Re: Why DRM Can Never Succeed — ps Enable

[Greg Titus]

On Feb 17, 2007, at 7:57 AM, Jeffrey Hergan wrote:
> "Apple makes its money on ipod sales, not on song sales."
>
> I have a very hard time believing that is anywhere near true.   
> Certainly there is decent profit from song sales, especially  
> considering the vast quantity of songs being sold.

Yearly net sales for 2006, from Apple's 10-Q:

iPod: $3,427 million
Other music related products and services: $634 million

Apple's margins for hardware were around 30%, but they don't break  
them down by product line. I'd expect the iPods to have even higher  
margins than the Macs. Conservatively at 30%, Apple made a profit of  
around $1,028 million on iPods.

The label's share of music sold on iTMS is about $.66 per track,  
leaving $.33 for Apple. Even if all of "other music related products"  
was iTMS, and even if they have zero expenses for servers and credit  
card processing and et cetera, that would be a profit of $209 million.

So even with all the assumptions in favor of the iTMS and against  
iPods, Apple makes 5 times as much money on the iPods as on the song  
sales.

	- Greg