Digital Music

Look At How Little Selling Music Matters To Apple [CHART]

image from www.google.com Yesterday, Apple announced financial results for its fiscal 2011 third quarter, posting record quarterly revenue of $28.57 billion and record quarterly net profits of $7.31 billion.  Apple's iTunes controls 75% or more of the digital music market, but how much does music matter to Apple's bottom line?  Less than than you might think. Apple Revenue By Product Chart:

image from static6.businessinsider.com

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6 Comments

  1. This is somewhat deceptive though. Music is an integral part of online culture. The easy access to such an enormous amount of music has significantly helped drive people to buy iPhones, iPods, iPads and computers in general.

  2. Sam, I think you make an excellent point. Though music competes with other uses on Apple products, it’s still one of the most popular activities.
    Here’s a Nielsen chart on the most popular mobile app categories:
    http://www.iqmetrix.com/sites/iqmetrix.com/files/shared_images/Apps%20used%20in%20past%2030%20days%20-%20Nielsen.jpg
    Note that music still comes behind games, weather, social networking, and navigation. It can be argued that music makes up an important part of the “games” and “social networking” categories, though.
    I think specifically “iTunes music revenue” doesn’t matter so much to Apple as the role music plays in selling devices.

  3. Imagine I came up with a device that could copy & reformat every video game in the world. Then I say to the Game makers “Hey, people are using my device to steal so you might as well sell through me.. and BTW im taking 30%”
    Music saved Apple & Little Itunes money they make PALES in comparison to what they get for Hardware sales
    However If Itunes Connect works.. Its the Ultimate payback

  4. Yeah this is misleading. For all you business nubes out there, “bottom line” means net of costs, i.e. profit. The chart that Bruce has posted is actually the OPPOSITE of the “bottom line”. It’s actually referred to as the “top line” (terminology comes the location of the line items on the company’s income statement)
    Contrary to what this piece would suggest, it is very common for companies with large manufacturing costs to make a much higher profit (bottom line) on the things that contribute a much smaller amount to the revenue (top line). For example, Circuit City’s revenues were split 95/5 between selling merchandise and warranties for that merchandise, but that 5% of warranty revenue actually contributed over 40% of profit for Circuit City at one time. I don’t know if that is the case with Apple, but I do know that there is no evidence in this chart to support the claims made about the lack of importance of music to Apple’s bottom line.

  5. All good points. Perhaps my headline which does not use the term bottom line is more accurate.
    Two somewhat conflicting thoughts:
    It would seem that selling a digital good for which they bear no manufacturing cost (download) and taking about 35% (as iTunes does)is profitable.
    Apple has said in the past that selling music is not all that profitable, but that selling iPods is.

  6. THE PRICE OF EVERYTHING by Equardo Porter.
    “Apple transferred much of listeners’ music budget from buying music to buying Applie Ipods.” Pg. 141
    BuyIndieSupportLocals.org to learn how to stop the Haliburtonization of the entertainment biz.

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