Peter Kafka

Recent Posts by Peter Kafka

Apple's App Downloads Are Booming. Apple's App Revenues Are…

A year ago, Apple’s customers had downloaded three billion apps. Now that number has jumped to 10 billion.

That’s an astonishing jump, and it speaks volumes about the growth, and usage, of Apple’s iTunes/iPhone/iPad/iPod ecosystem.

It’s harder to figure out what it means for Apple’s financials, but we can guess: Not nearly as much.

App downloads increased 233 percent in the last year. But revenue growth at the iTunes store, which distributes them, is much more modest.

In Apple’s last fiscal year, which ran up to Sept. 25, 2010, iTunes revenue grew roughly 23 percent. During Apple’s most recent quarter, iTunes revenue grew at the same rate.

Apple also sells music and videos, and now books via iTunes as well, but doesn’t provide any breakdown by category, so anything beyond those stats is guesswork. (And even getting to iTunes revenue numbers requires a small leap of faith*.)

But for what it’s worth, I’m assuming that revenue from apps is increasing at a faster clip than the numbers above suggest. Because digital music sales, which used to power iTunes sales, are slowing.

In any case, it shouldn’t be a huge shock to see that big app-download numbers don’t translate into big dollars for Apple, since the majority of app downloads are free.

Still, it’s a good reminder that Apple has always maintained it’s not trying to make money with the iTunes store–it’s a “bit over break-even,” CFO Peter Oppenheimer said last year.

iTunes’ real job is to give people more reasons to buy Apple’s hardware. And that’s working out very well indeed.

*iTunes revenue requires a bit of guesswork, because Apple doesn’t usually break out the store’s numbers, but lumps them into a “music related products and services” category, which includes accessories, etc. But the vast majority of that total comes from iTunes. And in the last quarter, Apple gave us something much closer to a real iTunes number: “revenue exceeding $1.1 billion.” FYI: That works out to about 77 percent of Apple’s “music-related products” number for that quarter.

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