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Ask HN: iTunes vs Device Earnings?

7 points by pg 17y ago

Does anyone know how much Apple makes (earnings, not revenues) from iTunes vs the physical devices they sell?

byoung2 17y ago
It's hard to tell where revenue comes from by looking at their earnings reports, since they aren't broken down by product/service (http://www.apple.com/pr/library/2009/07/21results.html http://www.apple.com/pr/library/2009/07/21results.html). Clearly they make more from selling Macs, but if you did a strict iPod/iPhone vs iTunes, it would be close.
brk 17y ago
Based on: http://www.techcrunch.com/2009/01/06/itunes-sells-6-billion-songs-and-other-fun-stats-from-the-philnote/ http://www.techcrunch.com/2009/01/06/itunes-sells-6-billion-... iTunes has sold 6 billion songs. That probably includes full album sales as well as singles. Guessing an average per-track price of 80 cents then, or 4.8 billion in revenue. According to: http://74.125.113.132/search?q=cache:OuySBgKhHGIJ:www.appleinsider.com/articles/07/04/23/itunes_store_a_greater_cash_crop_than_apple_implies.html+apple+itunes+profit+per+song&cd=1&hl=en&ct=clnk&gl=us http://74.125.113.132/search?q=cache:OuySBgKhHGIJ:www.applei... It looks like they make about 10 cents per song, so they've earned about 400-600million from iTunes sales. Other online stats point to about 220million iPod/iPhone devices sold, the vast majority of that number being iPods. I am going to guess that they have a pretty decent margin on iPods, 50% at least. An average iPod is probably $200, figure $50-$100 in profit per iPod and they've easily made 10-20+ billion on iPod sales. Even in the extreme best case/worst case scenario, they've earned at least 2x from hardware vs album sales.
sama 17y ago
If you believe that they make $200 per iPhone and have sold 35M iPhones, that'd be about 7 billion in earnings. It's a bit weird because they take the earnings over 2 years per device (or something close to that). Most estimates on profit per song sold are around 10 cents (http://www.appleinsider.com/articles/07/04/23/itunes_store_a_greater_cash_crop_than_apple_implies.html http://www.appleinsider.com/articles/07/04/23/itunes_store_a...), and they'd sold 6 billion songs by the beginning of this year. App Store sales are probably not significant here, although they're critical to why they sell so much hardware. I've read stuff that earnings to Apple are less than 100M. So, say 7B for iPhone (alone, not counting iPods!!) earnings and 700M for iTunes. EDIT: several people have suggested to me that in fact Apple makes closer to 400 than 200 per iPhone when you take into account revenue shares and all subsidies. strikes me as high.
- brk 17y ago
  * It's a bit weird because they take the earnings over 2 years per device* That's not really weird, it's standard accounting. iPhone sales are linked to two year contracts. The sale isn't "complete" legally until all contractual obligations are satisfied, thus the deferred revenue recognition. I had a sales person give 2 extra "free" years of hardware warranty, which in short caused that revenue recognition to be deferred until all contract obligations were met.
  - lionhearted 17y ago
    Fascinating - do you know if it's possible/feasible to do this if you're doing projects and contract work? Any ideas on what kind of view is taken of offering some long term support/warranty/guarantee and taking your earnings over two years? Any articles or insight would be very much appreciated.
  - mediaman 17y ago
    Usually you just create a warranty liability reserve account for that. It should not affect your revenue recognition.
- rms 17y ago
  http://www.macworld.com/article/141886/2009/07/att_subsidy.html http://www.macworld.com/article/141886/2009/07/att_subsidy.h... This says the subsidy is $300 per iPhone and that makes more sense to me than $200 per iPhone.
- rms 17y ago
  I don't think $400 per cell phone is necessarily high. A huge portion of cell phone payments go to pay commissions to various people up and down the line. I have no hard data about this, but I sold cell phones at Radioshack for a while, and the generally accepted wisdom was that it took 12 months of a 2 year contract to pay off all of the various commissions.

7 points by pg 17y ago

Does anyone know how much Apple makes (earnings, not revenues) from iTunes vs the physical devices they sell?

It's hard to tell where revenue comes from by looking at their earnings reports, since they aren't broken down by product/service (http://www.apple.com/pr/library/2009/07/21results.html http://www.apple.com/pr/library/2009/07/21results.html). Clearly they make more from selling Macs, but if you did a strict iPod/iPhone vs iTunes, it would be close.

brk 17y ago

Based on: http://www.techcrunch.com/2009/01/06/itunes-sells-6-billion-songs-and-other-fun-stats-from-the-philnote/ http://www.techcrunch.com/2009/01/06/itunes-sells-6-billion-... iTunes has sold 6 billion songs. That probably includes full album sales as well as singles. Guessing an average per-track price of 80 cents then, or 4.8 billion in revenue. According to: http://74.125.113.132/search?q=cache:OuySBgKhHGIJ:www.appleinsider.com/articles/07/04/23/itunes_store_a_greater_cash_crop_than_apple_implies.html+apple+itunes+profit+per+song&cd=1&hl=en&ct=clnk&gl=us http://74.125.113.132/search?q=cache:OuySBgKhHGIJ:www.applei... It looks like they make about 10 cents per song, so they've earned about 400-600million from iTunes sales. Other online stats point to about 220million iPod/iPhone devices sold, the vast majority of that number being iPods. I am going to guess that they have a pretty decent margin on iPods, 50% at least. An average iPod is probably $200, figure $50-$100 in profit per iPod and they've easily made 10-20+ billion on iPod sales. Even in the extreme best case/worst case scenario, they've earned at least 2x from hardware vs album sales.

sama 17y ago

If you believe that they make $200 per iPhone and have sold 35M iPhones, that'd be about 7 billion in earnings. It's a bit weird because they take the earnings over 2 years per device (or something close to that). Most estimates on profit per song sold are around 10 cents (http://www.appleinsider.com/articles/07/04/23/itunes_store_a_greater_cash_crop_than_apple_implies.html http://www.appleinsider.com/articles/07/04/23/itunes_store_a...), and they'd sold 6 billion songs by the beginning of this year. App Store sales are probably not significant here, although they're critical to why they sell so much hardware. I've read stuff that earnings to Apple are less than 100M. So, say 7B for iPhone (alone, not counting iPods!!) earnings and 700M for iTunes. EDIT: several people have suggested to me that in fact Apple makes closer to 400 than 200 per iPhone when you take into account revenue shares and all subsidies. strikes me as high.

brk 17y ago
* It's a bit weird because they take the earnings over 2 years per device* That's not really weird, it's standard accounting. iPhone sales are linked to two year contracts. The sale isn't "complete" legally until all contractual obligations are satisfied, thus the deferred revenue recognition. I had a sales person give 2 extra "free" years of hardware warranty, which in short caused that revenue recognition to be deferred until all contract obligations were met.
- lionhearted 17y ago
  Fascinating - do you know if it's possible/feasible to do this if you're doing projects and contract work? Any ideas on what kind of view is taken of offering some long term support/warranty/guarantee and taking your earnings over two years? Any articles or insight would be very much appreciated.
- mediaman 17y ago
  Usually you just create a warranty liability reserve account for that. It should not affect your revenue recognition.
rms 17y ago
http://www.macworld.com/article/141886/2009/07/att_subsidy.html http://www.macworld.com/article/141886/2009/07/att_subsidy.h... This says the subsidy is $300 per iPhone and that makes more sense to me than $200 per iPhone.
rms 17y ago
I don't think $400 per cell phone is necessarily high. A huge portion of cell phone payments go to pay commissions to various people up and down the line. I have no hard data about this, but I sold cell phones at Radioshack for a while, and the generally accepted wisdom was that it took 12 months of a 2 year contract to pay off all of the various commissions.