iTunes now costs $1.3 billion/yr to run
The iTunes store continues to grow. The data that Apple published in the last event included the following: — 15 Billion iTunes song downloads — 130 million book downloads — 14 billion app downloads — $2.5 billion paid to developers
Context & Ripple Effects
Apple’s iTunes base was already approaching one billion accounts, while iOS owners had downloaded more than 60 apps per device. The new cost estimate puts an operating figure behind that distribution system as it spans music, books and apps.
The store’s 15 billion song downloads, 130 million book downloads and 14 billion app downloads show that Apple is operating one consumer account and delivery layer across several digital-goods categories. Its reported $2.5 billion in developer payments also makes the App Store a material channel for software creators.
First-order effects
- Apple must carry a reported $1.3 billion annual operating cost to maintain the iTunes storefront and delivery infrastructure behind its music, book and app catalogues.
- Developers receive distribution and payments through the same iTunes system that has delivered 14 billion apps, with $2.5 billion reported paid out by Apple.
Second-order effects
- Apple’s scale makes iTunes economics depend on sustaining a shared platform across multiple content categories rather than treating music, books and apps as separate storefronts.
- For developers, a large installed base and high app-download intensity increase the value of publishing through Apple’s channel, concentrating their customer access and payment relationship in iTunes.
Third-order effects
- If account growth and cross-category purchasing continue together, digital distribution will favor platforms that can spread operating infrastructure across several media types and a large user base.
- The resulting dependence on a single account, storefront and payment layer raises the structural importance of platform-level switching costs for both consumers and developers.
The trend: Digital-content distribution is consolidating around large account-based platforms whose scale supports shared storefront, delivery and payment infrastructure across media categories.