Although Apple had said it runs its App Store and iTunes at near break-even, we now know the App Store, while wildly popular with users, contributes just 1 percent of the Cupertino, Calif. company’s gross profits. That, and many other interesting insights into the App Store’s balance sheet come from Piper Jaffray analyst Gene Munster.
In a research note to investors Wednesday, Munster wrote the App Store brought in $429 million since it was launched in July 2008. Apple has earned $33.7 billion in gross profit over the same period, meaning the App Store equates to just one percent of profits.
The analyst based his findings on numbers Apple CEO Steve Jobs recently mentioned. According to Jobs, the App Store brought $1 billion in revenue to developers since the store opened. If developers get 70 percent of sales, this means the App Store grossed $1.4 billion since 2008, with Apple pocketing $429 million, according to Munster.
Aside from developers’ 70 percent cut, credit card companies get 15 percent, with Apple retaining 14 percent and processing costing 1 percent. Although the average selling price of an application is $1.49, 81 percent of apps are free, according to the analyst’s figures. Apple’s margin on sales is about 44 percent, Munster said.
In January, Apple’s finance chief Peter Oppenheimer lumped the App Store and iTunes together when he told reporters the company was “running those a bit over break even.” However, Munster’s numbers suggest iTunes is 12 times more profitable than the App Store. The iTunes store earned $3.6 billion between the second quarter of 2008 and the second quarter of 2010, while the App Store grossed just $429 million. But as Apple is quick to point out, the App Store is a loss-leader, promoting sales of iPhones and iPod touch devices.
[via Fortune]
