“Research group NPD recently named iTunes the second-largest U.S. music retailer, and the company has just revealed that its store has passed the 4 billion download mark. So Billboard decided to crunch some numbers to see whether the conventional wisdom that Apple makes money from iPods—not downloads—still holds true,” Ed Christman reports for Billboard.
“Billboard 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,” Christman reports.
“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,” Christman reports. “At a 30% profit margin, the gross profit equals…”
Full article here.
Wired’s Eliot Van Buskirk picks it up, “At that point, the article tails off into subscriber-only territory (apparently Billboard didn’t get the memo). Without having read the rest of the article, these figures appear to mean that Apple made $570 million in profit from the iTunes store last year — not a bad haul.”
Full article here.
[Thanks to MacDailyNews Reader “Mike in Helsinki” for the heads up.]
From whence did the “30% profit margin” for iTunes Store come, Mr. Christman?
Sheesh, we sound like a slightly tongue-tied Captain Bligh.
Anyway, that 30% is quite an assumption. Christman also seem to have forgotten about the movie, video, games, audiobook, and ringtone sales along with the fact that Apple stated publicly during their last conference call to analysts – a venue in which the SEC doesn’t take kindly to lies – that Apple’s objective is to run iTunes Store just over break even as it helps to sell iPods.
Err… profit?… what about costs?… the development of the store, iTunes software oh yeah while it does cost to push those electrons down really fat pipes too. The article should at least have assumed it was gross as they do not know the costs associated with delivery.
Reporters, what’s facts got to do with it?
Of course it’s all profit. Haven’t you guys heard of the free internet? There is no cost for bandwidth. It’s all Comcastically free.
Question: What is billboard Magazine?
Question: What is billboard Magazine?
Question: What is billboard Magazine?
Question: What is billboard Magazine?
Question: What is billboard Magazine?
Question: What is billboard Magazine?
what a bunch of BS math. 30%?? Apple gets 30% of sales from indie labels, but i DOUBT they get that much from the majors. Plus take into account bandwidth costs, fixed costs, promotion costs… thats what you get when billboard tries to do financial analysis.
Baloney!
what an idiot. Apple makes $0.09 cents per $0.99 song. The rest go to the studios.
Some one should teach these people how to do basic math.
Oh yea and before I forget, the $0.09 a song is the gross profit. from that credit card companies, bandwidth, and server maintience has to be paid.
The article clearly says ‘gross profit’. That simply means the money you get BEFORE operating expenses. It doesn’t actually state 570 million as net profit, which is the implication of the MDN headline. The impression I get from the article it that it’s asking the question of how profitable is the iT music store. It’s only natural that a publication like Billboard will speculate on the possible margins. It’s also likely that Billboard knows Apples gross margin because they know what percentage the labels are getting for each sale. Apple doesn’t have to tell them that Apple has a 30% margin if the labels tell billboard that they (the labels) are getting 70%.
If my memory serves me, when the iTunes Store opened, Apple said that 67 cents of the 99 cents would go to the recording industry. That’s a 30% profit margin before costs of software development, servers, etc. I don’t know what the current costs are but the most important thing to remember is that the store makes it easy to get the music you love and to get it into your ipod.
Lame… For an article like this, it’s the margin that’s important, not the actual profit. If these so-called “researchers” just make up a margin number, they can make the assumed profit whatever they want it to be. Just another case where the results of so-called professional analysis and “research” are tailored to suit someone’s agenda.
nanisani:
Please do not try to paint white ignorant article since $570 million figure have nothing to with gross profits, ether. It has nothing to do with Apple at all. Gross margin is just about 10% and it is known officially for long times.
DH:
No, it is not 67%, it is 90% for years not depending on what was *speculated* at the time of iTMS opening
it seems that some “smart ass” guy from Billboard watched latest conference where Jobs presented Apps Store and talked about 70/30 split and decided to go with his “genius” “discovery” on “huge” profits by Apple from iTunes Music Store.
So the music industry made $2.2 billion from one retailer?
Cry me a river!!!
@ DenisRH, Not trying to ‘whitewash’ anything. Actually, I don’t really see what the issue is. If they think Apple is making 30% gross profit; so what?
As an Apple shareholder I’d rather that the press over-report their profit margin than under-report it.
It seems to me that some people want to think that Apple is not ‘in it for the money’ as if there’s something wrong with them actually profiting from the iTMS.
Even if Apple only makes 2 cents profit per track ( which they likely make more…) That’s still a lot of money…
They’ve sold 4 billion songs already… Do the math.. It’s not bad at all and it’s only getting bigger.
They shouldn’t have used the word “Profit”, it will confuse people. That $570 is their estimate of Apple’s Gross Revenues, as 70% goes to labels and 30% goes to Apple. It’s Apple’s share of Gross Revs.
Yeah, but Billboard is a record industry rag. They should do a report on how record companies manage to report zero profit on an album that sells 500k copies.
Don’t forget not all songs are 99¢. For example songs sold in albums are LESS that 99¢ each.