Apple has for sometime stated that it doesn’t generate significant profits from the iTunes Store and that it is, for all practical purposes, a break even venture. That notwithstanding, the addition of apps into iTunes has led to an enormous increase in the total number and bandwidth of downloads from iTunes. So while Apple may still be breaking even, the costs of operating the iTunes Store in its entirety seems to be on the rise.
Asymco recently broke down some of the financials associated with iTunes and arrived at a number of interesting figures. First up is how much Apple takes in from app and music sales on a monthly basis. Apple has stated before that the average selling price of an app on iTunes is about $0.29, of which Apple receives 30%. Meanwhile it’s been estimated that Apple enjoys about 10% margins on songs sold on iTunes.
This shows that what is left after paying the content license, Apple “keeps” about $50 million every month to run the App store (iTAS) and another $30 million to run the Music store (iTMS).
Apple makes $80 million a month but has to spend about $75 million. Given the uncertainties, they may just be breaking even on the music and app stores.
But Google will have to make money on the service itself, as it does not have any other products that will see increased revenue due to the music store. Apple supports a break-even iTunes store because it can then sell lots of hardware – even though the iTunes store is pretty agnostic regarding hardware.
Seems to me that Google will have to use an entirely different model. Because it is hard for me to see how music sales can directly lead to increased revenue at high enough levels to support the store.