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App Store Download Rate Forecast

Apple reported over 2 billion unique app downloads (excluding re-downloads and updates) in December. The total downloads reached 40 billion, payments to developers reached $7 billion and the total iTunes accounts reached one half billion.

The total downloads is shown relative to total songs is shown in the following graph:

Screen Shot 2013-01-08 at 1-8-2.09.04 PM

 

Although we have not received an update on song downloads for some time, it’s probably safe to assume that twice as many apps have been downloaded as songs.

This data can be reduced to a download rate:Screen Shot 2013-01-08 at 1-8-2.14.08 PM

The apps daily download rate was about 65 million/day during the holiday period but may be averaging about 50 million/day on a yearly basis. Note however that the rate is increasing at approximately 1 million/day/month. That implies that the average rate will reach 100 million/day in 4 years and may spike to that level by 2015.

The revenues associated with that rate will be $14 million/day. More about that in the next post.

  • Jaxon Kumaasi

    How long before download revenue (songs, movies, apps, stuff we have thought about yet, …) reaches the level of today’s device sales? No answer required. Just know that this (and now dividends) are reasons holding this stock for at least another generation.

    • rj

      Things will have to change quite dramatically for content sales to be a meaningful (direct) profit generator for Apple. The current model is pretty clear: commoditize the content, capture the profits in the hardware. Revenue on iOS devices is probably 10x that of iTunes right now. Profit on iOS devices is probably closer to 40x.

      Given that there are already a half billion iTunes accounts, I’m doubtful there’s enough potential future users in the world to sustain a ten-fold revenue increase. I’m certain there isn’t one to sustain a forty-fold increase.

  • Luis Alejandro Masanti

    “Note however that the rate is increasing at approximately 1 million/day/month.”
    How is it compared to the increasing in iDevices sold?
    Also, I would be nice to have a “# devices sold vs. iTunes accounts” graph.

    I just asking to look if the increase in songs/apps in merely because there are more devices or if it is because people buy more songs/apps. Of course, only Apple has all the data but you are a wonderful guesser!

  • lemon74

    Can you draw here also timeline about Apple’s payments towards developers? How that evolved over time?

    More importantly: How much Google has paid for Android developers?

    • http://twitter.com/asymco Horace Dediu

      I’ll post the economic analysis of the App Store in the next article. Google does not report any data on payments to developers.

    • http://www.asymco.com Horace Dediu

      Google has not released any information about what they paid developers.

  • Kizedek

    What makes the higher rate of App vs Song download more startling is that there are less people who can download apps than songs.

    Apps require an iOS device. Songs just require iTunes on either a Mac or PC and a pre-iOS iPod. I wonder how many of the 500m iTunes accounts are held by people without an iOS device? These people are not contributing to the App download figure at all.

    • rj

      Some thoughts…

      Songs cost much more – probably 4-5x as much. Average song cost is probably pretty close to the nominal 99 cents, and has remained pretty stable. Horace tweeted that average app cost is 25 cents since the start of the App Store. I suspect its lower now (and continuing to drop).

      Distribution of apps is probably quite a bit less uniform than songs too – a relatively large number of downloads are free, and a relatively small number are higher-priced apps and in-app purchases. For every app that generates in $5, there are 20+ free apps downloaded. There are probably many users that almost exclusively stay in the realm of the free.

      • Jurassic

        Actually, Apple yesterday announced that since they launched their app store in 2008, they have had 40 billion apps downloaded, and have paid app developers more than $7 billion. Since what Apple pays developers is 70% of the take, this gives a total sales figure of $10 billion, and revenue of $3 billion going to Apple.

        With an estimated 20 billion songs sold since 2003, and with Apple getting a much smaller cut from the music companies (Needham’s analyst Charles Wolf has stated that it is less than ten cents per song), Apple has made less than $2 billion selling music.

        10 years sales of music = $2 billion revenue for Apple
        5 years sales of apps = $3 billion revenue for Apple

        Apple’s apps business is much more profitable than selling music.

      • rj

        You seem to be correcting me, but I’m not sure why. I made no claim either way regarding the relative revenue or profitability of the music and app stores. My point was this: perhaps it isn’t that surprising that app downloads are so much greater than music downloads. Its quite possible to participate in the App Store for free (and likely many, many users do); but meaningful participation in the Music Store requires spending money.

      • Jurassic

        My comment was not to correct you, but to respond to your statement that “Songs cost much more – probably 4-5x as much. Average song cost is probably pretty close to the nominal 99 cents, and has remained pretty stable. Horace tweeted that average app cost is 25 cents since the start of the App Store.”.

        It’s true that songs are set at 99 cents, and albums (usually more than 10 songs) at $9.99, but comparing those prices to prices of apps that go from free (and I agree that most downloads are free apps) and up to multiple tens of dollars each, is really inconsequential.

        Rather than comparing prices as a benchmark, a more logical comparison would be the profitability of the two stores… which is what I pointed out in my comment.

      • Walt French

        “comparing those prices to prices of apps… is really inconsequential.”

        I beg to differ. Most of us think of apps as fairly consequential tools that we’ll keep using year after year, but downloaded music as something we might listen to less and less frequently over time—the classic long tail.

        But if the apps are games —or game-like—we might discard them entirely after a few weeks and shop for new ones. Games would then provide very little platform lock-in vs either apps or music.

        Methinks @rj’s intent was to look at price as a measure of consumption, which without assuming usage patterns isn’t the deepest dive the data offers. But he likely was guessing about repeat usage, so either his or my thinking could be quite consequential—perhaps quite a bit more so than current revs that interest you.

      • Jurassic

        There is nothing in rj’s comment that refers to “usage patterns”. It was focussed on price comparisons (and that most apps are “free”).

        Ultimately everyone has different usage patterns of music and apps they download. For example, some songs or albums I might play once and then never play again. Other albums become my favorites and I may play them quite often. The same thing happens with apps that I download (whether they are free or I have paid for them).

        But again, the previous conversation was not discussing “usage patterns”.

      • rj

        Horace’s chart is about units downloaded, and Kizedek’s observation is a direct comparison of song and app (ie unit) downloads. So I think per-unit pricing was relevant in my reply to Kizedek’s post. Horace’s chart would not look the same if songs were 25 cents each, or if a large number of songs were free.

        Comparing the revenues of the two stores might provide some insight into overall user spending on apps vs songs, although it would be incomplete. A lot of songs are acquired from other sources (existing CDs, Amazon), while apps are available only through the App Store (unless one counts web apps).

        Accurately comparing the profits of the two stores might be a bit trickier – while Apple’s cut is apparently larger on apps, I suspect its expenses are as well.

      • http://twitter.com/Yogi Jonas

        When did Horace tweet this? I ask since you imply they might have gone lower since, but the numbers Apple released last week equals an app cost of exactly 25 cents per app downloaded. (10B total revenue on 40B total downloaded apps.)

  • rational2

    Apple has a great opportunity in its app download data. It can mine that data to target better ads to the device. As it stands now, iAds appears to be using little or no awareness of the app the user is using (in which the ad is shown), much less awareness of the apps installed by the user.

  • Zivush

    Take into consideration that all around the world there are people who can buy apps from the appstore but can’t download media content from itunes. The reason for this is that apple doesn’t have copyright agreements with specific countries. Only recently apple published that people from 50+ countries can start buying music and movies.
    This is a major change that should account for some of the recent numbers and should have a tremendous effect on Apple’s future international sales.
    Think about all the ipods, iphones and ipads that were sold in the last ten years. people in a country like Russia couldn’t use them to buy music ,books or movies. On the other hand there was never a problem to buy apps because there are no copyright issues involved with apps.
    This is so strange – I can find almost no discussion about apple’s recent international content agreements.

    • Sacto_Joe

      The whole arena of nationally-specific aps and music is huge, and could literally be a source of major investment for some of that enormous international cash hoard of Apple’s.

  • http://alexandersmith.co/ Benjamin Alexander

    You know what, I think this is the most telling graph we’ve seen YET. We’ve got a hockey stick for apps – but not for music…

    This suggests something is wrong in the way we’re looking at the moment of disruption. This is out of order.

    I think we are looking at the wrong side of the supply/demand equation.

  • B

    The issue with this data is that it reflects apples and oranges. With few exceptions, it costs money to download a song. In large measure, the reverse is true of apps.

    Speaking from my own experience, I have downloaded hundreds of apps. many of those have, over time, been downloaded multiple times to different devices (multiple ipods and ipads). One question: how do these numbers account for multiple devices on the same account. Is downloading the Free Angry Birds to both an ipod touch and ipad one download or two?

    Despite all those downloads — with only a handful of paid apps and may of the free ones downloaded but never used more than once — the app revenue I have generated is dwarfed by the money spent on a few dozen song downloads… and the money spent on songs is less that that spent on a about a half dozen downloads of TV shows.

    This may be exceptional (I won’t touch an app that doesn’t have at least a free demo version to test it out), but it appears to match the broad behavior of everyone I know… many more app downloads than paid apps (recognizing that the split may be different for others).

    The question is what is the revenue, and trajectory of revenue, that these generate? The number of apps is a useful indicator of growth. Assuming the paid/free mix remains steady, it would indicate how revenue is growing. However, the data gives no indication whether the $/download is increasing, decreasing or remaining constant.

  • Fred Stein

    Would love to see the iBooks trend data isolated. Is this a sleeper? Just my guess, it could be a platform for edu apps, that parents would buy in the $100 / year range.

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