Apple is dominant in the app market, with an exponentially higher number of offerings than the competition. But that doesn’t mean it’s raking in the dough from all that inventory.
According to a new estimate by Piper Jaffray’s Gene Munster, based on Apple CEO Steve Jobs’ comments at the Worldwide Developers Conference two weeks ago, receipts from the App Store have amounted to about $428 million since its launch in July 2008, or just one percent of the computer giant’s $33.7 billion gross profit.
Eighty-one percent of the App Store software is free, Munster said.
He calculated the figures based on Jobs’ statement that $1 billion has been paid to developers. Apple gives 70 percent of its App Store income to developers and splits the difference with payment collectors. The average cost of an app has been placed between $1.49 and $1.99.
“Using a pricing scheme similar to iTunes, with 70 percent ($1.04) to the developer, 20 cents plus two percent of the ASP (23 cents) to the credit-card company, and one percent (two cents) per app for processing (storage & delivery), Apple’s App Store gross margin on revenue from paid apps ($428 million since launch) is about 44 percent, or $189 million in gross profit,” Munster explained in widely published excerpts from his research note. “This does not factor in the roughly $81 million Apple has spent since launch to store and deliver the four billion free apps that have been downloaded.”
It’s all part of a strategy similar to companies like ink-jet printer manufacturers, who create cheap hardware that drives the sale of expensive ink cartridges or other disposables. Only in Apple’s case, it’s reversed.
“Apple uses the App Store to drive hardware sales across its iOS device portfolio,” said consumer-devices research specialist Avi Greengart of Current Analysis. “Its goal is…