Business Matters: If iTunes Is Still Breaking Even, It Could Cost $1.3 Billion Per Year To Run
Business Matters: If iTunes Is Still Breaking Even, It Could Cost $1.3 Billion Per Year To Run

If iTunes is Still Breaking Even, It Could Cost $1.3 Billion Per Year To Run
-- iTunes could cost Apple $1.3 billion per year beyond royalties to publishers, according to an estimate by market intelligence firm Asymco. The estimate was based on numbers Apple has made public, such as a series of statistics in its latest media event.

Whether or not iTunes makes a profit has been debated for many years. Apple CFO Peter Oppenheimer answered that question back in January 2010 when he said iTunes was "a bit over breakeven." And although the statement was made almost a year-and-a-half ago, and iTunes has since grown and improved its scale, it's the last time an Apple executive mentioned iTunes' profitability.

So how much does iTunes cost to run when breaking even? Asymco estimates it takes in $313 million per month and has $113 million per month left over after content costs -- implying Apple keeps 36% of revenue and paying out 64% to content producers. On an annual basis that's $3.76 billion in revenue and $1.3 billion in expenses beyond content costs. If it's running at breakeven -- no profit, no loss -- then $1.3 billion per year is being spent on I.T.-related expenses, salaries, marketing and all the other things that keep a business running.

There is one small problem in its analysis, however. Aysmco mistakenly guessed that expenditures on new data centers were eating into Apple's operating margin. While some of those costs could probably be proscribed to iTunes, only the depreciation of such assets would apply (unless you're looking at iTunes on a cash basis, which is probably not what Oppenheimer meant when he said it was a bit over breakeven).

Nevertheless, Asymco appears to have put forth a pretty good guess on iTunes' basic financial figures. Hopefully Oppenheimer will revisit the topic of iTunes' profitability after iCloud is up and running later this year.

7digital Experiencing Good Non-iPad Download Sales
-- 7digital is seeing good things from download sales on tablets not named iPad, CEO Ben Drury says.

"We're seeing incredible results from BlackBerry and Playbook; we're seeing a huge conversion of Playbook users using the music store, unbelievable ARPU and the tracks they're purchasing is really encouraging for when the Playbook comes out in Europe," he says.

He added that any slowdown in download sales isn't coming from the likes of 7digital.

"You may be seeing flattening in growth, but that's just flattening of iTunes -- we're not seeing flattening in our sales," Drury says.

EC Green Lights Vivendi Acquisition of SFR Stake
-- Vivendi has received approval from the European Commission for its acquisition of Vodafone's 44% stake on French telecom SFR. Vivendi, the parent company of Universal Music Group, already owns the other 56%. The transaction should take place in the next few days. Announced April 3, the deal calls for Vivendi to pay €7.95 million ($US) for Vodofane's stake in the company and SFR and Vodafone to extend their commercial cooperation for three more years.
(Press release)

A Look At Best Buy's Latest Quarter Earnings
-- Looking at Best Buy's latest quarter earnings, the company's bread and butter immediately becomes clear. The computing and mobile phones category was up 4.7% and now accounts for 40% of revenue. Consumer electronics sales dropped 6.8% and account for 35% of total revenue. Entertainment revenue sank 13.1% and accounts for 12% of total store revenue, down from 13% a year earlier.

Although same-store sales were down 1.7%, investors sent the company's shares up 4.55% Thursday. Revenue came in at $10.94 billion, better than the $10.71 billion expected by analysts polled by Thomson Reuters.

"The top line was not as bad as people expected, particularly given the fact that we've continued to have a soft macro environment and we've also seen some supply disruptions," one analyst told Dow Jones.
(Best Buy earnings release, Dow Jones)

CMA Reseach: 42% of Americans Consider Themselves Country Fans
-- Country music often gets pegged as a genre for less affluent, rural people. But last week the CMA research team rolled out some statistics at Billboard's second annual Country Music Summit that put country fans in a different light: 42% of Americans count themselves as country fans, three-quarters of them are home owners and their average home price is $229,000 -- higher than that of the general population.

And while country music sales are notoriously CD-heavy, there are a couple signs that country fans are picking up new technologies. For example, the CMA app for iPhone and Android was downloaded 30,000 times, a 566% increase over 2010. In addition, the CMA has found that country fans are more likely than the average person to use Facebook. And they apparently love SMS messages: 30,000 unique text messages were sent to the LP Field Jumbotrons during last week's evening concerts.

Here are a few more statistics from the CMA Music Festival in Nashville that wrapped up June 12: average daily attendance of 65,000 (up from 56,000 in 2010); average daily attendance of the Fan Fair booths in the Convention Center was 14,000; and fans attended from 27 different nations, including Japan, Poland, Peru, Sweden and Brazil.
(Billboard Country Update, MusicRow)