John Paczkowski

Recent Posts by John Paczkowski

Apple’s Total Gross Profit From the App Store Since Launch: $189 million

Apple’s iTunes App Store may be the biggest mobile application around, but it’s not much of a revenue generator. The company claims it runs the App Store at “a bit over break-even,” and according to Piper Jaffray analyst Gene Munster, that is indeed the case.

Extrapolating from metrics provided by CEO Steve Jobs during his Worldwide Developers Conference keynote earlier this month–$1 billion paid to developers for five billion free and paid app downloads–Munster figures the App Store has contributed only $189 million to Apple’s total gross profit since it launched.

That’s about one percent of Apple’s (AAPL) $33.7 billion gross profit during the same period.

“Using a pricing scheme similar to iTunes, with 70 percent ($1.04) to the developer, $0.20 plus 2 percent of the ASP ($0.23) to the credit card company, and 1 percent ($0.02) per app for processing (storage & delivery), Apple’s App Store gross margin on revenue from paid apps ($428 million since launch) is about 44 percent, or $189 million in gross profit,” Munster explains. “This does not factor in the roughly $81 million Apple has spent since launch to store and deliver the 4 billion free apps that have been downloaded.”

So while App Store sales are through the roof, Apple is certainly not making a killing from them. But that’s never been the point, anyway. Like iTunes itself, the App Store’s purpose is to drive hardware sales. It’s a secondary business.

Said Munster: “We see a virtuous cycle of Apple’s robust app ecosystem adding features and functionality to the iOS devices, which drives sales, which makes the ecosystem more robust, which encourages more developers to write apps, and the cycle repeats itself.”

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