A recent article published by Bloomberg portrays iTunes as one of the biggest players in the media business. On their own, Apple’s music, movie, book and app stores make more money than the sum of The New York Times, Warner Bros. film studios (responsible for the blockbuster Batman franchise), Simon & Schuster publishing (with titles like that best-seller that has become the official biography of Steve Jobs) and Time Inc. the largest magazine publisher in the U.S.
The combined revenue of these companies over the last year has been $8.2 billion, $300 million less than iTunes has generated for Apple, with the additional aggravation that Apple does not produce any of the content found in its popular store, but serves only as a lucrative distribution channel.
I imagine that this is the advantage of having been the first to realise the importance that digital distribution would have and to bet on it with a shop that can boast of having the largest audiovisual catalogue in the world and, from today, of being available throughout 119 countries (155 in the case of the App Store).
But let’s compare the iTunes Store to some other companies. CBS, the TV network with the largest audience in America? Less revenue. Marvel? Universal? 20th Century Fox? Disney Studios? All outperformed. As Edmund Lee of Bloomberg points out, this division of Apple is six and a half times bigger than Paramount Studios.
The only ones who can cope are the conglomerates of companies that own these studios, chains and publishing houses. Holdings like News Corp (Fox News, 20th Century Fox, SKY…) with a total income of 33.88 billion or Disney (ESPN, ABC, Lucasfilm, the amusement parks…) and its more than 42.28 billion. But Apple’s audiovisual business is growing faster than any of these entertainment giants; about 35% annually, and by 2014 it could overtake Viacom (Nickelodeon, MTV, Paramount).
30% of Apple
The famous 30% commission Apple takes from each sale leaves a substantial margin even after subtracting the (low) infrastructure costs and the 25 cents that the credit companies keep in the transaction. The songs at 0.99 euros laid the foundation, but it is the films, books and magazine subscriptions that have increased the profits to the clouds.
Taking The Avengers as an example (16.99 euros in HD) we see that Apple gets almost 5 euros for itself, while the biography of Steve Jobs written by Walter Isaacson, with a price of 10.99 euros, leaves them a little over 3 euros. Not bad (for them, of course).
And what is it that gives Apple so much power when it comes to negotiating this deal with the other companies? Don’t look too far: the 435 million iTunes credit card accounts are a difficult argument to make, especially when your traditional sources of income are evaporating at an alarming rate.
Television, the last bastion
The cable companies don’t seem to be in it for the work, but bigger trees have been seen falling under the apple.