Apple has long maintained that its iTunes Store is a breakeven business, with the margins made on selling music (and more recently films, TV shows, e-books and apps) cancelled out by the costs of running the store.
If you’ve got an interest in the evolving economics of Apple’s store, though, a new blog post by Asymco is a must-read, noting that “the business has grown so rapidly… that its profit-free nature has come under severe pressure”.
Analyst Horace Dediu elaborates: “What is known as iTunes today has quintupled in seven years. Although cost of content sales are likely to have been preserved as a ratio (about 30%) the vastness of transaction volume (estimated at 23 billion item transactions in 2012 alone) implies that there are some significant economies of scale.”
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