Steve Jobs wasn’t right about everything. He pushed a mobile-browser centric model on to the first incarnation of the iPhone, but had to quickly shift gears and go the app route. Now those very same apps are turning into a massive cash cow for Apple and are key driver of its profits. Apple’s iTunes, Software and Services revenues will nearly double from $16 billion in 2013 to $32 billion, according to Macquarie Capital Research.
Much of the growth is going to come from Apple’s App Store, Macquarie analyst Ben Schachter estimates, and points out that App Store is a key driver of profits. In a research report shared with his clients, Ben pointed out that in the near future, the iTunes/Software/Services line will be renamed Services and will include Apple Pay revenue. Here are some highlights from the report and 4 charts that tell Apple’s app-side story:
- Video games continue to dominate the App Store charts and drive the vast majority of App Store revenue (est. 75%+) for AAP
- Similar to the last two years, non-gaming apps remain under-represented at the top of the charts, with just one of the top 10 grossing apps, two of the top 20, four of the top 30, and five of the top 40 in the App Store for 2014
- The App Store alone reached nearly $10 billion in sales in FY 2013 and we think that this can grow to nearly $20 billion by FY 2015
- Net App Store revenues to pass gross iTunes revenues in dollar terms (both as-reported) in the second half of FY 2015.
- Of the $1 in App Store sales, 24 cents is operating income while remaining 6 cents are spread across operational expenses and costs-of-goods-sold.
These charts are worth checking out!
