“iTunes Store will be 10 years old next month. From its inception Apple has stated that it aims to run the store ‘at break-even,'” Horace Dediu reports for Asymco. “The business has grown so rapidly however that its profit-free nature has come under severe pressure.”
“What is known as iTunes today has quintupled in seven years,” Dediu reports. “Although cost of content sales are likely to have been preserved as a ratio (about 30%) the vastness of transaction volume (estimated at 23 billion item transactions in 2012 alone) implies that there are some significant economies of scale”
Dediu reports, “This implies that the operating costs are spread more evenly and that therefore the possibility exists for some operating margin. Put another way, at break-even the cost of operating iTunes stores would be about $3.75 billion. It’s hard to imagine this level of operational expense for digital content.”
Much more in the full article here.