This link has been bookmarked by 4 people . It was first bookmarked on 12 Aug 2008, by Cousin Jacob.
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31 Jul 09
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Apple’s longstanding assertion that it doesn’t expect to make much money from the iTunes store
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the point is to make Apple’s hardware more attractive.
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Here’s what the iTunes store has: margins that are better than the best e-commerce companies around; no marketing costs and a built in audience; Sales of nearly $3 billion a year in its existing business; and a new $1 billion business on the way
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11 Mar 09
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12 Aug 08
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iTunes may be
the best business that Apple hasa business that many investors would be glad to own -
the basic dynamics of the iTunes store are much better than those of Amazon
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Bottom line: the iTunes business model looks more profitable than that of eBay, which despite its current problems, has been the most successful e-commerce business in the world.
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So I’m probably wrong that iTunes is Apple’s best business. (The company’s overall gross margin, after all, is 34 percent.) But I still think that with the scale it has, I still think that iTunes is a better business than Mr. Jobs makes it out to be.
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Um, no.
iTunes GMs are not higher than Amazon’s 24%. Both iTunes and AmazonMP3 are about 11% gross margin business. Given that most purchases are made 99c at a time, the auth + transaction credit card fees alone (even though Apple tries to batch multiple purchases together) bring it down from 30% to about 18%. Then the bandwidth, servers, and other cost of sale items bring it to about 11%.
Actually, Saul, Steve is right. The margins on these businesses are terrible and only at enormous scale contribute any meaningful profit. Instead, they server largely to make the higher-margin hardware businesses more differentiated.
— Posted by David Pakman
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