pixlnet Posted December 22, 2003 Share Posted December 22, 2003 (edited) My roommate and I have been arguing about iTunes recently and he says iTunes is losing money. I strongly disagree. Sure they have sunk costs of development, marketing, etc. but just wait til the Pepsi and McDonalds deals roll in. I read last May when iTunes for Mac came out that Apple makes around 30 cents per song. I also read in articles that Apple isn't making a profit. I think theyre just saying that the 30 cents is being paid into the sunk costs and thats the reason. My big question however is this: If iTunes and online music make no money.....then why has BestBuy, WalMart, Microsoft, MusicMatch, Napster, MusicNow, and many other companies jumped on this bandwagon???? Wait til we see all the promotions rolling in...... Edited December 22, 2003 by pixlnet Link to comment Share on other sites More sharing options...
SuBHuMaNGuY Posted December 22, 2003 Share Posted December 22, 2003 Well, they may have different contracts with the record companies. Also, it gets your name out there...even if people are just buying a $.99 song...they are still thinking about the company and are more apt to buy other stuff from a place where they have an account and have purchased before and know its secure and stuff. Just my guess anyway. Link to comment Share on other sites More sharing options...
Bling3k12 Posted December 22, 2003 Share Posted December 22, 2003 Steve Jobs has even said this market isn't a money maker and to get into it isn't the best idea. The only reason that Apple does it is to sell iPods. Link to comment Share on other sites More sharing options...
aristotle-dude Posted December 22, 2003 Share Posted December 22, 2003 iTMS is what is known in the biz as a loss-leader. The sole purpose is to drive iPod sales, as Bling2k12 said. Another side effect of it all is to raise brand awareness. The music store and these give aways drive people to the Apple site and this increases the chance that more people might look into macs while they're on the site. A lot of people are familiar with the name but don't realize that Apple is still in the computer hardware business. Link to comment Share on other sites More sharing options...
Tim Dorr Veteran Posted December 22, 2003 Veteran Share Posted December 22, 2003 Apple makes $.34 on every track sold. The other $.65 goes to the record labels. Of Apple's profits, most goes to paying off the bandwidth and server costs with Akamai. The remainder gets sucked into development and upkeep costs. They are losing money on this, but probably not a huge amount. It's more than made up with the amount of iPods it sells. Link to comment Share on other sites More sharing options...
kryptonik Posted December 22, 2003 Share Posted December 22, 2003 Apple has made over 8,500,000 USD from the iTunes Music Store. I'd say that is pretty good. ;) Link to comment Share on other sites More sharing options...
Fusion Posted December 22, 2003 Share Posted December 22, 2003 Just like everyone else has said, it is simply to sell more iPods. Link to comment Share on other sites More sharing options...
pixlnet Posted December 22, 2003 Author Share Posted December 22, 2003 Yes I agree with you hear....but Best Buy doesnt sell iPods. Most of them sell music that is to be burned, not put on a personal player. So why do they sink these costs if theres no money? I know iTMS sells iPods, it increases brand awareness, but Apple will infact make money off the iTMS solely. There will be many more promotions other than McDonalds and Pepsi. Even those two deals have a capability of selling an additional 1.1 billion songs which=$1.1 billion dollars. Not too bad for one product in a couple quarters. However that is what is capable, not actual. Still, online music will make money. Link to comment Share on other sites More sharing options...
the evn show Posted December 22, 2003 Share Posted December 22, 2003 Mcdonalds hasn't said anything about actually doing a billion song give-away. That was a rumor that was later denied: http://www.macrumors.com/pages/2003/11/20031106135855.shtml I'm willing to bet the online music sales business is the new business fad (like self-destructing DVDs, webtv boxes were a few years ago). Everyone wants to get in on it now because Apple is turning some very impressive numbers. Nobody wants to be left behind iTMS is available on Windows XP and Mac OS X. It runs on 2000 but by many accounts the experience sucks and 90% of the win2k desktops are in offices where it's doubtful IT departments are in a big hurry to let people buy online music with accounts tied to work machines. OS X + WinXP == 11% of computer users, tack on an additional 2% to account for the occasional win2k box with itunes on it and that's still less than 1/6th of the computers in the world that are even CAPABLE of running itunes. Out of that, fewwer still have access to iTMS but apple is still able to sell millions of songs a week. I Imagine walmart and friends saw that, figured "if we can make this work on Win9x, winnt, and maybe os x then we would have 6x more audience than apple: we could sell tens of millions of songs a week. At ten cents profit/song thats $50m/year+" Eventually the crappy services will be weeded out and ones that are a good value/experience will last. Link to comment Share on other sites More sharing options...
uiop Posted December 22, 2003 Share Posted December 22, 2003 Apple has made over 8,500,000 USD from the iTunes Music Store. I'd say that is pretty good. ;) you obviously don't understand managerial accounting. That money is not profit its gross profit meaning before expenses, they are lucky if they break even Link to comment Share on other sites More sharing options...
pixlnet Posted December 23, 2003 Author Share Posted December 23, 2003 That's in 6 months. You know how long it will take Longhorn to break even? It's not gonna be a fad I will tell you that. In fact, many people I know are giving iTunes gift certificates. Instead of buying 90's pop mixes, we can make our own. iTMS is market leader, and will continue to do these things 1. make money (i don't care what you say, even if its a million a year) 2. sell iPods 3. increase brand awareness (and realize Apple is a company great at judging what is good) 4. create great promotions Link to comment Share on other sites More sharing options...
aaron901 Posted December 23, 2003 Share Posted December 23, 2003 Apple will be making big money once iTMS goes global. :yes: Link to comment Share on other sites More sharing options...
Steve Posted December 23, 2003 Share Posted December 23, 2003 Apple will be making big money once iTMS goes global. :yes: Amen, UK first tho Aaron... :laugh: :happy: Link to comment Share on other sites More sharing options...
Tim Dorr Veteran Posted December 23, 2003 Veteran Share Posted December 23, 2003 Apple will be making big money once iTMS goes global. :yes: I would rephrase that as big revenues, because I think they'll lose even more money in foreign markets due to more complex licensing, and the legal fees associated with that. Link to comment Share on other sites More sharing options...
Himosan Posted December 27, 2003 Share Posted December 27, 2003 Apple makes $.34 on every track sold. The other $.65 goes to the record labels. Of Apple's profits, most goes to paying off the bandwidth and server costs with Akamai. The remainder gets sucked into development and upkeep costs. Actually the money made on every track varies primarily due to the credit card cost ($0.25). You show up and buy one track and that's it, apple's lost money on you that day. Tomorrow buy 10 tracks and they lump the credit card charge and make a few pennies. Buy a $100 gift certificate and Apple gets to split that charge 101 ways and be looking at a few dollars in profit (along with the cash flow advantage). Also note the artist gets ~10 cents on top of the record company. Link to comment Share on other sites More sharing options...
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