Text 9469, 182 rader
Skriven 2006-01-31 10:49:34 av Glenn Meadows (1:379/45)
   Kommentar till text 9462 av John Oellrich (1:379/45)
Ärende: Re: iPod business
=========================
From: "Glenn Meadows" <gmeadow@comcast.net>

Again, I'm not privy to their costs and internal overhead to support the
store(s), so it's hard to say.  Our C.O.O. just today, mentioned that the best
guestimate is that Apple gets now, about 25 cents per download to apply to
internal costs.  Most feel that they're not making their money there, but that
at some point, when/if the market saturates on the player sales, that they'll
have to re-vamp the pricing on the stores to make more there.

As to the amount an artist gets, it's all based on their existing contracts,
and that varies from artist to artist, what the rate is, how they're paid and
how the payments are calculated.  It's not a "one size fits all" model, by a
long stretch.

--

Glenn M.
"John Oellrich" <john@oellrich.us> wrote in message news:43ded817@w3.nls.net...
Glenn,

But I think you see my point, even after the labels get their 66%, Apple still
has plenty of cash flow to cover operating expenses and turn a profit, the
question remains how much of one. But Apple selling the iPod Nano at a clear
loss would seem to indicate Apple believes that iTunes does (or will in the
near future) spin off enough cash to allow them to subsidize iPod sales.

I used to believe that Jobs was an idiot when it came to both technology and
business (what he did during the gestation of the Mac and then at NeXT should
be proof enough), but it seems he finally got grounded with Pixar and then
returning to Apple. In fact the coup he just pulled off with Disney appears to
be beyond brilliant. Talk about the tail wagging the dog! So I also tend to
believe that he has his shit together when it comes to iTunes.

In my research on this subject I also found that the major labels may be making
out better than you thought, at the expense of the artists. At least from the
articles I read, the artists get 12% from CD sales, but only 6% from iTunes
sales. OUCH!

Oh couple of other points about the iTunes model. One the cost of bandwidth is
obviously plummeting. I now have the equivalent of a 10BaseT to the house for
$70 a month (or ~7T1s on the download side). And the carriers really discount
on the commercial side if you make a reasonably long term commit for a lot of
bandwidth. But I think a bigger key issue is that iTunes effectively doesn't
have any carrying costs, one copy of every tune in its library. If it is a
loser, no big deal, if it is a winner, that single copy can be downloaded
millions of times for very little expansion of its server farms or its network.

--
john

john@oellrich.us
  "Glenn Meadows" <gmeadow@comcast.net> wrote in message
news:43dd28be$1@w3.nls.net...
  I really don't know what it costs for them to run it, but I know it's a
  large staff, large data infrastructure.  I don't know what bandwidth costs
  are at that level either.

  BUT, I do know for a fact that we get 66/67 percent of the sale of each
item
  sold.  I see the sales reports every month.

  Their percentage they keep is actually LESS than Wal-Mart/Target get on
the
  physical good sale markup for standard retail.

  --

  Glenn M.
  "John Oellrich" <john@oellrich.us> wrote in message
  news:43dbfbde@w3.nls.net...
  Glenn,

  I'm pretty sure I read that Apple has been getting a much larger chunk of
  the music sale than that. But now I can't remember where I read it.

  As Apples revenues on iPods, of course it is a major contributor. The sold
  over 11 times more iPods than Macs of all flavors (14 million vs. 1.25
  million) in the last quarter. And for revenue its $2.9B for the iPods,
$1.7B
  for the Macs (or $207 per iPod and $1,724 per Mac). I would argue that the
  margins are much different for an iPod than a Mac. The Mac benefits from
  using truly commodity components (other than the CPU, but going Intel will
  solve that nasty little problem) where Apple benefits from the volumes of
  the entire PC industry. The same is not true for the iPod, a lot of
  comparatively low volume and expensive (smaller ain't cheaper) components.

  When the iPod Nano was released a study of its Bill of Materials (the cost
  of the components) showed that it was in fact being sold at a loss. The
cost
  of the flash in the device alone was around 40% of its list price. The
total
  BOM for a device should only be roughly 33% of its list price is the old
  rule of thumb. The speculation was Apple priced it as it did for one
reason,
  boost iTunes downloads.

  The revenue from iTunes last quarter was $491M (not a pure number, Apple
  rolled up some other revenue sources in the number as well, but iTunes is
  probably the lion's share). Let's ignore the fact that this isn't a pure
  number and go with your 2/3's back to the studio (oops just did a Google,
  Apple gets a tad over 34%). 34+% of $491M is $168.4M or $56.1M per month.
  How much do you really think it costs Apple to run iTunes per month?
  Whatever, it is not going to be anywhere close to $56.1M. Overall in
Apple's
  profits, yep iTunes is small potatoes, but a potato that is growing very
  rapidly.

  --
  john

  john@oellrich.us
    "Glenn Meadows" <gmeadow@comcast.net> wrote in message
  news:43db9005$1@w3.nls.net...
    John,

    I've got to side with Rich on this.  Apple does NOT make any appreciable
    profit on the store.  2/3 of the revenue from the sale of a track goes
to
    the label who owns the copyright (actually it's going up another few
  percent
    shortly).  Then from that, Apple has to pay the full staff that runs the
    store, does all the previewing of the music, etc. Plus, they pay the
  (Apple
    pays) the CC processing fees from their portion, as wall as all the
    bandwidth costs, customer support calls,etc.  And, for most of the
majors,
    they do all the encoding and processing of the new material (at least
they
    did for the first year to get it going).

    Within the industry, it's fairly well known, that Apple makes virtually
    nothing on the sale of the music, it's the drive of the content to sell
    iPods.  I believe that a recent news story I read said that they're
making
    as much, or more on iPod sales, than they are on computer hardware
sales.

    The iPod profit is a very large margin all the way through the retail
  chain
    is suspect.

    --

    Glenn M.
    "John Oellrich" <john@oellrich.us> wrote in message
    news:43db849c$1@w3.nls.net...
    Rich,

    Nope it is the other way around. Well they do probably make a profit on
  the
    iPod, but it has no where near the margin of iTunes.

    --
    john

    john@oellrich.us
      "Rich" <@> wrote in message news:43db18e3$1@w3.nls.net...
         Doesn't apple make money on the ipod hardware and little to none on
  the
    itunes store?

      Rich

        "John Oellrich" <john@oellrich.us> wrote in message
    news:43da8441@w3.nls.net...
        Talk about stupid! Yet another money losing piece of hardware where
  they
    will try to make it up in the volume ;->

        ...

        I would suggest that MS might be better off working with Creative if
    they want to blunt Apple's dominance in this arena. Get Windows Media 10
    ported to the device, and then MS could use MSN for the delivery vehicle
  for
    the purchased media which is where the real money is.

        --
        john

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