How profitable is iTunes? [u]
March 12th 2008
Virtually since the iTunes Store came online, Apple has said it breaks even or profits only slightly by selling digital content. The iTunes Store became the second-largest music retailer in the US as its sales surpassed 4-billion downloads in 2007, but how much money does that add to the bottom line?
Billboard claims that iTunes is indeed a profitable business on the back of 1.7-billion 2007 downloads, 940 million sold in the US alone.
Thereupon, Apple is said to have generated music revenues of $1.9 billion worldwide, which Billboard says is in line with the $2.7 billion the company booked for "other music products and services" last year.
Assuming that Apple maintained its traditional 30 percent margin, the company netted $570 million. However, how much of this can actually be reckoned as profit is debatable as Apple has consistently maintained iTunes is at best only marginally accretive to the bottom line.
Billboard itself hides their guestimate of iTunes profitability behind a pay wall, so someone will have to pay them before the rest of us find out what it is.
[u] Qouting Pali Research data, AlleyInsider reports that Disney has sold four million movies and 45 million videos via the iTunes since 2006 and thereby netted a tidy $123-million profit or about 10 percent of the company's goal for download revenues.
