iTunes makes $570m; Austria iPhone date; Japan iPod investigation

***AppleInsider*** · 03-12-2008, 06:38 PM

Apple's iTunes media store drew in more than half a billion dollars across 2007 and is a small profit machine for Disney, say new estimates. Also, Austria may learn deals of its iPhone launch this week, and Japan is investigating an iPod nano breakdown.

Apple pockets $570m from iTunes in 2007?

Although Apple has often maintained that the iTunes Store is a vehicle for sales of the iPod rather than a source of profit, the company may have earned $570 million for 2007 alone, according to calculations by the music chart keeper Billboard.

Using as a yardstick Apple's recent revelation that it had sold four billion songs since the store opened in April 2003, the publication estimates that Apple sold about 1.7 billion tracks last year. This amounts to more than just $1.7 billion, however: as stores in Europe and elsewhere often charge more than 99 US cents per track, Apple is more likely to collect $1.9 billion.

After factoring in Apple's roughly 30 percent direct earnings from every song sold, this leaves the Cupertino, Calif.-based company with about $570 million of its own versus the 70 percent left to the labels.

The income doesn't translate to a similar amount in pure profit for iTunes, however. Apple has explained in the past that its portion of the song price is largely used by bandwidth and maintenance costs, though the company has never broken down its revenues in public statements.

Analyst: Disney earns $123 million in iTunes sales since debut

As unclear as Apple's revenue stream may be, its close partner Disney has been making a small but tangible profit on videos from iTunes, estimates by Pali Research show.

Studio chief Bob Iger's claims to have sold between four million movies and 40 to 50 million total videos since movies became available from iTunes in fall 2006. If taken literally, Disney has earned about $122.8 million after casting aside Apple's portion of each purchase, Pali analyst Rich Greenfield says.

The number is just a small fraction of Disney's total $35 billion in sales for 2007 alone, but is easily sustainable. Without the normal marketing and manufacturing costs associated with feature films and DVDs, virtually all of the income is considered a supplement to Disney's core movie-making business rather than an essential focus.

Newspaper claims iPhone Austria announcement by Friday

Austrians will hear of plans for the iPhone's launch at the same time as the Irish launch, according to a report in the national newspaper Der Standard.

The publication refers to anonymous industry sources who claim that T-Mobile Austria will sell 8GB and 16GB iPhones at the same prices of 399 and 499 Euros as for French, German, and Irish offerings. Like most iPhone subscriptions, owners will be tied to a two-year contract and will pay between 50 and 60 Euros a month.

T-Mobile has not confirmed the dates, though chief Hamid Akhavan pledged a release in the first half of 2008.

Japanese officials to investigate iPod nano sparks

An incident with a first-generation iPod nano has triggered an inquiry into the safety of the player by the Japanese Ministry of Economy, Trade and Industry.

The player reportedly shot sparks while it was being recharged, prompting concerns that other users may have encountered the same problem. No one has been injured, though Apple reported the issue to Japanese officials late last week.

Roughly 420,000 of the iPods were sold in Japan between 2005 and 2006. Later second- and third-generation iPod nanos aren't part of the current investigation.

[ View this article at AppleInsider.com ]

markb · 03-12-2008, 06:58 PM

Quote:

Apple has explained in the past that its portion of the song price is largely used by bandwidth and maintenance costs

30% sounds high for bandwidth and maintenance. If their guidance on this is as conservative as all other financial data that they release I would guess the real number is 20% leaving roughly 185Millions as a actual realized profit. Keep in mind the numbers quoted here sound like song revenue only. TV/Ringtones/Movies sound like they are above and beyond that,although I doubt the margins are as good on those items as they are higher maintenance and much more bandwidth intensive per $ brought in.

SpamSandwich · 03-12-2008, 07:20 PM

"the company may have earned $570 million in pre-expense income for 2007"

That the whole trick now, isn't it? The "expense" part.

Bergermeister · 03-12-2008, 08:15 PM

I wish they would investigate the morality of selling nanos with tilted screens. All of the models at my local shop are tilted, still, months after the first complaints, and we're not talking about one or teo here, but rather the majority of nanos produced have the problem.

macinthe408 · 03-12-2008, 08:19 PM

Will GM be investigated because one of its cars completely suck ass and break down all the time? Highly doubt it.

In related news, Steve Jobs drove away from the parking lot and jumped on the freeway. Why is that not headline news?

Restalot · 03-12-2008, 08:34 PM

I have the same three words that I used when the Irish launch was announced...

CA NA DA. There, I said it.

**Mr. H** · 03-12-2008, 08:57 PM

The first part of this article is exceptionally poorly worded.

Quote:

Originally Posted by AppleInsider

Apple pockets $570m from iTunes in 2007

No, Apple hasn't "pocketed" $570 million. "Pocketing" implies pure profit. In fact what you are talking about here is revenue.

Quote:

Originally Posted by AppleInsider

iTunes makes $570m

Similarly: "makes" implies profit, not revenue.

Quote:

Originally Posted by AppleInsider

The income doesn't translate to a similar amount in profit for iTunes.

So why choose headlines that imply the $570 million is pure profit?

Quote:

Originally Posted by AppleInsider

Apple has explained in the past that its portion of the song price is largely used by bandwidth and maintenance costs, though the company has never broken down its revenues in public statements.

But it has repeatedly stated that the iTunes store is run at "just above break-even". I'm going to go out on a limb here and guess that Apple would have to be breaking a law or two if it was officially saying it made no money out of it, when in fact it was making significant profits. At the very least, I'm sure shareholders could sue Apple for lying to them.

nagromme · 03-12-2008, 09:17 PM

"the publication estimates that Apple sold about 1.7 billion tracks last year. This amounts to more than just $1.7 billion, however: as stores in Europe and elsewhere often charge more than 99 US cents per track, Apple is more likely to collect $1.9 billion."

That doesn't make sense. The single price (.99 US, more in some countries) is the MAXIMUM price per track. It's less--sometimes much less--if you buy an album. If they're assuming all tracks are bought as singles, that's bad math.

Londor · 03-12-2008, 09:27 PM

^ And do not forget the "free single of the week". Those also get counted when Apple says it has sold x amount of songs.

anantksundaram · 03-12-2008, 09:52 PM

Silly article on iTunes financials, with too many misstatements and mistakes (many pointed out above).

Kasper's automaton needs to take a finance class, esp. considering how often financial and analyst-related news makes it to the top on this site.

(Btw, I have to compliment the automaton to say that the quality of the copy-editing in the stories has significantly improved in the past few months.)

GQB · 03-12-2008, 10:40 PM

Quote:

Originally Posted by Mr. H

No, Apple haven't "pocketed" $570 million. .

Not to put too fine a point on it, but Apple is a (singular) company... Apple "hasn't".
Do you say Great Britain "aren't"?

Who polices the police?

**Mr. H** · 03-12-2008, 11:14 PM

Quote:

Originally Posted by GQB

Not to put too fine a point on it, but Apple is a (singular) company... Apple "hasn't".

Hmmm, excellent point. Well spotted. I did that on purpose, obviously.

Anyway, thanks for the heads-up; I always appreciate a correction if I've made a boo-boo.

Quote:

Originally Posted by GQB

Who polices the police?

The Language FBI?

GQB · 03-12-2008, 11:43 PM

Quote:

Originally Posted by Mr. H

Hmmm, excellent point. Well spotted. I did that on purpose, obviously.

Anyway, thanks for the heads-up; I always appreciate a correction if I've made a boo-boo.

But what's odd is I see that usage frequently from our 'separated by a common language' brethren.

pmoeser · 03-13-2008, 06:10 AM

and no iPhones in Australia either

Why are we waiting
wh-y are we waiting
why are we waiting
oh why why why...

teckstud · 03-13-2008, 08:26 AM

Quote:

Originally Posted by Mr. H

Hmmm, excellent point. Well spotted. I did that on purpose, obviously.

Anyway, thanks for the heads-up; I always appreciate a correction if I've made a boo-boo.
The Language FBI?

Blah,blah, blah, blah- more from the pompous one.
Someone from a country that still believes in ROYALTY should stick to critcizing his own and leave America's FBI out of it.

shigzeo · 03-13-2008, 08:34 AM

well, it is nice to see that apple have made money in the itunes market, who cares if we want to give them more credit if they make less. i have bought from itunes store and really enjoyed the products that i have received. well, less the drm rubbish but oh well.

as for language, did someone just call out the stupid police? haha, i see usage of 'apple has done this in the past' sort and then in the next or very same sentence, 'they' being used in place of apple as a company. if anything is wrong it is splitting the pronoun between 複数 and 単数. sorry, i don't know the word in english at the moment.

im pretty sure that using a plural for a company composed of many individuals and at least keeping subject agreement is much better than correcting someone on a topic that seems to have no proper explanation other than, 'i think that looks differnt'.

e1618978 · 03-13-2008, 08:55 AM

Why don't they use standard terms? They really mean $570m in revenue, not "pre-expense earnings". And most (or all) of that will be paid out in credit card fees.

http://rentzsch.com/notes/creditCardMicropayments

delreyjones · 03-13-2008, 09:28 AM

Quote:

Originally Posted by GQB

Not to put too fine a point on it, but Apple is a (singular) company... Apple "hasn't".
Do you say Great Britain "aren't"?

Who polices the police?

Don't the British swing both ways? LIke the Elvis Costello lyric:

Oliver's Army is here to stay
Oliver's Army are on their way
...

ajmas · 03-13-2008, 11:54 AM

Quote:

Originally Posted by pmoeser

and no iPhones in Australia either

Why are we waiting
wh-y are we waiting
why are we waiting
oh why why why...

Well, at least with Australia we can use the excuse that you are too far

Canada on the other hand is right next door, to the USA, and still we have no iPhone. Thank goodness for the grey market. Not sure whether we should be blaming the telcos or Apple.

rtdunham · 03-13-2008, 12:19 PM

the headline's misleading. the company might have made $570M BEFORE all the company's hard and soft costs of conducting that business, "bandwidth and maintenance cost" being perhaps the largest of those, but certainly not the only expenses. It surely didn't actually make/earn/show as profit that much.

**Mr. H** · 03-13-2008, 01:34 PM

Quote:

Originally Posted by teckstud

Someone from a country that still believes in ROYALTY should stick to critcizing his own and leave America's FBI out of it.

Where did I criticise the FBI?

03-12-2008, 06:38 PM	#1
*AppleInsider* Kasper's Automated Slave Join Date: Nov 1997 Posts: 6,151	iTunes makes $570m; Austria iPhone date; Japan iPod investigation Apple's iTunes media store drew in more than half a billion dollars across 2007 and is a small profit machine for Disney, say new estimates. Also, Austria may learn deals of its iPhone launch this week, and Japan is investigating an iPod nano breakdown. Apple pockets $570m from iTunes in 2007? Although Apple has often maintained that the iTunes Store is a vehicle for sales of the iPod rather than a source of profit, the company may have earned $570 million for 2007 alone, according to calculations by the music chart keeper Billboard. Using as a yardstick Apple's recent revelation that it had sold four billion songs since the store opened in April 2003, the publication estimates that Apple sold about 1.7 billion tracks last year. This amounts to more than just $1.7 billion, however: as stores in Europe and elsewhere often charge more than 99 US cents per track, Apple is more likely to collect $1.9 billion. After factoring in Apple's roughly 30 percent direct earnings from every song sold, this leaves the Cupertino, Calif.-based company with about $570 million of its own versus the 70 percent left to the labels. The income doesn't translate to a similar amount in pure profit for iTunes, however. Apple has explained in the past that its portion of the song price is largely used by bandwidth and maintenance costs, though the company has never broken down its revenues in public statements. Analyst: Disney earns $123 million in iTunes sales since debut As unclear as Apple's revenue stream may be, its close partner Disney has been making a small but tangible profit on videos from iTunes, estimates by Pali Research show. Studio chief Bob Iger's claims to have sold between four million movies and 40 to 50 million total videos since movies became available from iTunes in fall 2006. If taken literally, Disney has earned about $122.8 million after casting aside Apple's portion of each purchase, Pali analyst Rich Greenfield says. The number is just a small fraction of Disney's total $35 billion in sales for 2007 alone, but is easily sustainable. Without the normal marketing and manufacturing costs associated with feature films and DVDs, virtually all of the income is considered a supplement to Disney's core movie-making business rather than an essential focus. Newspaper claims iPhone Austria announcement by Friday Austrians will hear of plans for the iPhone's launch at the same time as the Irish launch, according to a report in the national newspaper Der Standard. The publication refers to anonymous industry sources who claim that T-Mobile Austria will sell 8GB and 16GB iPhones at the same prices of 399 and 499 Euros as for French, German, and Irish offerings. Like most iPhone subscriptions, owners will be tied to a two-year contract and will pay between 50 and 60 Euros a month. T-Mobile has not confirmed the dates, though chief Hamid Akhavan pledged a release in the first half of 2008. Japanese officials to investigate iPod nano sparks An incident with a first-generation iPod nano has triggered an inquiry into the safety of the player by the Japanese Ministry of Economy, Trade and Industry. The player reportedly shot sparks while it was being recharged, prompting concerns that other users may have encountered the same problem. No one has been injured, though Apple reported the issue to Japanese officials late last week. Roughly 420,000 of the iPods were sold in Japan between 2005 and 2006. Later second- and third-generation iPod nanos aren't part of the current investigation. [ View this article at AppleInsider.com ]

03-12-2008, 07:20 PM	#3
SpamSandwich Registered User Join Date: May 2005 Posts: 8,453	"the company may have earned $570 million in pre-expense income for 2007" That the whole trick now, isn't it? The "expense" part. "The natural progress of things is for liberty to yield, and government to gain ground." —Thomas Jefferson Proud AAPL stock owner.

03-12-2008, 08:15 PM	#4
Bergermeister Registered User Join Date: Oct 2005 Location: Southern Paradise Posts: 4,647	I wish they would investigate the morality of selling nanos with tilted screens. All of the models at my local shop are tilted, still, months after the first complaints, and we're not talking about one or teo here, but rather the majority of nanos produced have the problem. Teacher: "What state do you live in?" Calvin: "Denial."

03-12-2008, 08:19 PM	#5
macinthe408 Registered User Join Date: Jan 2006 Location: Los Gatos, CA (spanish for The Gatos) Posts: 149	Sparking Nano Will GM be investigated because one of its cars completely suck ass and break down all the time? Highly doubt it. In related news, Steve Jobs drove away from the parking lot and jumped on the freeway. Why is that not headline news?

03-12-2008, 08:34 PM	#6
Restalot Registered User Join Date: Feb 2007 Location: $$$ A Slave to Rogers (Fido...) 3 year iPhone plan $$$ Posts: 72	I have the same three words that I used when the Irish launch was announced... CA NA DA. There, I said it. 20" Intel iMac - Airport eXtream N - 16gb Black iPhone - Apple TV

03-12-2008, 09:17 PM	#8
nagromme Registered User Join Date: Apr 2002 Location: No GPS signal. Posts: 1,169	"the publication estimates that Apple sold about 1.7 billion tracks last year. This amounts to more than just $1.7 billion, however: as stores in Europe and elsewhere often charge more than 99 US cents per track, Apple is more likely to collect $1.9 billion." That doesn't make sense. The single price (.99 US, more in some countries) is the MAXIMUM price per track. It's less--sometimes much less--if you buy an album. If they're assuming all tracks are bought as singles, that's bad math. nagromme Would you like a treatment?

03-12-2008, 09:27 PM	#9
Londor Registered User Join Date: Apr 2004 Location: earth Posts: 207	^ And do not forget the "free single of the week". Those also get counted when Apple says it has sold x amount of songs.

03-12-2008, 09:52 PM	#10
anantksundaram Registered User Join Date: Sep 2006 Posts: 3,218	Silly article on iTunes financials, with too many misstatements and mistakes (many pointed out above). Kasper's automaton needs to take a finance class, esp. considering how often financial and analyst-related news makes it to the top on this site. (Btw, I have to compliment the automaton to say that the quality of the copy-editing in the stories has significantly improved in the past few months.)

03-13-2008, 06:10 AM	#14
pmoeser Registered User Join Date: May 2005 Location: Brisbane Australia Posts: 58	No kangaroos in Austria and no iPhones in Australia either Why are we waiting wh-y are we waiting why are we waiting oh why why why...

03-13-2008, 08:34 AM	#16
shigzeo Registered User Join Date: Mar 2006 Location: Korea Posts: 25	brethren well, it is nice to see that apple have made money in the itunes market, who cares if we want to give them more credit if they make less. i have bought from itunes store and really enjoyed the products that i have received. well, less the drm rubbish but oh well. as for language, did someone just call out the stupid police? haha, i see usage of 'apple has done this in the past' sort and then in the next or very same sentence, 'they' being used in place of apple as a company. if anything is wrong it is splitting the pronoun between 複数 and 単数. sorry, i don't know the word in english at the moment. im pretty sure that using a plural for a company composed of many individuals and at least keeping subject agreement is much better than correcting someone on a topic that seems to have no proper explanation other than, 'i think that looks differnt'.

03-13-2008, 08:55 AM	#17
e1618978 will burn in the Fiery Pit of Hell. Join Date: Jun 2003 Location: Colorado Posts: 5,317	Why don't they use standard terms? They really mean $570m in revenue, not "pre-expense earnings". And most (or all) of that will be paid out in credit card fees. http://rentzsch.com/notes/creditCardMicropayments 45 2a3 300b 211 845 833

03-13-2008, 12:19 PM	#20
rtdunham Registered User Join Date: May 2004 Location: florida Posts: 212	the headline's misleading. the company might have made $570M BEFORE all the company's hard and soft costs of conducting that business, "bandwidth and maintenance cost" being perhaps the largest of those, but certainly not the only expenses. It surely didn't actually make/earn/show as profit that much.

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