From: "Rich Gauszka" 

Apple has stated that the iTunes store operates around break-even but some
analysts have questioned that

http://www.appleinsider.com/articles/07/04/23/itunes_store_a_greater_cash_crop_
than_apple_implies.html

iTunes Store a greater cash crop than Apple implies?

"For each $0.99 song, we estimate that Apple pays $0.70 to major
labels, which own over 85 percent of the market, and $0.60 to $0.65 to
independent labels, which drives an average price per song of approximately
$0.69," he explained. On top of that, of course, are Apple's network
fees, transaction fees, and general administrative expenses associated with
operating the iTunes Store.

Hargreaves calculated the network fees at $0.05 per song, which includes
the delivery fee, and the hardware and software to facilitate delivery.
"Operating expenses are likely less than $0.05 per song, based on the
relatively small number of employees we believe work on iTunes," he
wrote.

Then, of course, there's the transaction fee -- or royalty paid to credit
card companies each time a sale is processed -- which Hargreaves argues is
"the primary reason iTunes profitability has not been higher
historically." However, he notes hat Apple has recently adopted a
number of measures to limit those fees, such as managing a weekly sweep of
its credit card transactions, broadly distributing gift cards, and by
encouraging larger transactions through services such as
"Allowance."

Therefore, the analyst believes the iPod maker is now forfeiting only around
$0.10 per song per song to credit card firms, compared to as much as $0.25
per song when iTunes first launched. "Going forward, we expect Apple
to continue improving its payment schemes to cut down on transaction fees
and improve the profitability of iTunes," he added.

Based on those cost estimates per song, Hargreaves arrived at the 10
percent margin estimate. Applying that estimate to the $1.2 billion in
revenue that iTunes is expected to generation in fiscal 2007, he believes
the service will generate $0.09 to $0.14 in earnings-per-share for Apple.

"Glenn Meadows"  wrote in message
news:4645d59b$1{at}w3.nls.net...
> Part of what that label exec is comparing, is not "Apples"
to "Oranges".
>
> The micro payments form Real are for RENTAL/SUBSCRIPTION downloads, NOT
> sales.  We see the exact same, but in USD's.
>
> What the REAL situation is, is that virtually ALL of the other services
> sell NOTHING!!!!!!! They're wastes of time and resources, as they have NO
> MARKET SHARE!!!
>
> There are 2 services that are #1 and #2.  Apple, and eMusic.  Between the
> two of them they provide 92+% of all online revenues, period.
>
> The rental/subscription model may have a bunch of people, but as far as
> ANYONE making revenue from it, it's ONLY the services that are making the
> money.
>
> This is true for SONY, WEA, MCA, EMI.  They make virtually NOTHING from
> all of the other services that handle their content.
>
> eMusic is a non-factor for the big four, since at this point, they only
> have contracts with DRM based services.
>
> And as a proportion of all music shared (limewire, etc), the total sold
> number of tracks is probably only 10% of what's going on.
>
> --
>
> Glenn M.
> "Rich Gauszka"  wrote in message
> news:46447de4{at}w3.nls.net...
>>
>> http://www.macworld.co.uk/news/index.cfm?RSS&newsID=17997
>>
>> Apple's iTunes service dominates online music retail, the latest figures
>> from aggregator Digital Music Group (DMG) confirm.
>>
>> The figures emerge as UK labels have begun articulating their compaints
>> at the level of payment they receive from online music services other
>> than iTunes.
>>
>> Speaking on condition of anonymity, one independent label owner praised
>> iTunes because the service hands over the most of the 79-pence per track
>> sale price directly to the label - but is furious at the kind of revenue
>> he's generating through other online services.
>>
>> The label head's comments don't consider the slice of income that's
>> handed across to music publishers, but he's pretty clear that iTunes
>> offers his acts the better deal.
>>
>> "For everything sold on iTunes, we get the majority of the 70-79p per
>> unit sale price," he said, then added: "But for
everything sold on the
>> Ruckus Network we receive the princely sum of œ0.005 per unit. That's
>> half a pence. My distributor then takes their 25 per cent off of that,
>> leaving myself and the artists to dish up the remaining fractions of a
>> penny between us."
>>
>> It's not much better through Real Networks, he informed - for sales
>> through that service, his label receives a penny per track, he claimed.
>> The thousand tracks sold so far have accrued œ10 to the label (to share
>> with the artists) rather than, "the œ790 or so we'd have got
for the same
>> amount of sales through iTunes."
>>
>> iTunes also drives business at international distributor of
>> independently-owned music and video catalogues, DMG.
>>
>>
>
>

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