Ten Years In, iTunes Store Revenue Higher Than All of 2003 Apple

iTunes $12 Billion Revenue

The iTunes application celebrated its 12th birthday this week, but the iTunes Store, launched as the iTunes Music Store in 2003, will hit the ten-year-mark on April 28, 2013. According to an analysis Wednesday by Asymco’s Horace Dediu, the nearly ten-year-old iTunes Store is certainly making its parent proud, as it now generates as much revenue alone as all of Apple did in 2003.

Using Apple’s recently release download figures for its App and Music stores, payment totals to developers, and data on the price of applications, Mr. Dediu calculates that the “iTunes economy” now records gross revenues of about $12 billion per year. As pointed out by Business Insider, Apple recorded $8 billion in revenue for the entire company in fiscal year 2004.

Apple has long since surpassed its 2004 revenue numbers, and took in $36 billion in revenue in the fourth fiscal quarter of 2012 alone, but the growth of iTunes mirrors the astounding financial success of the company as a whole over the past ten years.

The iTunes store has also greatly expanded since its inception as a music-only store. Below are some notable highlights from the service’s history:

  • 2003: Debut as “iTunes Music Store,” Launch of iTunes for Windows
  • 2004: International Expansion of iTunes Music Store
  • 2005: Introduction of Podcasts, Launch of Video Content
  • 2006: The first games for click-wheel iPods, Change of Name to “iTunes Store”
  • 2007: Introduction of iTunes U, Launch of iTunes Plus DRM-Free Music
  • 2008: Movie Rentals, iOS App Store, Genius Recommendations
  • 2009: HD Video Content
  • 2010: iBookstore
  • 2011: iTunes Match
  • 2012: Introduction of 1080p Video Content, iTunes 11 Major Redesign, iTunes in the Cloud

Although iTunes revenue numbers are high, the margins are not as large as those for Apple’s other products and services. The company has often reported that it operates the iTunes Store at a low profit in order to generate more lucrative hardware sales.

Mr. Dediu’s analysis estimates that about $24 billion in revenue was generated via the store over the past five years, at a cost to Apple of about $10 billion in terms of bandwidth, fees, and advertising. However, Apple does not get to keep the entire balance; it famously established the digital store standard of splitting revenues 70/30 with developers and content creators.

Interestingly, apps still only account for about one-third of store revenue (about $4 billion per year) but they are growing faster than non-app content, with a growth rate of 50 percent compared to 28 percent. Total revenues for the store have continued to grow at a rate of between 32 and 38 percent per year.

Apple will announce its official results for the first fiscal quarter of 2013 during an investor call on Wednesday, January 23 at 5:00 PM EST. The Mac Observer will provide live coverage of the call and analysis of the results.

Teaser graphic made with help from Shutterstock.