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The Cost of Running iTunes/App Store

06-14-2011, 12:41 PM
#1
Joined: May 2010
Posts: 975
The Cost of Running iTunes/App Store

This isnt perticualy related to gaming but more so platform related. I found this article interesting as it shows were some of the app developers 30% cut to apple actually does.

Maintaining iTunes and the App Store costs Apple a whopping $1.3 billion a year, according to numbers determined by Asymco blogger Horace Dediu.

Using published data made available at last week’s Worldwide Developer’s Conference, Dediu was able to conclude the total costs associated with iTunes and the App Store, which he says means Apple runs the stores at "just above break even."
Dediu combined the average price of songs and apps within the digital stores and subtracted the money paid to devs as well as music labels to arrive at the $1.3 billion sum.

He estimates Apple spends $113 million per month, from a total income of $313 million (also per month).
The statistics support what Apple has been saying for years: iTunes and the App Store don’t really make much money at all.

According to statistics, Apple’s digital stores account for 15 billion song downloads, 130 million book downloads, and 14 billion app downloads.

There are 225 million iTunes accounts and 50 million Game Center Accounts. The App Store offers 425,000 apps in total, 90,000 of which are designed specifically for the iPad.

"Much of that cost does go into serving the content (traffic and payment processing). Some of it goes to curation and support. But it’s very likely that there is much left over to be invested in capacity increases," Dediu said.

Apple continues to put money towards the digital storefronts like the $500 million data center built in Maiden, N.C. The company said earlier this year the facility will support iTunes and MobileMe. As MobileMe is phased out, the data center will likely support the newly announced iCloud service.

ITunes is currently the largest music and movie store in the world.


Big stores require big support I guess.

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06-14-2011, 12:45 PM
#2
Joined: Jul 2009
Location: Houston/Austin, TX
Posts: 13,251
Definitely some interesting statistics but nothing unexpected..

Twitter: @back2this

06-15-2011, 02:56 PM
#3
Joined: Apr 2010
Location: United States
Posts: 157
Agreed, but the intangibles are also significant. The App Store, and the Itunes Store in general, is arguably the biggest draw for using an Ipod.
06-15-2011, 05:22 PM
#4
Joined: Mar 2010
Posts: 1,737
How is $113m from $313m "just above break even"? I understand that it's negligible compared to Apple's total revenue, but using that logic, even if the costs were $0, you could still say it's break even.
06-15-2011, 06:20 PM
#5
Joined: Jun 2011
Posts: 23
Quote:
Originally Posted by Dazarath View Post
How is $113m from $313m "just above break even"? I understand that it's negligible compared to Apple's total revenue, but using that logic, even if the costs were $0, you could still say it's break even.
I guess for them $200m is nothing
06-16-2011, 07:40 AM
#6
Apple must be grieved for the hundreds of million tech support fee it paid to Nokia
06-16-2011, 11:01 AM
#7
Joined: Oct 2010
Location: Belfast N Ireland
Posts: 2,169
I personally think it will be a lot more profitable than that, 30% of everything sold is huge and the app store as far as I can see is nothing but an apt-get system with some gloss and payments added. If free Linux distros can maintain them cheaply then I'm pretty sure a company with apples resources can as well.

I don't doubt it's very busy and has a lot of bandwidth costs but I'm pretty sure that is completely dwarfed by profits.

I think the app store is basicly a license to print money for apple.

I don't mean to sound bitter, cold, or cruel, but I am, so that's how it comes out
06-16-2011, 11:14 AM
#8
Joined: Jun 2009
Location: London, UK
Posts: 3,741
Perhaps you'd better hunt down the same published data the expert used and give us your updated conclusion!

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06-16-2011, 08:38 PM
#9
Joined: Oct 2010
Location: Belfast N Ireland
Posts: 2,169
Quote:
Originally Posted by MidianGTX View Post
Perhaps you'd better hunt down the same published data the expert used and give us your updated conclusion!
No need the App Store drives the sales of the IOS hardware as well I know I wouldn't have bought an Ipod if it didn't exist I also know I've spent more on the app store than on my xbox 360. I really don't think there is any doubt at all the app store is a far bigger profit maker than apple ever dreamed of and the majority of their profit is directly down to it.

You can have all the paid experts in the world trying to convince me apple doesn't make much money but somehow they earned over 15 billion last year.

I don't mean to sound bitter, cold, or cruel, but I am, so that's how it comes out