transactions have declined 58 percent while the transaction size dipped 17 percent, yielding the 65 percent revenue decline.

The researcher said most transactions on Apple’s music store are “impulse buys.” The result is that median transactions amounted to just $2.97. Forrester wrote in the report that half of households spent less than $17 and only 20 percent spent more than $50 in the past year.

Shares of Apple dipped $2.18, or 2 percent, to $86.57 in recent trading.