Apple and America Online

[ssurgeman]

Originally posted by bousozoku


At least, the bumbling crowd that is AOL won't mind the heavy-handed compression Apple uses.

Not sure how you can call FairPlay heavy handed. I mean sure its not unrestricted open Ogg files. But lets not forget how much of a break Apple got compaired to other legit services at the time. You can't have it all and this as close as it gets.

On a side note now that AOL is in the iTMS boat whta about MusicNet which is their current partner? I mean they are competing services and I belive that AOL/TW owns a chunck of MusicNet. Anybody hear anything about this? Cuz as of 9:30pmeastern AOL music only lists MusicNet.

Also although I don't think AOL is great by any means I do think they serve a market, one that none of us are in. New users willing to pay a bit more for "simple internet" in a sence like a mac user, exept that Macs are alot better than AOL. But still Macs are better and we pay a (teeeeny) premuim, AOL is easier than others and they pay a much bigger primum. My biggest gripe with AOL is how they destroyed Netscape. Still I have no problem recommending AOL to a new user. I personally have not had bad experiences with their support.

 

[weave]

Re: Re: Re: Business acumen

have investors always been so conservative?

Take a look at SCOX sometime!

 

[greenstork]

Originally posted by Phil Of Mac
I don't think this is that much of a risk at all, iTMS is already profitable, and with an expanded user base it'll be even more so. And AOL will guarantee even more customers.

iTMS is not profitable. When will people get it - it's all about the hardware. It's not a moneymaker, it's a gateway drug.

Read this story straight from the horse's mouth:

Will iTunes make Apple shine?

 

[bousozoku]

Originally posted by ssurgeman
Not sure how you can call FairPlay heavy handed. I mean sure its not unrestricted open Ogg files. But lets not forget how much of a break Apple got compaired to other legit services at the time. You can't have it all and this as close as it gets.
...

I said compression, not licencing restrictions. 128 Kbps AAC is not that great, especially for classical music.

 

[billyboy]

Originally posted by greenstork
iTMS is not profitable. When will people get it - it's all about the hardware. It's not a moneymaker, it's a gateway drug.

Read this story straight from the horse's mouth:

Will iTunes make Apple shine?

I think Apple are playing down the token but useful revenue they might get from the store. You saw what just happened to the stocks - one of the reasons being their gross profit margins dropped by .5%. iTMS profit will be small but with the volume they are hoping for, it should prove to be another useful string to their bow to keep the stock market happy. ie

Apple made $44m net profit this qurter. The maths on the projected 100 million tracks, at even 5 cents net for Apple adds up to $5m profit. Its not a lot over a year and like you say, the other $95m "lost" is the lure for iPod sales, but if they say now that itms is not going to make profits, the ****ing Wall Street analysts make projections based on that. Come next quarter iTMS might possibly chip in a million or two "unexpected" profits and AAPL has outperformed. Psyche out the psychers, Jobs is quite good at that.

 

[greenstork]

Originally posted by billyboy


Apple made $44m net profit this qurter. The maths on the projected 100 million tracks, at even 5 cents net for Apple adds up to $5m profit.

I think there's a misunderstanding in terms here. Profit = Revenue - Expenses.

Right now iTMS is heavy on expenses like advertising, R&D, bandwidth, maintenance, etc. and it's not a winning venture. In time, with many more users, it may turn a modest profit but nothing compared to hardware sales.

edit: It's going to take more than a few million extra for Apple to exceed analysts expectations.

 

[DigDug]

iTMS has profit potential

Despite what analysts and Apple execs may say (boy, it sounds pretty ignorant to start a post like that, but I'm going to soldier on), I think iTunes Music Store can be profitable. Look at it this way: the record industry has been selling CDs for c. $15 for the past decade, and making huge profits, with very little additional income source (remember that performance and merchandise income rarely goes to the label). It's well-known that CDs cost more than they need to. The record could sell them for less and still make a tidy profit. Now, consider that maintaining an online service can cost less than physical distribution (actually getting it there is of course a major challenge) and voila: profit. The big challenge is getting to critical mass: the cost to be in business is enormous (R&D,bandwidth,marketing) but at a certain point, the marginal cost increase to serve each additional download starts to decrease, while the income continues to scale linearly. So it's all about market share -- and increasing the size of the market itself.

Yes, the real money's in the hardware. But that doesn't mean the music has to be a loss leader.

-DigDug

[edit:] hey, check it out: greenstork already said exactly what I said. Okay, so -- right on, dude!

 

[yamabushi]

I agree with DigDug. iTunes will be very profitable. The partnership with AOL costs Apple very little and offers them millions of potential customers. iTunes on Windows has only development, bandwidth and marketing costs. These costs will likely be easily covered even under very conservative sales projections. I think Apple has a winner for now with iTunes. Lets just hope that they don't neglect development on Mac hardware and software.