App Store Is 1% Of Apple’s Gross Profit [REPORT]

Posted Jun 23, 2010

Above is a chart generated by Piper Jaffray analyst Gene Munster about what an application costs Apple to sell.  Apple currently claims that the App Store is at or near broke even.
Munster used two pieces of information to make these assumptions.  In Steve Jobs’ keynote two weeks ago, he said that 5 billion apps have been downloaded and $1 billion has been paid out to developers.  Below are some of Munster’s key points regarding those figures.

– If $1 billion has been generated for developers since the store launched on July 10, 2008. then this suggests a $1.4 billion gross app store revenue.  Of that number about $429 million is kept by Apple after the 70% cut paid to developers.
– About 81% of apps are free and 19% is paid with an average selling price of $1.49.
– Apple’s gross margin on the App Store is 44% assuming that 70% is paid to the developer, $0.20 plus 2% of the sale goes to the credit card, and 1% is spent on storage and delivering the application.
– Since Apple generated a total of $33.7 billion in gross profit since the App Store launched and the App Store contributed $189 million, this means that market is 1% of Apple’s gross profit.
– Between Q4 2008 and Q2 2010, the iTunes store generated $3.6 billion as a whole and the App Store contributed $429 million of that number (12%).