iTunes Store and App Store Cost Estimated $1.3 Billion To Run
Who thought Apple's cash mountain that is the iTunes and App Store would be a break even business?
Honestly I never really took Apple's claims that the iTunes and App Store didn't generate much profit, but Asymco blogger Horace Dediu crunched some very convincing numbers using data published by Apple during last weeks WWDC.
Apple has estimated their digital store downloads have reached 15 billion songs, 130 million books, and 14 billion apps. Dediu combined these numbers with average price of songs, books and apps purchased to come up a monthly total income of $313 million versus $113 million in operating costs. That $113 million a month equates to nearly $1.3 billion a year to run the iTunes and App Stores.
Still with these numbers that leaves about $200 million in profits after expenses. However, the comments by Apple CFO Peter Oppenheimer that iTunes is running just over break even does make sense after analyzing just where that excess money is going. The exponential growth and traffic the App Store has seen since its inception and the growth of the iTunes store as well means more and more money must be sunk into expansion and upkeep. Still $200 million in expansion and investment would be quite ludicrous. But, those who understand capital investment vs an Income Statement know that times of heavy investment, like say sinking $1 billion into a data facility would show iTunes and the App Store as breaking even, or taking a loss for the year.
Dediu suspects that is exactly where much of the excess capital generated by the iTunes operating margin went, to help build Apple's iCloud hungry data centers.
Without an open look at Apple's accounting techniques and internal financial statements all this is still educated guessing. However, at $1.3 billion in operating costs, the App Store and iTunes store generate enough income to Whether that business is as break even as Apple's top brass would like us to believe is another story.