Wednesday, February 21, 2007

Is it true that Apple doesn't make any money from its iTunes store?

Who's asking: Tom Ehrenfeld, Cambridge, MA

If the Answer Girl blog were a genuine journalistic enterprise, I'd call the Apple PR office to ask this question. Since it's a hobby, I just clicked around for a while and found the latest Apple earnings press release, along with a few blogs and forums that gossip about Apple's corporate health as if it were a high school sports team. (One of the reasons I fought the switch from PC to Mac for so long was the awareness of this rabid Apple subculture... I have enough geeky subcultures of my own, thank you.)

Anyway, Apple doesn't split out iTunes revenues or profits from the rest of its earnings report. Apple's fiscal year runs from October 1 to September 30, so it reported its first quarter earnings last month. In the first quarter of the 2007 fiscal year, Apple took in $7 billion in revenue and made a profit of one billion dollars. That's "billion," with a b. That's a lot of money.

In slightly less than four years of operation, the iTunes store has sold more than two billion songs, at an exponential growth rate. It took two years and two months for the iTunes store to sell its first 500 million songs, but it sold another 1.5 billion between June 2005 and December 2006.

Whether or not the iTunes store is profitable as an independent enterprise seems irrelevant to the main story, which is that the iTunes store is an extremely popular, revenue-producing chunk of one of the most profitable companies in the world. The iTunes store is a crucial piece of Apple's iPod marketing, and trying to measure one piece of that success against another is like trying to figure out which part of the cookie has the most chocolate chips.

I love my iTunes, but don't buy much at the iTunes store -- mostly single songs that have stuck in my head, which I don't feel like buying the whole CD for. (Example: my latest purchase was "It's a Shame About Ray," by The Lemonheads. No idea why this song popped into my head, but the only version of the album I had was on an old cassette.)

Five Random Songs from the iPod Shuffle:

"Smarter," Maria McKee. My entire romantic history in one song.

"Call and Answer," Barenaked Ladies. One of the most honest love songs ever written; it's a tender song of devotion that ends with the promise that the singer will "crucify" his partner if she wigs out on him again.

"Mike Post Theme," The Who. From the most recent album, Endless Wire. This song amuses me for obscure reasons of my own.

"Life on a Chain," Pete Yorn. This CD (Music for the Morning After) never got old for me; it's a nearly-perfect pop album.

"Peace," Eurythmics. Annie Lennox does take herself too seriously sometimes, but this record is beautiful, and this song is one of the best things on it.

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