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iTunes users spending at the rate of $40/yr.

In the latest quarter the iTunes top line grew by 32%. Additional newly reported items:

  • Quarterly revenues topped $4 billion (a new high) and the company suggests that this rate is maintainable by stating it has a “$16 billion annual run rate”. The pattern of revenues is shown below.

Screen Shot 2013-05-12 at 5-12-8.12.30 AM

  • The content portion of iTunes revenues was $2.4 billion, up from $2.1 billion sequentially. Growth into Q1 is not unusual as many holiday iTunes gift cards are redeemed during January.
  • Revenue growth has been surprisingly steady, averaging 29%/quarter for more than six years.

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  • Music is now available in 119 countries.
  • The Music catalog now consists of 35 million songs.
  • Movies are available in 109 countries. 60,000 titles are offered.
  • iBookstores are present in 155 countries offering 1.75 million iBooks.
  • There are iTunes App Stores in 155 countries whose residents make up about 90% of the world’s population.
  • iOS developers have created more than 850,000 iOS apps, including 350,000 made for the iPad.
  • Cumulative app downloads have surpassed 45 billion and are on track to reach 50 billion at time of writing (estimated to be reached mid May).

Screen Shot 2013-05-12 at 5-12-8.21.31 AM

  • The company reports that over 800 apps are downloaded per second. Including all media, the download rate is now above 1000 items per second. Estimated download rates by media types are shown below (note: first graph is plotted on a log scale):

Screen Shot 2013-05-12 at 5-12-8.34.37 AM

 

Screen Shot 2013-05-12 at 5-12-9.07.49 AM

 

  • App developers have been paid over $9 billion for their sales through the App Store including $4.5 billion in the most recent four quarters. I estimate the split between media types as follows:

Screen Shot 2013-05-12 at 5-12-9.13.48 AM

  • Canalys estimates that sales from iTunes App Store accounted for 74% of all app sales worldwide in the March quarter.
  • iOS app revenues more than doubled year-over-year.

Including all (gross[1]) content revenues, the sales rate is now nearly $5 billion per quarter ($4.94 billion). Including services, the iTunes consolidated business cleared over $5.5 billion.

Screen Shot 2013-05-12 at 5-12-9.18.30 AM

In March Apple reported that they have 500 million iTunes so one way to think about the iTunes business is to say that  iTunes users purchase content and services at the rate of about $40 per year.[2]

Bless them.

Notes:

  1. “For third-party applications sold through the App Store and Mac App Store and certain digital content sold through the iTunes Store, the Company does not determine the selling price of the products and is not the primary obligor to the customer. Therefore, the Company accounts for such sales on a net basis by recognizing in net sales only the commission it retains from each sale. The portion of the gross amount billed to customers that is remitted by the Company to third-party app developers and certain digital content owners is not reflected in the Company’s Consolidated Statements of Operations.” From Apple SEC filing 10-K, October 2012.
  2. Apple users spend about $1/day for each Apple device in use making the iTunes franchise an incremental 11% marginal revenue source (assuming one device/user.)
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  • obarthelemy

    I’m left with more questions than answers:

    – is iTunes growth in step with, out-pacing, or lagging device sales ? It seems to be somewhat lagging, even while iTunes availability was expending ? What prospects now that iTunes is available pretty much everywhere ?

    – is it $40/yr as stated in the title, or $1/day as stated in the footnote ?

    – “bless them” ? really ? Is spending money on iTunes equivalent to buying Indulgences ? Or even particularly worthy in your eyes ? That religious and value judgment seems wildly out of place is a supposedly analytical blog.

    Assuming $40/yr is right, it’s nice, but indeed not much compared to the $300-$800 price of the devices themselves, which offer higher margins too, and probably have a 2 to 3 yrs useful life.

    • ronin48

      1) Please do some of your own research and thinking. You can’t make facile comparisons between mobile device sales and iTunes revenue growth. iTunes is on more than just mobile and iOS devices. iTunes content is not available uniformly and at the same time globally. iTunes availability lags iTunes device availability. I could go on but hopefully you get the point.

      2) Arithmetic please. $365 is spent on the hardware and $40 is spent on iTunes. 40/365 = 11%. Pretty simple.

      3) The “bless them” comment was clearly meant humorously. You are the one who brought religion into the comments. It wasn’t in the post.

      4) So what if operating margin on the iTunes store is only 15% or so? Should Apple just ignore the $2 billion plus profit generated? And that what of the infinitely more valuable ecosystem that iTunes creates and supports?

      Please think before you post.

      • Gregg Thurman

        I think obarthelemy’s comment was tongue in cheek.

        Stevesup’s comment was spot on. Total value of a product is not limited to its original acquisition cost. It also includes residual/resale value, and most importantly, what it can do for you while you own it. Of the latter 2 Android has no, or very limited, value in relation to the iPhone.
        The market clearly demonstrates this difference between the Android ecosystem and iOS.

      • obarthelemy

        Regarding usage value, I keep requesting examples of stuff iPhones do that Androids don’t (or do significantly worse), I’ve only got music creation for now, which is relevant, but a small niche.

        Regarding resale value, see my answer to Stevesup :-p

        Regarding purchase price, I’ve expounded at length in previous posts that iPhones are 40-60% more expensive than Galaxy Ses at retail. That’s fine when you don’t pay retail, but that bites when you do.

      • Gregg Thurman

        Apparently your comment was not tongue in cheek.

        Asking individuals a question like you have is worthless. At best the response would be anecdotal and statistically of no value.

        The proof of usage value is in what the collective think, and their response is in the amount of data they consume. iOS users, with about 27% unit market share, consume 65+% of data. In other words, iOS usage value is more than twice that of Android.

        This is an excellent measure of usage value because ALL users have equal access to the internet/data. Its in the fact that Android users do not use their “smart phones” to access readily available data that details Android’s usage value.

        The reason why this imbalance exits is immaterial. The fact that it does is the important take away.

      • Gregg Thurman

        Apparently your comment was not tongue in cheek.

        Asking individuals a question like you have is worthless. At best the response would be anecdotal and statistically of no value.

        The proof of usage value is in what the collective think, and their response is in the amount of data they consume. iOS users, with about 27% unit market share, consume 65+% of data. In other words, iOS usage value is more than twice that of Android.

        This is an excellent measure of usage value because ALL users have equal access to the internet/data. Its in the fact that Android users do not use their “smart phones” to access readily available data that details Android’s usage value.

        The reason why this imbalance exits is immaterial. The fact that it does is the important take away.

      • obarthelemy

        Nope.

        You’re assuming a lot of things:
        1- that value = internet downloads.
        2- that getting stuff into (doing stuff with ?) your phone implies as much internet access across all OSes.
        3- that ALL users have equal access to internet/data.

        That’s where exploratory, qualitative, studies are useful: they give you insight into what’s happening, and then allow you to formulate hypotheses that can be validated and quantified with hard data. Looking at data without trying to understand what it represents first can lead us to be blindsided.

        Case in point: about 80% of the stuff I do on my phone has no Internet component, and 95+% of the stuff I do on my phone has no Web component. Up to 2 years ago I was a heavy smartphone user with no data plan, because those were too expensive to make sense (over $50 a month, they’re down to $20 now).
        – First question is: are they tracking Internet traffic, or Web traffic ? The more I learn about my phone, the less Internet I do on it. I just got a smartphone for my elderly parents, they use it to read mails, play games, take pictures, as a GPS. 0 Web access, 0 data plan, very little Internet. 0 value ?
        – Second question: are they tracking Mobile traffic, or wifi traffic too ? That would skew the debate by demographics (mobile youth vs home/work-bound adults and seniors) and device type (sedentary tablets vs mobile phones), as well as OS features (background sync at home vs foreground sync while on the move)…
        – 3rd question: does the comparative ease of getting data onto/off a device directly from a PC/LAN impact Internet usage ? I know I’m moving stuff to my phone via wifi, USB or SD several times per week, while lotsa people don’t even know how to do that.
        – 4th question: are there different usage patterns by segment, and do those segments correlate with devices/OSes ? SInce I have a large-screen phone, I’m spending my downtime reading books or magazines, which takes a lot less space than web pages, especially with ads; on top of that, that content is usually transferred from my PC, bypassing the Internet. Do Facebook web page view count as more “usage” than reading 10 novels ? Do people with 5-6″ phones do more “old-school’ reading on them than people with 3.5-4″ phones ?
        5- building on that, do features have an impact ? I spend several hours a week listening to the radio on my phone. Not podcasts, straight FM radio. Going by your metrics, that’s 0 usage value ? Also, my carrier is happy about my listening to the radio: I’m not munching on my unlimited data while I do that ^^
        – Etc, etc…

        So no, Internet traffic != value. Not anecdotally, and most probably not statistically, either.

        So to my question “but what can an iPhone do that an Android can’t”, the answer is not “Lots ! Look, iPhones are downloading moar !”

      • fromthearticle

        “Canalys estimates that sales from iTunes App Store accounted for 74% of all app sales worldwide in the March quarter.”

      • fromthearticle

        To elaborate: You often appear to be using the fact that you don’t understand the situation from the bottom up (“but what can an iPhone do that an Android can’t?”) to imply that what’s obvious, and measured, from the top down mustn’t be true. The cause is interesting to try to understand, but the effect is confirmed by all datapoints I’m aware of.

        A few consequences:
        Internet traffic does equal value for Google, which is why it must be a shame for them that Android does so poorly on that front.
        App sales do equal value for developers, so Android is a less valuable platform for most types of apps, aside from the ones that are going to sell their users to someone in a buyout. Similarly for music, video and books, and for the people who produce them.
        That leaves device manufacturers, who don’t particularly care, at least directly, if people surf the internet or buy apps on their device. They might be happy, in theory, if you just buy their phone and use it to listen to FM radio. Samsung is the only large player profiting from selling Android phones so perhaps a direct Samsung vs Apple comparison is more interesting here.

      • Kizedek

        Thanks for your personal anecdotal experience. It rather proves Gregg’s point.

        You also missed his point completely. When he speaks of equal access, I am sure he means democratically. You and I both have equal access to this site. If what you say is true, you probably have more “opportunity” of access than I do.

        The opportunity to access is largely irrelevant. In fact, not only do I have no data component to my phone plan, I have no data card slot in either iPad. I use wifi only.

        WHEN I access the internet, the fact that I might prefer to do so on my iPad or iPhone vs my desktop speaks volumes about the usability of my devices and iOS. Apparently you still prefer your “computer”.

        So, to your objections, the obvious answer is that EVERYONE does what you claim Gregg is assigning zero value to — we all listen to music, we all read books, we all access LANs, we all do this or that.

        …but guess what, WHEN people access the internet on a mobile device they are far more likely to do so on an iOS device than any other, DESPITE the disproportionately low market share of iOS devices. Sure sounds like valid use-case data to me.

      • Gregg Thurman

        Kizedek, you have greater tolerance of those that argue from an agenda, vs reason and facts, than do I.

      • Kizedek

        Thanks (if that’s a compliment and not a sad commentary). Sometimes I think I do it just because I want to test myself and see if I do understand what other are saying, and to see if I do get the concepts and issues like I think I am getting them — and it beats passively watching a TV program or something. Seems like I might be on the right track given I am more up than down in rating. A couple of people around here might be a bit of a lost cause, though ;).

      • obarthelemy

        except he’s not talking about use-case data, but usage value.

        also, everyone does it, but to different degrees,which is kinda the point, you missed it.

      • Kizedek

        It boils down to the same thing. No-one has said “surfing is more valuable than reading a book or doing your stuff on LAN”. You missed it again.

        All that anyone has ever said is that people generally use iOS devices far more of their relative computing time and for more of their computing tasks (and likely for a far wider variety of tasks, whatever those tasks may be), than Android users use their Android devices. Period.

        This makes the “value” of their device greater, because they are getting more *use* out of it. Period. Hence “usage-value”. it’s actually being used, ‘as a *smartphone*’!

        The internet use survey indicates this greater degree of use in just this one “use-case” — accessing the web or internet, which everyone does, or can if they so wish. Just one of many ‘jobs-to-be-done’. Therefore, “usage-value” of iOS devices for internet is greater than the usage-value for Android devices.

        The usage-value of iOS devices is probably greater for other use-cases as well, but at least we have data for internet use.

        Only, you seem to be “reasoning” thusly: “iOS usage on internet is SO great because that’s ALL that iOS users do, and iOS users call this ‘real work'; whereas, as we all know, ‘real work’ can only be done and is only done on Android devices, like my work”. …some of which you presumably do on your Galaxy or Note out of preference to your desktop, not because you are away from your desktop?

        Never mind that 97% of Android phones are ill-equipped to do ANY “real work” because very few are Galaxy-class devices. But Android continually gets the benefit of the doubt in these discussions anyway.

        I wonder why Samsung doesn’t make ONLY Galaxy phones? Oh, yeah, it’s because “consumers want ‘choice’. Then maybe we have to consider that very few Android users are using their devices like your anecdotal use. So, it does come down to “usage-value” in the sense you have mistakenly inferred — what exactly are most Android users actually using their Android device to DO? What is the job-to-be-done? It certainly ISN’T surfing the web and buying stuff online — which is the least smart thing they could be doing, and which ALL phones these days are capable of doing (that’s where the benefit is given to Android).

        Hmmm, maybe we have to consider there is actually some truth in one of the theses on this site: “Android” is the default OS put on anything and everything by all sorts of OEMs. And yet, many seem to consider it makes any phone a “smartphone” by definition (another pass given to Android).

        You can’t have it both ways, as you continually try to have it when you comment here: Either, internet usage IS a good indicator of “usage-value”; OR we have to wonder what the heck anyone does on 97% of the Android devices out there, because it sure isn’t what you are doing with yours.

      • obarthelemy

        And by that same “web” metrics, Chromebooks have a much higher “usage value” than Windows PCs, heh ?

        When people are saying “internet usage = usage value”, they *are* saying Facebook = value, reading books = no value (also works with podcasts vs radio, online games vs off-line games, downloading stuff directly on the phone,vs moving it over from a PC…). That would be fine if we could assume usage patterns were the same across platforms, but they aren’t: iPhones don’t have FM radios, more book reading happens on bigger screens (my Ascend Mate’s screen is bigger than a Kindle’s), Android devices can act as removable drives out of the box, making transferring stuff from PCs easier hence probably more common…

      • Kizedek

        Nope. The only person really making value judgements is you: iOS is used for airy-fairy, fun stuff; discerning and educated power-users use Android.

        You are still mis-construing “usage-value”. In fact, once again, a pass is given to Android. We haven’t even gone there, but we could argue that when Android users surf or access the internet, it is all about Facebook and such. Your bias shows when you cannot even conceive of anything else other than Facebook as a proxy for internet usage.

        When iOS users access the internet, it is often for “valuable” services (in addition to Google services, which again, is fairly democratic). Just as you are anecdotally on LAN and so forth a lot, I am using the internet for, whew, let’s see: Dropbox, Box, Project Management, Team Collaboration, CRM, Invoicing, Time Management, Finances, syncing calendars and grocery shopping lists with my wife and kids, logging car use and expenses, text recognition on receipts and business cards, recording and syncing photo streams, ….

        As you say, the surveys probably don’t even touch any this stuff. The overwhelming “internet use” being recorded in the surveys for iOS is probably only the tip of the iceberg (for iOS, but probably not for Android). You often go on about how websites and webapps are just as good as native apps, like “what’s the big deal” with this app obsession? You want to talk about ‘”value” of usage’? I don’t think so; you don’t want to go there.

        Why do all the great new start-ups and services target iOS first or exclusively with native apps? Because first, the usage is greater, and secondly, the usage-value, in your sense of the term is greater.

        No, I don’t “spend” more time “transferring files” and whatnot than surfing like you do… because it is done unconsciously: I open an Office file or attachment using an iWork app, it is automatically on iCloud and I can mess with it anywhere and save it back to Office. I want a PDF or other file? I keep my files in my desktop Box or DropBox file and use the corresponding app on my iOS device. Many of the tasks you outline are done by an iOS user in the course of getting certain jobs done.

        What is really happening is that traditional, closed, in-house, IT services are being commoditized. So, not only are people beginning to BYOD, but many services can be outsourced. I believe the major growth there is going to be seen on the iOS device side, due simply to security, stability and native api concerns. This is one reason Apple is so undervalued and why people still think the sun shines out of Google’s rear end. Apple is set up to work with everything coming down the pipe, such as new innovations by startups; but Google, like MS, wants to swallow everything and try to turn it into its own version.

        And why do I need an FM radio? I have “apps for that”. When I am in the car, I have a radio. When I am walking the dog, I listen to a podcast. Just another case of feature-itis. BBC has a great radio app out which has scroll wheel interface of all their local and international radio stations with live previews.

        You keep pressing us for specific use-cases and our own anecdotes, and we refrain. Because we know “value” is more than you whipping out your Galaxy so you can say, “see, I can do that, too”. It’s about what you spend time doing, consistently and efficiently, that replaces traditional or similar tasks on the PC, or which represent new tasks. Dude, don’t even go there.

      • Gregg Thurman

        Apparently your comment was not tongue in cheek.

        Asking individuals a question like you have is worthless. At best the response would be anecdotal and statistically of no value.

        The proof of usage value is in what the collective think, and their response is in the amount of data they consume. iOS users, with about 27% unit market share, consume 65+% of data. In other words, iOS usage value is more than twice that of Android.

        This is an excellent measure of usage value because ALL users have equal access to the internet/data. Its in the fact that Android users do not use their “smart phones” to access readily available data that details Android’s usage value.

        The reason why this imbalance exits is immaterial. The fact that it does is the important take away.

      • Mark Jones

        Regarding usage value: You keep asking for feature differences, but it’s not only about features or specs. It’s really about users being able to do the daily “jobs” they want to do, easily and enjoyably.

        The best reported indicator for this is user satisfaction, a metric for which iPhone has consistently outscored its competitors by huge margins over multiple years across several independent surveys. A similar indicator is iPhone owners plan to buy another iPhone at a higher rate than its competitors. Other supporting indicators are that iPhones account for a disproportionately large share of those who acquire and use apps/content, share photos, and buy products/services. You oddly discount web access (which encompasses much more than implied by your use of “download”). But Steve Jobs introduced the modern smartphone as an “Internet communicator” and I think most users (consumers, businesses, and advertisers) recognize smartphones as having an edge over other computing devices precisely because it is always-with-you AND always-connected (for data services).

        Regarding resale value: “The numbers beg to differ.” See my other response. In sum, resellers only pay more to buy used iPhones because they are sure there are more buyers out there willing to buy at those higher prices.

        Regarding purchase price: Prices vary around the world, but in the US, there has not been a 40-60% retail price gap at launch (subsidized or not). Maybe it’s so where you are. Even in India, iPhone 5 launched at 44900 while Galaxy S4 launched at 41900 rupees (less than 10% difference). And today, Galaxy S4 was repriced to 40000 rupees, so maybe it will become a 40% difference. If so, it looks like it will follow the previously-seen high-end Android phone pattern of rapid price decreases within months of launch (and thus get to a 40% difference).

        So why are iPhone users very satisfied and want to buy again? Because iPhone does well the jobs that its users value and want to do. And that includes doing well at such emotion-inducing qualities like pleasing aesthetic design, fulfilled iOS upgrades, and excellent customer support.

    • stevesup

      Apple phones offer the best value in subsidy programs today. The best build for the same initial contract/phone cost, far better Samsung plastic phones.

      The “bullion” value of iPhones attests to their build value: Gazelle will buy back broken, nonworking iPhones for $50-125; Samsung phones? Zip.

      • obarthelemy

        Na, it’s just that so few Galaxies break compared to iPhones that there’s nothing to buy :-p

      • dmarcoot

        truth be told, in drop tests Samsung devices fair considerably worse than iPhone or iPad. But you can keep on believing whatever you wish

      • http://www.isophist.com/ Emilio Orione

        Just don’t let truth brush against you and you will be fine

      • obarthelemy

        OTOH, unlocked phones, “good” condition, no water damage, go for:
        – iP4S 16GB: $205
        – iP5 16GB: $300
        – GS3: $185 (surely 16GB too)

        The difference is less than the retail price difference, so GS3 comes out on top overall :-p

      • stevesup

        Cheaper build, more likely to break and lose all resale value. No sale.

      • obarthelemy

        the numbers beg to differ, GS4 lose less value than iPhones.

      • Chaka10

        This is the kind of crappy comment without backup that makes me think Oba is a front for Samsung or the ilk. What “numbers”? The SIV has been out for less than a month, how can there be any reliable used market yet to determine how well it holds value?

      • obarthelemy

        Sorry, I meant GS3

      • Mark Jones

        iP4S 16GB was released on Oct 2011 for $199 w/contract, $649 unlocked at Apple Store.
        GS3 16GB was released on June 2012 for $199 w/contract, $689 unlocked at Amazon on 6 June 2012.

        iP4S 16GB resale today: $260 (Amazon)
        GS3 16GB resale today: $175 (Amazon)

        The numbers beg to differ alright.

      • Mark Jones

        Don’t know where you looked up those prices but unlocked, good condition, no water damage at Amazon USA at 6:54PM on 12 May is:
        iP4S 16GB: $260
        iP5 16GB: $350
        GS3 16GB: $175

        O, whenever you post prices, I can count on it always shortchanging Apple products.

      • Chaka10

        I’ve engaged Oba a bit recently. I’m getting a sense he’s some sort of “official” rep for Android/Samsung. Nothing firm, just a sense ….

        Know in advance Oba, I will not engage on this.

      • obarthelemy

        You said Gazelle so I went to Gazelle, but then again, I’m an untrustworthy devious bastard. Mooooom !

    • handleym

      Spending on iTunes seems to me to obviously lag spending on the devices.

      Every person I know with an iPhone starts off playing with apps fairly soon, but it takes a little longer to start buying music, even longer to buy video, even longer to buy a book. I think it’s a completely flawed model to assume that for most buyers, the day they buy their iOS device they start exploring the pay side of the iTunes store.
      Much more realistic, I think, is that they hold onto the the device, perhaps for years, perhaps for multiple devices, before they buy a certain type of item. Generally nothing happens until some sort of trigger event, like they’re bemoaning “I never saw such-and-such-a-movie”, and a friend says “OK, let’s watch it now”, orders it up through iTunes, and new possibilities are grasped.

      Takeup is getting slower not least because ever more iOS buyers fit into the late-adopter category. Having made the leap to an iOS device, they still have to make these further leaps, to have friends show them in appropriate situations, you can do this and that and the next thing.

      This is not special pleading, it’s common sense. The flip side is that I think this sort of revenue is pretty stable. Once you’ve realized that you can rent movies through iTunes, you will continue to do so. If you tend to find yourself renting a movie once a year, you’ll spend that rental fee once a year fairly consistently. On the other hand, you’re also not likely to start renting movies once a month; and nothing Apple (or Hollywood) does is likely to change that. Same for books, same for music.

      Even pretty much the same for apps now. I would buy new apps that better solved the problems for which I currently use apps — but they would have to be BETTER. (And contrary to what certain idiot commenters claim, what is required is not new skinning, there is no “boredom” with the appearance of the current apps. What is required to replace an app is that the app be BETTER. Which means at least one of: faster, more stable, better UI, or more capabilities.) It was fairly easy to generate better apps in the early days — just like the churn we saw in PC software in the 80s.
      But it’s getting harder and harder nowadays, as the competition becomes more capable. I expect at some point this will result in higher prices for serious app SW, which can be sustained because there will be a set of brands people trust, but the days of buying four new apps a month just to see what’s out there seem to me to be gone and not coming back.

      • obarthelemy

        Still:
        – iTunes is at 30% growth
        – iDevices sales have been showing growth rates much higher than 30% over several years: http://i41.tinypic.com/30iam84.png
        – and in the mean time, iTunes has expaded to a lot more markets

        Even with a lag effect, early adopters should be at the “buy a lot” stage by now, and ever more later-adopters should be joining them. All the more surprising that iTunes sales per iDevice seem to be going down, not up.

        Maybe early adopters have bought all they wanted, and later adopters buy less ?

        Looking around me, you’ve got the ebooks buyers that buy content right off the bat, but usually for a Kindle or Nook, for some reason reading on a tablet or phone doesn’t have much success. Outside that market, people start with a handful business apps, then a couple handful of games, then go into maintenance mode, often not buying content at all, and adding 1 app a month if that. It does seem that Apple users transition into Content more.

        I’d be curious about statistics on what share of users have ever bought apps and, separately, content, and how that evolves over time indeed. Fat chance of getting that info :-p

      • Chaka10

        I would expect iTunes sales, and growth thereof p, to correlate more closely to total installed base of iOS, rather than how many incremental devices are sold in any period. The number of devices sold in any period really reflects the growth of the installed base, so looking at the growth of current device sales is looking at the growth of the growth (i.e., acceleration — a higher order derivative, if you will).

      • KirkBurgess

        You forget people have been buying media from the iTunes Store for their iPods, Macs & PCs for over a decade now, well before iOS even existed. Often iTunes was the ONLY way to buy music digitally, especially globally where it remains the default choice for most people. This is also true with movies – outside the USA there is nothing like Netflix, and iTunes is often the only option for buying video on demand.

      • http://twitter.com/rainshocker Andrew Alvarez

        Actually Netflix made a great campaign here in Latin America a few months ago. While iTunes was not availaible in all Latin America countries.

      • handleym

        You’re assuming the iPhone buying population is the same as the iPod owning population. They’re not — that’s precisely my point.

        Phones are a much less techy item that iPod, or Netflix. I know plenty of people with iPhone who never owned an iPod, and have no idea what Netflix is.
        My point is that it is silly to just write those people off as NEVER being part of the iTunes eco-system. Rather they will enter it, but slowly, as, over a period of years, they see friends do things with their phones and copy them. What keeps them sticky for now is a general level of happiness with the “pure” iPhone experience as delivered on an unmodified phone from Apple.

        Is the same slow build-up happening for Android or Win8? I don’t know. Anecdotally I’d say the only people who buy Win8 are those who really want it, and that the non-techies with Android seem rather less satisfied than those with iOS; but that’s anecdote and worth nothing.

    • Alec Dumas Fetty

      I’m concerned with how much might be lost through piracy and how much more content might be purchased if a huge crackdown against online piracy finally occurred.

      • http://twitter.com/mozfart willo

        Piracy is much less of a problem for IOS/Apple than Android/Google.
        As far as I know unless you are on 6.1.2, you won´t really be able to use pirated apps, unless you use some unsecure and highly intrusive Chinese solution. And Apple can easily plug that hole, but it is not even on their radar.

    • http://twitter.com/Neofluxs Taz 

      I think, regarding the growth, that iTunes has expanded to more countries indeed but some of these countries are 3rd world countries or countries where the income of the individual is so low that $1 is actually quite a huge sun of money or the culture of the society in a country doesn’t encourage respecting copyrights or purchasing digital content, where people would be willing to spend $1000 on an iPad (iPad 4, 4G, 128 GB costs almost that) because it’s a physical thing (they can touch it) but not willing to spend a $1 on an app because it doesn’t have a physical existence and there are other ways to get it (piracy) also the laws in these countries doesn’t combat piracy

      • http://twitter.com/rainshocker Andrew Alvarez

        You sum up the entire thinking of all Latin America.

      • handleym

        There are ways to derive value from an iPhone and iTMS without paying money, most obviously iTunesU and podcasts.
        It will be interesting to see if Apple pushes those aggressively with the low-cost iPhone.
        You can also price-segment fairly easily with local-language movies, music and books. What’s problematic, of course, is when the local language is a world language — part of your India situation…

        I’ve long thought that the poor of the developing world (at least some of them) would benefit from having a very cheap DAP, along with a way to load it once a month or so with spoken word content, so they have something to listen to while they plough the fields, or walk five miles to the village. This isn’t really the Apple sort of market, but Apple may offer a similar vision to the middle class of these countries.
        (And then, with luck, Nokia and the Chinese will provide such services for the poor. The real problem is the mechanism to reload the device once a month; but there’s probably a business opportunity there for peddlers and similar itinerants… I hope so.)

  • branfon

    Your lives are boring. Use your time in a more productive manner. Get up, get out, get something.

    • Steve

      Get educated? Good idea. Try it.

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  • Chaka10

    Horace, how are you able to estimate the amounts for “Services, Licensing and Other” and for “Software (Apple)”. I’ve tried, for a prior quarter, by looking at Apple’s historical presentations and reconciliations to the new product segment presentation, but some assumptions are needed still…. Thanks.

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

      My assumption is a value for growth in software. Given content revenues, Services has to be what’s left.

  • Chaka10

    “Apple users spend about $1/day for each Apple device in use making the iTunes franchise an incremental 11% marginal revenue source (assuming one device/user.)”

    Again, is it a profitable revenue source? What are the margins? Without knowing the specific answer, I think it must be,… for Apple to present and emphasize it as they have increasingly done.

  • http://twitter.com/mozfart willo

    Imagine the day Apple release a streaming solution similar to both Spotify and Netflix. Can you imagine how many customers a solution like that would get? Lets say $29.99/month would give me free streaming of both Videos & Music. Impossible? Far from it.

    • http://www.facebook.com/people/Shameer-Mulji/1685212657 Shameer Mulji

      No doubt the long-term future of consuming content is streaming / renting as opposed to ownership. The question is, will the content owners sign a deal to allow Apple to move forward with such an initiative?

      Seeing how Apple turned the music industry upside down, so to speak, I’m sure they’re reluctant to do so and instead help Apple’s competitors instead to help level the playing field.

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  • Sacto_Joe

    Does obarthelemy (1) have nothing better to do with his day than post anti-Apple commentary or (2) is his day job being a paid troll? I’m still inclined to think it’s the former, but some days I’m less sure about that than others….

    • truthseeker

      Pretty sure obarthelemy is being paid, more likely by Google than Samsung – he is occasionally defending Samsung competitors, but never says anything bad about Android.

    • simon

      I don’t think he’s paid. He just considers himself to be intellectually superior because he’s a shrill contrarian who goes for cheaper products that are superior in his opinion. He’s been doing it for years and years.

      Also he lives in Europe, France. Perhaps that affects his thinking since he probably bases his thinking in anecdotal stories around him. We’ve seen another incredible anti-Apple zealot in a person named Charbax from France who will let you know how overpriced Apple products are and how amazing Archos Android products are, million times a day.

      However it’s hard to take someone seriously when he insists on comparing the price of a 64G iPhone against a 16G Galaxy S3 with a SD card when Samsung is selling a 64G model of the Galaxy.

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  • Jacob Willliams

    To start, I’m an iPhone user. However, I can’t help but feel the fanboyism within this thread. It makes me hold my tongue for fear of becoming an enemy if I do any of the following:

    Suggest another company does something better or even equal.
    Suggest that Apple could do something better.

    I think you shoot yourself in the foot by scoffing at or assuming someone is a shill simply because they have the courage to even raise a question.

    Horrace talked about something interesting in a past episode. The lack of motivation to upgrade from a 4S to an iPhone 5.

    Is it possible that most smartphones have gotten to the point that they all fulfill the tasks they need? Aside from the Ford/Dodge debate, car owners rarely debate the differences as I assume they once had.

    I’ve had an upgrade for three years. I’m on an iPhone 3GS. I started a company that repairs smartphones. So it’s not like I didn’t have plenty of opportunity to use one of the hundreds of used iPhones we sold. Nor is it an issue of money considering the business does well.

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