App Store growth makes Apple's iTunes business alone more valuable than Xerox, CBS

Posted:
in AAPL Investors edited February 2014
The explosive growth of Apple's App Stores has made the company's iTunes unit one of the most valuable businesses in the world, driving more revenue than old warhorses like Xerox, CBS, and U.S. Steel.

iTunes Revenues


If the iTunes business were spun off, its $23.5 billion in gross yearly revenue would be good for 130th place on the annual Fortune 500 list, according to data compiled by Asymco's Horace Dediu. The iOS and Mac App Stores alone, with more than $10 billion in sales last year, would themselves slot in at number 270 ahead of credit firm Discover and casino giants MGM and Caesar's.

Dediu estimates that App Store revenues grew by 105 percent last year while sales from the iTunes Music Store declined by 14 percent, helping apps leapfrog music as Apple's largest source of content revenue for the first time ever. Revenue from software and services is also growing quickly, despite the fact that many of the company's software products are now free with new devices.

Overall, the iTunes business is growing at approximately 34 percent year-over-year.

The growth is likely to march on as Cupertino, Calif.-based Apple continues to post record-breaking hardware sales. The company sold 51 million iPhones and 26 million iPads in the just-finished holiday quarter.

Launched in 2008, the App Store now boasts more than 1 million apps in 24 categories with over 500,000 optimized for the iPad. Apple has served more than 65 billion cumulative app downloads in that span.

Comments

  • Reply 1 of 16
    Steve Ballmer was going: "come on, Windows App Store! Make daddy proud!" Right before the Surface RT cratered.
  • Reply 2 of 16
    jungmarkjungmark Posts: 6,647member
    Very impressive. DOJ to investigate the success of the iTunes Store.
  • Reply 3 of 16

    And what is really amazing is how they operate it at pretty much break-even overall, according to what Apple has said.  

  • Reply 4 of 16
    Originally Posted by jungmark View Post

    Very impressive. DOJ to investigate the success of the iTunes Store.

     

    It’s now illegal to partner with music companies to set the price of a song at 99¢.

  • Reply 5 of 16

    It is always interesting to read Apple Insider's spin on stories. Early this morning when I read a different version of this story, the focus was on analysts having to actually start considering the App Store as an Apple growth engine instead of ignoring it!

     

    In the other version of the story, Horace Dediu provided perspective of how big the App Store is by comparing the App Store's yearly growth to Google's yearly growth. The App Store's yearly earnings had grown to reach half of what Google's core business earns in a year. Horace Dediu had even projected the App Store's earnings were growing faster than Google's!!

     

    Instead of just writing this response, I decided to read what Horace actually wrote just to make certain the other version of this story chose not to mention Xerox and CBS. To my surprise and dismay, Horace never mentioned Xerox and CBS. This site chose to edit out the references to Google and put in references to companies not in direct competition with Apple.

     

    For a site that is focused on providing Apple news, I wonder why this site chose to not give credit to Apple's accomplishment especially since it made the effort to write an article about Google speaking with Foxconn concerning robotics.

  • Reply 6 of 16
    Do you see all the Google Ads on their site?
    Does anything else really need to be said?
    ;-)
  • Reply 7 of 16
    gatorguygatorguy Posts: 20,032member
    sudonym wrote: »
    And what is really amazing is how they operate it at pretty much break-even overall, according to what Apple has said.  

    That's what they said several years ago. It's been some time since they made that claim and it's obviously become a profit center in the meantime. At some point last year it became Apple's second fastest growing revenue stream.
  • Reply 8 of 16
    Quote:
    Originally Posted by leavingthebigG View Post

     

    Horace Dediu provided perspective of how big the App Store is by comparing the App Store's yearly growth to Google's yearly growth. The App Store's yearly earnings had grown to reach half of what Google's core business earns in a year. Horace Dediu had even projected the App Store's earnings were growing faster than Google's!!


    But the iTunes Store is likely a substantially lower-margin business than Google's.

  • Reply 9 of 16
    rhyderhyde Posts: 294member
    "But the iTunes Store is likely a substantially lower-margin business than Google's."

    That means the stock price will go up, no?
  • Reply 10 of 16
    malaxmalax Posts: 1,598member
    Quote:

    Originally Posted by anantksundaram View Post

     

    But the iTunes Store is likely a substantially lower-margin business than Google's.


    I don't see why it would be.  Reviewing apps and providing bandwidth isn't all that expensive.  I wonder how the numbers compare to YouTube for example.  It's not obvious to me that the ad revenue divided by the server/bandwidth cost for YouTube should be higher than the 30% Apple "cut" divided by iTunes App Store overhead.

  • Reply 11 of 16
    Quote:

    Originally Posted by Gatorguy View Post





    That's what they said several years ago. It's been some time since they made that claim and it's obviously become a profit center in the meantime. At some point last year it became Apple's second fastest growing revenue stream.

     

    Undoubtedly.

     

    I would imagine large portion of Apple's costs were fixed or relatively fixed (as opposed to a smaller portion of variable costs) , and as the store has boomed, it has become more profitable. Or perhaps the equipment infrastructure is more mature and not being depreciated the same. Or even if it is, as the revenue pie gets bigger, the cost is relatively smaller.

  • Reply 12 of 16

    Google must hate when Apple always announces things like App Store downloads or revenue paid out to developers.

     

    Only thing Google ever yaps about is how many Android activations there are. Which makes Google Play even more pathetic since it has a higher installed base of users than iOS yet generates a fraction of the revenue. Must suck to have so many users and not being able to monetize them, right Google?

  • Reply 13 of 16
    apple is domed.. they make way to much dinnero$$
  • Reply 14 of 16
    Quote:

    Originally Posted by Gatorguy View Post

     
    Quote:

    Originally Posted by SudoNym View Post



    And what is really amazing is how they operate it at pretty much break-even overall, according to what Apple has said.  




    That's what they said several years ago. It's been some time since they made that claim and it's obviously become a profit center in the meantime. At some point last year it became Apple's second fastest growing revenue stream.

     

    Fast growing revenue streams may or may not generate profit.  The analysts can guess  about it all day, but I'll believe Apple.

  • Reply 15 of 16
    gatorguygatorguy Posts: 20,032member
    sudonym wrote: »
    Fast growing revenue streams may or may not generate profit.  The analysts can guess  about it all day, but I'll believe Apple.

    Then believe Apple and read their quarterlies. They're making good profit there by their own admission.
  • Reply 16 of 16
    asdasdasdasd Posts: 5,233member
    malax wrote: »
    I don't see why it would be.  Reviewing apps and providing bandwidth isn't all that expensive.  I wonder how the numbers compare to YouTube for example.  It's not obvious to me that the ad revenue divided by the server/bandwidth cost for YouTube should be higher than the 30% Apple "cut" divided by iTunes App Store overhead.

    But they are subsidising the free stuff. Bit of a bind there although Apple could increase the yearly fee I suppose.
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