Friday, June 10, 2011

iTunes Makes No Profit! Really?

Within this NY Times article this morning about Apple giving Publishers a break comes this little gem, "As the largest distributor of music, for example, Apple generates a hefty stream of revenue for major labels. But the iTunes store accounts for just a sliver of its own revenue, and the company has said in the past that it generates virtually no profit from the store. In the most recent quarter, Apple said the sale of apps, music and content combined brought in just $1.6 billion of the company’s $24.6 billion in revenue." As they say on Saturday Night Live, "Really?"

So it makes just over 5% of Apple's quarterly revenue, what iTunes really does is make all of it's manufactured devices invaluable. Yes the iPhone, iPad, and iPod are great products, but consumers purchase them because of what they do and the content available. Content is King and the iTune store delivers the content that makes these products run. It is the little engine that could. These Apple products would not be nearly the hit they are without the iTune store. It's like a car that needs gas to run. And it is the iTunes quantity of content, wide assortment of apps, and ease of use that makes their products the more preferable purchase choice.

So don't underestimate the profitability that iTunes truly generates for Apple. It is the engine that drives it's products success. And it is why the iPad, iPod, and iPhone are the respective leaders in their category. Makes no profit, Really!