Apple’s App Store, iTunes Popular, Not So Profitable

Apple’s App Store, iTunes Popular, Not So Profitable

Although the App Store recently passed the 3 billion mark and iTunes has expanded vastly beyond its music-only roots, Apple said both or not generating great profit. “We are running those a bit over break even,” Apple’s finance chief, Peter Oppenheimer, told reporters Monday.

Apple said its App Store “dwarfs anybody we are competing against” – Google’s Android Market with 20,000 apps as of December still is far behind the company’s 100,000 apps as of November. Although he didn’t mention any hard numbers, Oppenheimer said iTunes experienced a “record” quarter.

The Cupertino, Calif. company appears to view two of its most well-known properties as loss-leaders. Indeed, with a company that has $30 billion in the bank, it seems more about getting new developers into the iPhone tent than scrounging around for the 30 percent cut of every sale.

“We are very excited to be providing our developers with a fabulous opportunity and we think that it is helping us a lot with the iPhone and iPod touch platform,” Oppenheimer said. A few numbers seem to support Oppenheimer’s suggestion about the importance of the iPhone.

Despite the impressive 3 billion download figure, the App Store made an estimated $20 billion to $45 billion in the first 10 months of its life, according to a 2009 study by Lightspeed Venture Partners. That figures the 30 cents Apple earned from each app sold and the increasing number of free apps downloaded. Monday, Apple said iPhone sales accounted for 35 percent of the $15.7 billion it earned during the quarter ended Dec. 31.

In the end, sales of apps, as well as developer licenses, is “a trickle compared with the profits that are flooding in every quarter from what really matter to Cupertino: the sale of iPhones and iPod touches,” Fortune said. That trickle could increase if Apple adds e-books to its growing list of products sold via iTunes.

About the author

Ed SutherlandEd Sutherland is a veteran technology journalist who first heard of Apple when they grew on trees, Yahoo was run out of a Stanford dorm and Google was an unknown upstart. Since then, Sutherland has covered the whole technology landscape, concentrating on tracking the trends and figuring out the finances of large (and small) technology companies.

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