Is iTunes making money?
p2pnet news | Music:- iTunes is constantly held up by the mainstream media as the be-all and end-all of corporate music download sites.
However, p2pnet has always held the position that it’s no more than the online loader for Apple’s iPod music players, wondering when it stopped being a loss leader and went into the black, if indeed that ever happened.
Apple has been touting steady, and nicely rounded, increases since iTunes went online in 2003, and they’re always taken as gospel, never to be questioned.
The latest number is four billion, as supplied by NPD which has gone from being a wholly unknown (as far as the entertainment business is concerned) entity to one of the most quoted market research companies.
‘ … industry-leading a-la-carte download store’
iTunes is a “formidable competitor against free peer-to-peer (P2P) file-sharing services,” NPD maintains, said p2pnet in 2005, going on the assertion was (and still is), “complete and utter nonsense”.
We continued >>>
P2p research firm BigChampagne says in the US in May, on average 6,290,327 people were logged onto the p2p networks at any given moment. The global statistic was 8,665,319.
And yet, “According to information from NPD’s MusicWatch Digital service, Apple iTunes’s industry-leading a-la-carte download store tied with LimeWire as the second-most-popular digital music service in March, 2005,” says MacDailyNews. “Both iTunes and LimeWire were used by 1.7 million households.”
Is this possible? – p2pnet asked LimeWire coo Greg Bildson.
“I wonder at the source for their numbers,” he said. “Our numbers seem rather small here.
“I mean we get 6,000,000 or more downloads a month so we’ve got to assume that we’re in more than 1.7 million households. I don’t think iTunes is getting six million downloads a month on the software itself.”
Nonetheless, “One of the music industry’s questions has been when will paid download stores compete head-to-head with free P2P download services,” MacDailyNews has NPD spokesman Russ Crupnick saying, going on, “That question has now been answered.”
Crupnick’s statement was as completely off then as it is now.
‘At a 30% profit margin …’
Under the tantalising headline, Apple’s iTunes Store Has Sold 4 Billion Tracks – But Is It Profitable?, Billboard decided to, “crunch some numbers” to see if the “conventional wisdom” that Apple makes money from iPods, not downloads, still holds true.
“While iTunes did not respond to a request for comment, its music suppliers think the store is making money on a cash basis, if not an accounting basis. Indeed, they say iTunes has told them its store is profitable,” says the story.
Well, if iTunes says it’s so, then it must be so.
Apple, “announced it had sold its 2 billionth download Jan. 6, 2007; its 3 billionth July 31, 2007; and its 4th billion Feb. 27,” says Billboard, and as such, “estimates that the store sold 1.7 billion downloads last year, and that of that amount, 940 million tracks were sold in the United States and 732 million were sold abroad, as the company operates stores in 21 other countries.”
It goes on >>>
If all 1.7 billion downloads were counted at the U.S. price of 99 cents, they would equal $1.7 billion in revenue last year.
But when it repatriates sales revenue from other countries, it likely enjoys a bump thanks to exchange rates. For example, in the United Kingdom, iTunes charges 79 pence per track download, but that equals $1.56, according to Web site oanda.com.
So when revenue is brought back to the States, Billboard estimates iTunes’ music download revenue at $1.9 billion last year, which is in line with the $2.7 billion in revenue it reported during calendar year 2007 for other music-related products and services. Those consist of iTunes Store sales, iPod services and Apple-branded and third-party iPod accessories.
At a 30% profit margin, the gross profit equals …
The three dots mean Billboard expects you to take out a paid subscription for the remainder of the post.
No one really knows how much Apple retains free and clear from each iTunes download, but at any rate, it seems the iPod front-end is now making money, boasting it’s the second largest music retailer in the US behind Wal- Mart.
From whence does does Apple draw the claim?
You guessed it.
NPD stats.
Meanwhile, has anyone seen the entire Billboard piece and is iTunes profitable, according to it?
[NOTE - p2pnet is running a special reader's survey. It only takes 20-30 seconds and it'd be a huge help if you'd fill it in. Please click here. Cheers! And thanks ... Jon]
Also See:
wholly unknown – If you can’t beat them …,November 17, 2003
p2pnet – iTunes is beating LimeWire, June 7, 2005
Billboard – Apple’s iTunes Store Has Sold 4 Billion Tracks – But Is It Profitable?, March 11, 2008
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