iTunes Costs Apple $1.3 Billion a Year to Run

The latest analysis by Horace Dediu of Asymco shows that Apple require $1.3 billion a year to run iTunes. We all know iTunes is growing day by day and with growth, the cost increases.

The analysis was conducted on the basis of the results released by Apple about iTunes. Dediu used the average price of song and apps, and share between the developers and Apple, they were able to estimate the total cost incurred on iTunes during a financial year.

The latest results of iTunes released by Apple show:

  • 15 Billion iTunes song downloads
  • 130 million book downloads
  • 14 billion app downloads
  • $2.5 billion paid to developers
  • 225 million accounts
  • 425k apps
  • 90k iPad apps
  • 100k game and entertainment titles
  • 50 million game center accounts

You can see the “content margin” of iTunes by month. This margin is what Apple retains after paying the content owners but not other costs such as payment processing etc. So, in strict financial terms we can say that its not the “actual gross margin”.

If we add the content margins from music and apps and assume the store runs at break even we can get an idea of what it costs to operate the store. The latest number is $113 million per month (from a total income of $313 million/mo.). It implies over $1.3 billion per year.

Much of that cost does go into serving the content (traffic and payment processing). Some of it goes to curation and support. But it’s very likely that there is much left over to be invested in capacity increases.

Via Deepak

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