Categories

Bigger than Hollywood

Apple paid $10 billion to developers in calendar 2014. Additional statistics for the App store are:

  • $500 million spent on iOS apps in first week of January 2015
  • Billings for apps increased 50% in 2014
  • Cumulative developer revenues were $25 billion (making 2014 revenues 40% of all app sales since store opened in 2008)
  • 627,000 jobs created in the US
  • 1.4 million iOS apps catalog is sold in 155 countries

Putting these data points together with others from previous releases results in a fairly clear picture of the iTunes/Software/Services[1]

Screen Shot 2015-01-22 at 1-22-10.38.39 AM

The App ecosystem billings (what consumers actually pay) is shown in the red area above. 70% of those payments are transferred directly to developers and Apple reports the 30% remaining as part of its revenues. This view of the iTunes ecosystem shows the impact of Apps relative to the other media types. When we measure the payments to the content owners we can see that Apps also dominate: 

Screen Shot 2015-01-22 at 1-22-10.44.16 AM

The red area above adds up to the approximately $25 billion total paid to developers. This view of the payments to ecosystem contributors shows how apps are now a bigger digital content business than music[2] and TV programs and Movie rentals and purchases put together.

This is quite a story.

Put another way, in 2014 iOS app developers earned more than Hollywood did from box office in the US.

 

Although the totals for Domestic (US) Box Office are not the complete Hollywood revenues picture, Apple’s App Store billings is not the complete App revenue picture either. The Apps economy includes Android and ads and service businesses and custom development.  Including all revenues, apps are still likely to be bigger than Hollywood.

But there’s more to the story. It’s also likely that the App industry is healthier. On an individual level, some App developers earn more than Hollywood stars[3] and I would guess that the median income of app developers is higher than the median income of actors.[4] The app economy sustains more jobs (627,000 iOS jobs in the US vs. 374,000 in Hollywood) and is easier to enter and has wider reach. As the graph below shows It’s also growing far more rapidly.

Screen Shot 2015-01-22 at 1-22-11.30.06 AM

The curious thing is that even though the medium of apps is swamping other forms of entertainment in all measurable ways, comprehension of the phenomenon is lagging.

Information asymmetry is a wonderful thing.

Notes:
  1. soon to be renamed Services and encompass everything under the heading of iTunes software and services today including content, apps, licensing and other services and beginning Q4 2014 it will also include Apple Pay. []
  2. Music payments due to iTunes Radio streams are not shown as part of Music cost of sales. Streaming revenues are included in the services/licensing income and payments come out that cost structure. []
  3. so do YouTube stars, but that’s another story. []
  4. A large majority of actors earn less than $1,000 a year from acting jobs []
  • http://sumocat.blogspot.com Sumocat

    I would just point out that Apple’s 30% share of app sales is a maximum value, not the true value. iTunes gift cards regularly retail at 10-15% discount, sometimes going as low as 20-25%. Assuming retailers aren’t voluntarily taking a loss with no upside, that puts the wholesale price as low as 75% face value, though it probably varies by retailer and season. That wholesale discount cuts into Apple’s 30% share, not the developer’s. Impossible to gauge just how much this detracts without knowing gift card sales figures, but it does detract somewhat from Apple’s 30% cut.

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

      Promotions are part of the expenses of the iTunes service I guess, while the 30% cut is part of the earnings.

      • http://sumocat.blogspot.com Sumocat

        This isn’t something that can be expensed. Example: Last year, I paid $75 to PayPal for a $100 iTunes gift code. I spend that in the iTunes Store, sellers get 70% or $70 of the $100 amount. But even if PayPal sold those codes at cost and passed the full amount to Apple, Apple records only $75 revenue. That other $25 was never real. The discount is removed before revenue is recorded and, therefore, cannot be subtracted as an expense.

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

        Things are simpler: you buy a 100$ iTunes gift, so when you make a purchase you have 100$ no matter how much you paid it. You always spend 100$ that go to revenue and 70$ go to developers. The expense is calculated from your itunes card value, that is 100$.
        But apple did not cashed 100$, how can the calculus be right?
        When you purchase the card apple can register 100$ in revenue and the difference between 100 and the price you pay, say 75, is registered in promotion costs, 25$ are a cost paid by apple to promote the service, 100$ is the revenue of the service, 75$ is the cash in apple hands.

      • http://sumocat.blogspot.com Sumocat

        Pretty sure that’s not legal (or simpler). You’re talking about recording revenue that was never realized. The system you describe would work for a rebate, where I pay $100 and get back $25 in the mail. But that’s not what’s happening. In the gift card example, I’m paying $75 for $100 worth of goods. Apple never receives more than that $75, so that’s all they can record. They can defer that recognition, but recording more than that would be inflating the revenue, which is fraud.

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

        They can record 75$ of revenue from the customer and 25$ of revenue from the apple promotion department.
        The promotion department will detract 25$ from its budget and record a 25$ cost.

      • http://sumocat.blogspot.com Sumocat

        That’s still fraud.

      • Tatil_S

        Sales promotions (rebates, commissions etc.) are routinely recorded as marketing expenses. How they are treated clearly affects revenue, but has no effect on the calculation of the profit, which in the end is what matters for shareholders.

      • http://sumocat.blogspot.com Sumocat

        Yes, I already stated this system would work for rebates. It would work for commissions as well. In both cases, the expenses are subtracted from the amount of revenue received. It’s not money that was never actually received.
        Furthermore, you are wrong about revenue mattering to the shareholders. As a public company, Apple is legally obligated to accurately report revenue and expense to shareholders. They cannot legally report more revenue than is actually received and balance that out by recording the difference as an expense. They can time-shift the reporting by deferring or accruing revenue, but the amount reported and received has to match up at some point. Obviously, there is room for accounting errors, but I do not know of any legal manner in which a public company can habitually report revenue that is never received.

      • ptmmac

        There is also an outstanding addition to income that cannot legally be taken if it is never recieved. I suspect your problem is eaten by this other virtual income. The sale does not occur until it is redeemed. This is the required method for charging for the item to insure that sales tax is not being dodged. The reason Apple is willing to accept less than face value at times is the growing accrual of unredeemed cards from lost or unused cards is always available to off set this expense. The truth is that any business that receives credit from it’s customers creates money out of thin air just like banks do when they make a loan. Usually this is just temporary because the reconciliation of the overpayment happens relatively quickly. With gift cards the inability of some customers to use this money creates a permanent addition to the cash flow of the business.

        Hope this helps.

      • http://sumocat.blogspot.com Sumocat

        First, no. Second, let me explain.

        “The sale does not occur until it is redeemed.This is the required method for charging for the item to insure that sales tax is not being dodged.”
        And the iTunes gift code is redeemed when you go the iTunes Store, tap the button marked “Redeem,” and enter your code. It is not redeemed when you tap the “Buy” button.
        Using my gift code example, they record $75 real money in revenue and give me $100 iTunes credit. When I spend that full $100 iTunes credit, they pay out $70 in real money to the sellers, leaving Apple with $5. Clearly, that’s not a 30% cut. The split between actual money and iTunes credit (virtual money) is very clear in my example. Everyone else seems to be complicating it.

        “The reason Apple is willing to accept less than face value at times is
        the growing accrual of unredeemed cards from lost or unused cards is
        always available to off set this expense.”
        Which means they accept less than face value and therefore do not collect the idealized 30% off every iTunes purchase, which goes back my original point.

        “The truth is that any business that receives credit from it’s customers
        creates money out of thin air just like banks do when they make a loan.”
        That’s not how credit or banks work. Banks loan out money collected from depositors. It was not created from thin air. This also applies to credit cards issued by those banks. Credit cards independent of banks, like Discover and AMEX, rely on other types of assets, but the money they loan out is also real. What is not real is the money listed in your savings account. That’s a record of how much money you have deposited, but most of it was actually loaned out. That’s where the thin air is.

      • ptmmac

        Banks loan money out 10 times over. The system we have is based upon the banking in Europe in the late middle ages. Goldsmiths would spend money to keep their gold safe in the form of guards, and vaults to protect from theives and fires. They would then charge customers to store their gold safely at the vault. That is until they realized that they could loan that money out to the inn keeper’s cook who wanted to build another inn. The gold that was spent would wind up redeposited into the goldsmiths accounts after the builder paid for all the supplies and labor to build the new inn. The banker would then loan the gold again, and again until it only had 1/10th of the total assets deposited in his vault on hand, and the loans outstanding would be 10 times the original amount of gold. The banker just created 10 times the amount of gold that he started with by using paper accounting systems and increasing the velocity of money. Now the Goldsmith is no longer charging to keep your money or pay your debts. He is paying you because he can earn way more loaning it back out.

        The Federal Reserve System is similarly organized. only 10 to 15% of the banks total assets are in Cash at any given time. The rest of a banks capital is based upon paper loans that multiplied the original money supply by 10 fold.

      • http://sumocat.blogspot.com Sumocat

        Fascinating. Not so much the story but that you can write it down and still not see the gold loaned out is actual, physical gold while the gold recorded in the vault is the part that isn’t real. The gold loaned out was not created out of thin air. Up to 90% of the amount listed as being in the vault was numbers on paper. Again, that’s where the thin air is.

      • Tatil_S

        I don’t know whether Apple actually records the gift card discounts as part of its revenue. I just said it would not be out of the ordinary. In any case, what is the big difference with commissions? They are due as soon as the sale is made and the retailer selling your item probably subtracts the cut it is supposed to earn from the payment due for the “full” wholesale price. Whether the retailer reduces the price of the item (or gift card) to attract more customers or use it as its retail margin should not make a difference for the manufacturer.

      • http://sumocat.blogspot.com Sumocat

        And that amount of revenue recorded never exceeds the amount received. If I pay you $75 and you take your cut of $25 and pass $50 to the supplier, you never record more than the amount paid. You don’t record $100 and expense out $25 to match the $75 paid. Emilio literally states they can do that.

      • Tatil_S

        AppStore can pay a retailer a sales commission of $25 for selling that a $100 gift card card to a consumer. That commission may be paid for every card sold or only if a minimum sales volume is met.

        Retailer and AppStore can settle their debts immediately or a few months later.

        The retailer can charge for $75 or $100 for that card. In the former case, it uses the commission to induce more shoppers to come visit its facilities. In the latter case, it uses the commission to increase its profits. It can use those cards into creating “hardware + gift card” bundles, making the retail price of the card even murkier.

        AppStore owner has no control over what a retailer will do based on the sales incentives it offers. Thus, the amount a retailer charges for a card has no bearing on how the wholesaler calculates its own revenues. It can record unearned revenues of $100 (as gift cards do not get redeemed right away) and incur costs that provide incentives to the retailer middleman to get those cards into the hands of consumers.

      • http://sumocat.blogspot.com Sumocat

        The only question I have with that scheme is how much money, actual money, is paid to Apple. If the retailer gives Apple the full $100 regardless of sale price, then sure, they can record $100 revenue and expense out the commission. That said, I don’t see why Apple would adopt this tactic instead of discounting the wholesale price. It’s a scheme designed to solve your problem, not Apple’s.

    • Bart

      LOL, actually, gift cards are extremely profitable no matter what kind. Hundreds of millions of dollars worth of gift cards (of all sorts) are sold every year which are never even CLAIMED. Secondly, what kind of source could you possibly have for any store selling an apple gift card for anywhere NEAR that kind of discount, except maybe a black friday sale or some other extreme promotion? I’ve never, ever seen that. (I would have noticed.)

      And remember, all the apple gear and gift cards that are used for stuff like this is evidence of the draw that it has. It’s not an accident that so many people have iPhones, or that literally all the other phones undeniably follow after them and are still trying to catch up. (I never bought any of the claims from some who try to convince people that Android has somehow ‘caught up’ to Apple–not even close.)

      • http://sumocat.blogspot.com Sumocat

        “LOL, actually, gift cards are extremely profitable no matter what kind.”
        I never said they weren’t. I only said they detract from the 30% cut.

        “Secondly, what kind of source could you possibly have for any store
        selling an apple gift card for anywhere NEAR that kind of discount,
        except maybe a black friday sale or some other extreme promotion? I’ve never, ever seen that. (I would have noticed.)”
        Would you? Here are links to TWO of the 25% off deals I got last year.
        https://twitter.com/itunescarddeals/status/538278862803988480
        https://twitter.com/itunescarddeals/status/512277576719802368
        One of them was a Black Friday deal. The other was in September (Back to School deal, maybe?). Might I suggest following @itunescarddeals on Twitter, or perhaps a Google Alert, so you can notice these deals that you’ve never, ever seen.

      • Bart

        Thanks for making my point for me–that any discount on iTunes is extremely rare. Moron.

      • http://sumocat.blogspot.com Sumocat

        Sorry, when you wrote, “what kind of source could you possibly have for any store selling an apple gift card for anywhere NEAR that kind of discount,” I thought you actually wanted to see the source of these deals you’ve “never, ever seen” (but would have noticed). Obviously, your problem with me claiming “sometimes going as low as 20-25%” was that “sometimes” did not adequately convey the rarity of these deals. The fact I saw 25% off deals twice in 2014, plus 20-24% off deals every few weeks, clouded my judgment on the matter. I should have balanced my wording to be more compassionate to those who have “never, ever seen” such deals. My bad.

      • Bart

        Liar. You said they regularly are discounted. They are not. In fact, most any sales excludes them.

        They may go on sale for a day or two next year, they may not. You don’t have one single source of where they are on sale anywhere.

        Not that it matters, you will just lie about it again to push whatever point you think you have.

      • http://sumocat.blogspot.com Sumocat

        What I literally wrote (because the comment is visibly posted) was: “iTunes gift cards regularly retail at 10-15% discount…” This happened last week at Staples and Best Buy with 15% and 10% off, respectively. You can still see the deals at the @itunescarddeals Twitter feed. https://twitter.com/itunescarddeals. Of course, that was last week. For a current deal, the discount at Giftcard Zen is now 13% (normally 11%). https://giftcardzen.com/buy/171/iTunes

      • Bart

        And now your lies are backed by online only deals where you have to buy from some fly by nite online org that makes you jump through hoops. This is not a regular retail discount. Give it up man, you are patholgicical.

      • http://sumocat.blogspot.com Sumocat

        I wouldn’t call Staples or Best Buy “fly by night.” Oh, you mean Giftcard Zen. 2 years old, BBB accredited, reviews on Yelp and other review sites. Maybe they’re playing the long con?

        Wait, maybe I’m playing the long con? Maybe I found those 25% off deals, bought them, and retweeted the deals, all in preparation for someone calling me out on finding 25% off deals. Then I timed my comment to coincide with 10% and 15% iTunes discounts at Best Buy and Staples and baited the trap with the hyperbolic term of “sometimes.” Well, apparently I owe you another apology for weaving this elaborate trap.

      • Bart

        You truely are insane. You are trying to use all manner of schemes to somehow prove that iTunes cards “regularly retail” at a discount. They do not. You lied. Buying online (where shipping the cards can cost MORE than your supposed “discount”) is total BS.

        Walk in any store. Are they on sale? Not on your life! I’m sure if you jump through a LOT of hoops you may save a buck, if that’s worth it to you, but the cards are STILL RETAILING FOR THE SAME PRICE.

      • http://sumocat.blogspot.com Sumocat

        They were on sale last week at Staples and Best Buy when I made that comment. Not my fault you missed it. Surprised you didn’t notice those sales. BTW, how does walking to the store, paying for a gift card, scratching off the silver covering, and entering the revealed code into iTunes add up to fewer hoops than buying a code online. I got my 25% off codes on my iPhone without putting my walking shoes on (or wasting plastic and paper). You should look into this online shopping scene. It’s easy, and I hear it’s going to be very popular someday.

      • Bart

        No end to your lies–your own Twitter link is riddled with people saying that the cards have to be MAILED and you have to pay shipping, with invslidates the “discount”.

        Besides which, the cards still retail at the same price…

      • http://sumocat.blogspot.com Sumocat

        C’mon dude, you know $2 shipping does not invalidate $15 savings on that Staples deal, and Best Buy offered free shipping, both of which don’t matter when you pick up in-store. You know, I’m under the impression you’re starting to get a little uptight about this. You’re laughing. I’m laughing. We’re all having a laugh so maybe ease up with the caps.

      • Bart

        It’s a moot point–the cards still retail at same price, regardless of any coupon one may have.

      • http://sumocat.blogspot.com Sumocat

        So you keep saying. Do you mean the retail price remains the same? Because it doesn’t. Used as a verb, retail means to sell to an end-user. If a retailer sells something at a discount, he retails it at a lower price. Or do you mean the face value remains unchanged? This is true: the $100 gift codes I bought for $75 each were redeemed at $100 value. Still paid less than retail price for them. I do look forward to your answer on this.

    • pk_de_cville

      “Assuming retailers aren’t voluntarily taking a loss…”

      That’s quite an assumption. Retailers take losses on Apple sales all the time. Buyers come in and ARE the traffic they’re looking for. It’s called a “loss leader”.

      OTOH, Apple has a reputation for rarely playing with pricing much. See their awfully weak Black Friday Specials and Refurbish Item pricing.

      This whole thread appears to be based on a doubtful premise: that Apple is suffering the cost of Gift Card discounts. I believe these discounts are solely the creation of Apple’s retailers.

      (How do you spell “BOGO”, Apple? “NOT HAPPENING”.)

      • http://sumocat.blogspot.com Sumocat

        “It’s called a “loss leader”.”

        I know what it’s called, but you don’t know what they are. Loss leaders generally are not sold below cost but are sold below or close to below the minimum profit margin. The intent is to bring in traffic to the store in an attempt to drive sales of other products
        http://en.wikipedia.org/wiki/Loss_leader

        That tactic doesn’t work when you sell a gift card below face value through eBay, which is what happened in my two examples below. But let’s say PayPal was just selling gift cards below profit margin for kicks. What would be their margin if they’re selling at 25% off? 20%? Do they give Apple $80 for every $100 gift code sold? Okay, that still means Apple collects less than 30% actual money from every iTunes virtual money purchase.

        What you’re not understanding is that Apple is the one selling iTunes credit as a loss leader. Apple operates iTunes Store on a break-even model. They set high margins on their real products, but iTunes products aren’t considered real. They’re data. They exist as electrons and code. They take a 30% cut but that’s of iTunes virtual money.

      • nonredeemed

        Have you not appreciated what everyone is trying to tell you below? You need to factor in non-redemption of gift cards as well, not just the wholesale discount.

      • http://sumocat.blogspot.com Sumocat

        I would appreciate it more if that value weren’t statistically 1%.

        “According to
        the most recent figures from CEB TowerGroup, about 1 percent of the total value
        of gift cards was predicted to go unused in 2013.”
        http://www.creditcards.com/credit-card-news/7-tips-losing-gift-card-funds-breakage-spillage-1271.php

        Realistically, iTunes gift cards should have a lower unused rate as they don’t require the user to go anywhere to redeem them. Less than one percent non-redemption does not seem to significantly detract from a 10-25% wholesale discount.

      • nonredeemed

        Pretty suspect figure. No idea about the methodology.

      • http://sumocat.blogspot.com Sumocat

        Of course. You believed CEB TowerGroup in 2006 when they reported 10% breakage, but not in 2013 when they report 1%. They’re like an old rock band. You like the classics, but when they say “this is from the new album,” it’s bathroom time.

      • nonredeemed

        I have no idea what you are talking about. Are you confused? never posted anything about 10% breakage or believed that figure or whatever you think happened.

      • http://sumocat.blogspot.com Sumocat

        Fine. What does your gut tell you the breakage (I’m sorry, “nonredeemed”) rate is?

  • dancharvey

    How are you arriving at those job creation numbers?

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

    A lot of apps generate purchases outside of apple control to avoid the 30% cut, like dropbox or office subscriptions, other apps have an impact on merchandising, like angry birds, this purchases too can be included in the app economic picture.

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

    I reckon there is something more deep in this shift of economic power, in apps there is more powerful ability to entertain us than traditional media.
    A book, a song, a movie in an app can be more interactive and others app capabilities are not even matched by traditional media.
    Apps are a blend of all form of communications and allow interaction between authors and users, they are interactive entertainment and information.
    Apps have the potential to rule the world of entertainment, transforming also our TV box in an interactive screen for apps.

  • fstein

    “information asymmetry” — Interesting phrase. Reminds me a bunch of slides from Mary Meeker where she showed, a few years ago, that Mobile Ad revenue was absurdly low relative to Ad revenue on other screens, like TV and ‘PC/Web’.
    Thanks, Horace. Showing such asymmetries with data and charts helps us guess the future.
    While others, naive analysts, worry about the future for iOS devices, they don’t see that iTunes group revenue could pass $50B in a couple years… and continue growing.

    • Korf

      So, what is the deal with advertising on mobile/trans-device and in apps?

      Having worked in the industry I find that the “ads” themselves sadly under utilize the capabilities of the devices known and implied user data (location etc). No one is really nailing native ads or native monetization outside of iAPs in things like social apps and games.

      Mopub seems to be drowning in Twitters problems, Facebook is downright amazing in its own walled garden, but is trapped there as well, Google/AdMob is nowhere to be seen in mobile/apps, and iAD … while a solid platform with great potential seems to be a stepchild Apple ignores. Millennial? ChartBoost? InMobi? Many players but limited innovation. Thoughts?

      • fstein

        Good questions. My point is that the asymmetry is a great indicator of potential. When Mary Meeker pointed out the asymmetry, FB stock was flat.Later their mobile ad revenue kicked in and investors ‘got it’ taking the stock up 100% and beyond.
        I’m NOT saying Apple will get a 100% boost. I AM saying App revenue may be the next big thing – and is hiding in plain sight. (Sorry for the flamboyant prose)

      • Jacob Williams

        Content creators should make direct deals with advertisers instead of relying on the platforms to.

        It puts more money in the creators pocket and provides a significant amount more value per dollar to the advertisers.

        Adwords, pre-role ads, and anything else determined by an algorithm is what I term “dumb efficiency”.

        If I owned a large corporation, I would create marketing teams that go out and strike deals with all the podcasters, YouTubers, writers, etc. that have an audience that’s targeted for my product.

        The problem is that the creator of that product hasn’t discovered asymco, and asymco hasn’t discovered that product or service.

        I make beginner programing tutorials. Who could be a better sponsor than a company that sells an IDE? I had to make videos pitching the sponsorship to these companies and explaining why they should sponsor me.

        My referrals perform 10X better than their adwords campaigns do according to their analytics.

        There’s a much better targeted product for the Asymco audience than Lynda.com. It’s better than most options of course. However, I live with the idea that advertising should be aiming for a 100% close rate. After all, 100% is the ceiling.

        There’s a maximum amount of impressions where it becomes more effective to increase click throughs than page views.

        Sorry, I’m sure you know all this. I just went on a ramble.

  • jameskatt

    The Screen Actors Guild warns its new members to get a day job, that most actors cannot make a living as an actor.

  • Christian Peel
  • Joe

    Slightly misleading to compare worldwide apps figure with US-only box office figure…

    • Harmonica2

      And omitting the TV business, where “Hollywood” earns most of its revenue.

    • Tatil_S

      You could also try reading *all* of the article:
      “Although the totals for Domestic (US) Box Office are not the complete Hollywood revenues picture, Apple’s App Store billings is not the complete App revenue picture either. The Apps economy includes Android and ads and service businesses and custom development. Including all revenues, apps are still likely to be bigger than Hollywood.”

      • Meaux

        US represents less than one third of box office revenue. So he’s probably not right.

      • sigaba

        I read all the article. “Although apples are not oranges, oranges don’t include strawberries or grapes either.”

  • http://waynuff.com Bill Sanders

    It’s a great headline, but I’m not sure of its
    significance.

    First, make it a less specious comparison. If it’s
    comparing the apps business to the “Hollywood/LA” movie business,
    you’d have to throw in television/video distribution, including the $$ the
    studios make on these same feature films when they are exploited on cable, over
    the air, home video (sounds anachronistic now) and of course, streaming and
    downloading. And it would really have to be the worldwide take, since I’m sure
    he’s not talking about app sales in the US only.

    And then there’s all of tv per se, basically any
    programming not made for initial exhibition in a theater. Including
    exploitation of library assets. That adds quite a few more dollars to the Hwd
    side of the equation.

    But even if the apps economy dwarfs the Hwd entertainment
    economy, that’s like saying the shmatte business in New York dwarfs Broadway.
    As with apps, there’s some creativity and high-priced talent involved in the
    fashion industry, but one is a utility of daily living while the other is art
    (with a small “a”). For every Fruit Ninja (art with a very small
    “a”), there are a million banking apps, navigation apps, chat and
    messaging and photo apps, search, catalog, storefront, coupon, bargain
    shopping, ticket buying, sports score updating, college professor rating, and
    even app buying apps.

    As for developers’ median income being higher than the
    average actor’s, I’m not sure that should be surprising, as there are many more
    actors (mostly unsuccessful) than any other type of guild member in Hollywood.
    People call themselves an actor even if they have no experience, no training
    and no talent. That’s pretty hard to do as a developer. Where he is on the
    right track is in noting the celestial salaries of both the highest paid
    developers AND actors– both are hit-driven businesses. Just as one hit pays
    for an entire year of a studio’s other failures, less than 1% of all apps make
    something like 90% of the revenue. I’m not sure how much solid, reliable,
    long-term employment either business supplies to its local economy.

    Would I want to be in a business that used an app as an
    integral part of its business plan, like Uber or Amazon? Sure. Would I want to
    be an app developer? Eh. In my teen son’s world, that’s like asking if you want to
    be a ballplayer without specifying Major League.

  • http://search.websonar.com:8080/ Duane Bemister

    Impressive numbers until you factor in the cost to produce an app, which in our case is close to $100.000 and I expect that is below the mean. With 1.2 million apps on iTunes it seems the developers are still a long way from breaking even. It’s good to be in the game but consumers still prefer free to paid by 100 to 1 so it will be difficult to find a silk purse until apps are priced on their merits rather than trying to fool the consumer. I put my old shoes and magazines in the free box on the roadside but don’t plan to offer everyone free use of my hand made cedar canoe.

    • expensive

      Movies are pretty expensive to produce.

      • sigaba

        The majority of costs charged against the production of a film are formula percentages of revenue 🙂

    • Walt French

      OK, 1.4mm apps at $100K mean cost is $140 billion, so devs, with cumulative payments of $50 billion (un-S WAG for Android revs being equal) have made almost $100 billion in investments that won’t break even for a couple of years.

      At best.

      Something’s gotta give, no?

      • http://search.websonar.com:8080/ Duane Bemister

        The problem is the consumers taste for free and the majority of app vendors catering to this group. I think Apple made a big mistake initally providing the structure to accommodate this situation.
        No one really wants to be tracked and sold, view ads, or be nagged to purchase functions that would normally be provided in the app but “getting a deal” is the first thing they will boast about when telling their friends about acquiring their new (fill in the blank).
        Of course if you take this to it’s logical conclusion then the most impressive acquisition would be free, or optionally stolen. Since the producer obviously cannot actually give you their product for free they have to fool the customer with sales and as Ron Johnston found out the hard way, most consumers actually like to be fooled.
        I think the solution for apps would be a separate section in the app store for smart customers.

    • http://sumocat.blogspot.com Sumocat

      Those 1.4 million apps includes free apps using ad-financed and corporate/promotional models. My company offers four of those apps to provide benefits to our membership. We’re not tapping into the iTunes money pool.

  • Enrico Ros

    $10B is still a very small number if you consider it represents the whole sales of APPs on iOS in 2014 (or 0.06% us GDP). With software companies at market value of tens or hundreds of billions, one could expect to see a Trillion market on software.

    Luckily more revenue is generated by advertising, partnering, customer development, external marketplaces (buy on web, view on iOS), and web channels. Here is my question: will 1% US gdp ever be achievable?

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

      No, but more importantly, you’re asking the wrong question.

  • http://whatgamesare.com Tadhg Kelly

    Hollywood is a lot bigger than box office sales.

  • Kim Soares

    “It’s also likely that the App industry is healthier. On an individual level, some App developers earn more than Hollywood stars[3]and I would guess that the median income of app developers is higher than the median income of actors.[4]”

    App industry most certainly is not healthy. Median income for an app is around 500 dollars.

    • MoBizMa.com

      always a boring product, always another copycat app and always those who have no clue how to market their app. Take a look at celeb apps – gazzilions out there of simple apps with lyrics or some images. So much junk, that it is unfair to say ‘app industry is unhealthy’. Just like websites, brick and mortar shops and restaurants- even uni grads – some make it some don’t.

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

      I did not say it was healthy (I have no way to make that judgement). I said it was healthier.

  • MoBizMa

    100k cost to dev an app? Gimme a break. First of all, there are a ton of utility apps in app shops, simple games from frameworks that even non programmers can use, all kinds of gimmic apps and even corporate and business apps for restaurants, local businesses and realtors, html5 embedded apps and book apps etc etc.

    On elance many people hire app dev for a few hundred to a few thousand dollars. Dep on complexity.
    Simple games like puzzles, shooting, hopping over stuff etc and copycat games even have code one can buy for peanuts in code marketplaces if you don’t want to use available dev platforms or hire an elancer.
    For eCom and directory kind of apps there are special prototype script apps [white-labeled also] for max $4-10k from my research, already with all functionality in there.
    Our apps for local businesses, musicians, artists, online shops etc are so feature rich and cost almost nothing to make and host.

    So where’s your $100k per app and all dev are losing money?!
    I know of great success stories of some guys making an app for less than $1k and selling a million of it for $0.99 a piece before they were bought out even – ifart, for example.

    TOP apps that spend that kind of BIG money are most likely 2 categories: [1] special startup ideas community and sharing type or a special portal. Gambling apps maybe and similar. [2] fancy games and graphics/3D.

    Then you need marketing to be at the top, esp nowadays with so many apps everywhere. The marketing is the big spend, the biggest. Top game companies buy installs and this can cost anywhere between $.50 to a few bucks even for incent and offerwall in game purchasing. So even with $1 to make calculations easy, they easily can spend a few millions on a good campaign, plus social and media buys they or the affiliates run.

    It is always the 20-80. Probably even less than 20% of the apps are the ones making 80% of sales, profits and income. Game companies and VCs treat this as any investment- 8/10 is a loss, 1 is break even and one will be a winner making bank.

    And while the app shop reports income for sales of their apps, ingame sales not always part of the picture, if via 3rd party offerwalls and coin/virtual currencies, ads etc.

    And on smaller scale we have all the eCom and local biz communication apps – where appshop gets nada, but a local biz , an artist or other service provider, list owner marketer can make money by using app to communicate with list [app users] via the notification messaging feature to promote, sell etc.