Apple's iTunes revenues don't include $7 billion paid to app developers

Posted:
in iPod + iTunes + AppleTV edited January 2014
Apple has paid its iTunes App Store developers a cumulative $7 billion, with $5 billion of that paid out just in 2012. However, those payouts aren't included in its reported $12.9 billion in iTunes revenues for 2012.

iTunes


Horace Dediu of Asymco clarified that Apple's "iTunes/Software/Services" counts wholesale revenues of iTunes Music sales, but "agency model" revenues of Apps and iBooks, meaning that Apple only counts its 30% cut of apps within iTunes revenue, not the more than $7 billion that it has paid out to app developers.

@danieleran Yes, music is different (wholesale model). Books and apps are agency. This is why iTunes revs don't scale as downloads.

? Horace Dediu (@asymco)


The rapid increase in the pass-through payments Apple has made to its developers shows how fast the company's own app revenues are actually growing. It also highlights why developers are targeting iOS first, or exclusively, while largely ignoring Android and other mobile platforms.

A self-funding marketing campaign

Apple first announced having paid out over $1 billion to developers in June 2010, after just over two years of App Store sales involving over five billion app downloads.

In the summer of 2011, the amount paid to developers had jumped to 2.5 billion, more than doubling its size and pace in just one year.

Four months later at the iPhone 4S launch in October, Apple stated it had sold 250 million iOS devices and that the App Store had seen a total of 18 billion downloads, paying out over $3 billion to developers.

Just a few months later (one year ago at the start of 2012) Apple said it had now reached $700,000 in payments to developers in just one quarter, pushing its cumulative payouts to developers above $4 billion.

By the end of 2012, the cumulative payments to app developers had more than doubled to $7 billion as app downloads hit the 40 billion mark.

The incredible growth of iOS app sales has funded, through the 30 percent cut Apple charges paid apps within iTunes, the rapid development of iTunes on both the Mac and iOS. Last year, Apple completely overhauled both its mobile clients and its desktop apps.

At the same time, developers' contributions to the iTunes App Store have kept it the largest and most frequently updated mobile software marketplace, despite the appearance of rival app stores introduced by Amazon, Google, Microsoft, RIM, Nokia, Samsung and others.

As previously noted, Apple is now reporting iTunes/Software/Service and Accessories revenue greater than the entire phone business of any of its rivals apart from Samsung.

Comments

  • Reply 1 of 13
    Puts things in perspective (for those who couldn't see it before.)
  • Reply 2 of 13


    This is great news and very significant to me.


     


    I've been an Apple Zealot since about 1979. In 1987, I became a fulltime freelance illustrator working exclusively on a Mac and using Adobe software.


     


    Earning a decent living ensued for the next 25 years.


     


    I'm now transitioning into being an iOS developer, learning the language and roughing in numerous ideas for apps.


     


    Having worked for myself all these years, I've enjoyed one benefit in particular: being able to choose my customers, sometimes "firing" the ones I didn't like.


     


    The iOS platform was an obvious choice for me as it appeared on the scene. Though the Corona SDK has its merits and though it offers cross-platform compilation of my source code, I've decided to stay with Apple, Cocoa Touch, and most likely publish exclusively for the iPad.


     


    It's just what seems "right" to me for all the things I want to do, and for the kind of people that choose the iPad.


     


    So it's very reassuring that I picked the right path so many years ago, that I've stayed the course, and that Apple has prevailed and prospered into what it is today so that my main dream for these decades is finally going to be realized.

  • Reply 3 of 13

    Quote:

    Originally Posted by DESuserIGN View Post



    Puts things in perspective (for those who couldn't see it before.)


     


    Um... puts WHAT in perspective?

  • Reply 4 of 13
    jragostajragosta Posts: 10,473member
    desuserign wrote: »
    Puts things in perspective (for those who couldn't see it before.)

    Not really. Big numbers like that don't mean very much.

    It would, however, put things in perspective if you mentioned that Android developers have earned $1.57 on Android apps.
  • Reply 5 of 13
    mj1970mj1970 Posts: 9,002member

    Quote:

    Originally Posted by AppleInsider View Post



    Apple has paid its iTunes App Store developers a cumulative $7 billion, with $5 billion of that paid out just in 2012. However, those payouts aren't included in its reported $12.9 billion in iTunes revenues for 2012.





     




     


    That's because revenue (to Apple) reflects what Apple was paid. Apple's costs (in this case perhaps cost of goods sold) is where the money paid to developers (or music companies or book publishers) is reported.

  • Reply 6 of 13
    512ke512ke Posts: 782member


    Thank God Amazon doesn't have to pay any money for any of the products it offers.


     


    I know Walmart gets to keep all its sales money and pay nothing for the merchandise.


     


    Hollywood, too.  They don't have to pay a penny to directors, actors or producers.

  • Reply 7 of 13
    saareksaarek Posts: 1,141member
    512ke wrote: »
    Hollywood, too.  They don't have to pay a penny to directors, actors or producers.

    You're so right, it's terrible to think that all of those actors like Tom Cruise or the directors like Mr Cameron do what they do for free & live on the street. /S
  • Reply 8 of 13
    jragostajragosta Posts: 10,473member
    mj1970 wrote: »
    That's because revenue (to Apple) reflects what Apple was paid. Apple's costs (in this case perhaps cost of goods sold) is where the money paid to developers (or music companies or book publishers) is reported.

    512ke wrote: »
    Thank God Amazon doesn't have to pay any money for any of the products it offers.

    I know Walmart gets to keep all its sales money and pay nothing for the merchandise.

    Hollywood, too.  They don't have to pay a penny to directors, actors or producers.

    You're both misunderstanding this.

    Revenue IS the amount of money you bring in. The TOTAL amount. Then you subtract all your costs and what is left over is profit. Profit != revenue.

    Under ordinary circumstances, if this were treated as a sale, the $7 B would have been included in the revenue figure. So if Apple sold $10 B worth of Apps, they'd report $10 B in revenue and then $7 B in expenses to developers (plus whatever other expenses there are).

    Apple didn't do that. Instead, they count only their own 33% as revenue, not the full amount of money they bring in. That says that it's not being treated as a normal sale for accounting purposes. I'm not completely familiar with accounting for the agency model, but it seems to be in line with the way you'd handle an agency sale or consignment sale. In any event, it's an important piece of news so that investors know how Apple is accounting for these sales. Essentially, if they had treated them as 'sales' rather than whatever agency system they are using, Apple's revenues would have been $7 B higher (and margins correspondingly lower).
  • Reply 9 of 13
    Of course, the amounts paid to developers are not Revenue, they are Expenses. Duh.
  • Reply 10 of 13

    Quote:

    Originally Posted by jragosta View Post







    You're both misunderstanding this.



    Revenue IS the amount of money you bring in. The TOTAL amount. Then you subtract all your costs and what is left over is profit. Profit != revenue.



    Under ordinary circumstances, if this were treated as a sale, the $7 B would have been included in the revenue figure. So if Apple sold $10 B worth of Apps, they'd report $10 B in revenue and then $7 B in expenses to developers (plus whatever other expenses there are).



    Apple didn't do that. Instead, they count only their own 33% as revenue, not the full amount of money they bring in. That says that it's not being treated as a normal sale for accounting purposes. I'm not completely familiar with accounting for the agency model, but it seems to be in line with the way you'd handle an agency sale or consignment sale. In any event, it's an important piece of news so that investors know how Apple is accounting for these sales. Essentially, if they had treated them as 'sales' rather than whatever agency system they are using, Apple's revenues would have been $7 B higher (and margins correspondingly lower).


    No. Revenue is not Gross Revenue. And no, Profit is not Revenue - Expenses. There are all these pesky lines with different names measuring different things. Gross Margin, Net Taxes, Deferred Revenue, Prepaid Expenses, etc. Timing is everything. Accounting practices and laws determine when and how all this stuff is recognized and reported. 

  • Reply 11 of 13
    Amazing That analysts Never care to ask before ....
  • Reply 12 of 13

    Oops... wrong quote...

  • Reply 13 of 13

    Quote:

    Originally Posted by MJ1970 View Post


     


    That's because revenue (to Apple) reflects what Apple was paid. Apple's costs (in this case perhaps cost of goods sold) is where the money paid to developers (or music companies or book publishers) is reported.



    This article says the opposite... Apple isn't counting that 70% towards revenue.  They are only booking the 30% as revenue.  If anything... this is Apple doing the opposite of attempting to make their numbers look better...

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