> Apple will sell $5B in apps this year and make $1.5B from their 30% stake. Almost pure profit, as the App Store can't cost more than $100M to operate. In fact, the marketing of the App Store is probably 10x the cost of running it (someone in advertising please fact check my ass on that one).
It has been widely suspected that the App Store and iTunes are loss-leaders for Apple. The company itself has reported that it ekes out a profit from those divisions. The App Store and iTunes exist to sell iOS devices and Macs.
A payments API makes sense just like the in-app purchases API does. This is a lot of hand-waving for something that has probably always been on the table.
That was what made Steve Jobs brilliant. He didn't just create great products, he created great _support_ for those products, so when they launched, it was revolutionary from day one.
But what does "ekes out" mean for a company making as much money as Apple? They're probably impossible to separate, but it would be interesting to compare iTunes store profits to those of other retailers.
It means they are features, not products, as Steve said to the founders of Drobox. They exist to support the true products where Apple makes money. The same will be true of iCloud. They charge money for larger storage allowances, but will never make real money on it - it exists to strengthen the ecosystem that supports the real cash cow.
Thank you for asking that question. I only realy, fully understood what Steve meant, what his thinking was by his comment on Dropbox when writing this reply.
That distinction makes sense. I find Apple interesting in that even their "loss leaders" seem to be profitable, and more, that though they could throw tons of money into something like ebooks to try to hurt Amazon, they wouldn't. Though now I wonder where Apple TV fits in this, since it can't possibly have the same kind of margins that other products do.
Why not? The apple tv must be significantly cheaper in terms of components than an iphone. Its has no touch screen, battery, sensors, or 3G Radio. Why can't this be made for well under $100?
It has been widely suspected that the App Store and iTunes are loss-leaders for Apple. The company itself has reported that it ekes out a profit from those divisions. The App Store and iTunes exist to sell iOS devices and Macs.
A payments API makes sense just like the in-app purchases API does. This is a lot of hand-waving for something that has probably always been on the table.