It has been long assumed, and alleged by Apple, that the iTunes service just barely breaks even on selling individual tracks for 99 cents. But a recent analysis by PacificCrest analyst Andy Hargreaves suggests Apple may be raking in as much as 10 cents per song sold these days.

Key to the profits are the growing popularity of prepaid cards. Besides music licensing fees, one of the greatest costs to Apple for each song sold has been credit card fees. Between the increased use of prepaid cards, and Apple's ability to negotiate better rates through it's massive sales volume, Hargreaves estimates Apples' operating profits for iTunes now run as high as 10-15%.

A full breakdown of Apple Insider's math is as follows:
Wholesale cost/licensing -- Apple pays major labels about 69 cents for each song bought, while it pays indie labels only 60-65 cents.
Network fees -- 5 cents
Transaction fees -- 10 cents
Operating expenses -- 5 cents
Operating profit = 10 cents (based on a 99-cent song)

Hargreaves also believes a subscription service is over a year away, but when launched will likely charge between $10 to $15 a month and result in another $900 million in annual revenues.

For more information, see the Apple Insider post.