Apple’s iTunes store has sold some 10 BILLION songs, currently at a rate of over a billion songs a year. Apple reports iTunes revenues as follows:
2006 : $895 million
2007 : $1.20 billion
2008 : $1.59 billion
2009 : $1.80 billion
Apple has insisted for many years that this is just a break even scenario, and that it doesn’t make any profit on this, and that it uses iTunes to sell more iPods/iPhones/iPads. Soooo, hard to believe, but a really smart bluff nevertheless. You’d really want to distract your competitors into sinking resources into a similar system without expecting any profit, or possibly even making a loss.
Enter Nokia. Remember, Apple’s true competition is not Microsoft, as many people believe. The fight is no longer about PCs; it’s about the pocket PC, the mobile phone. Apple’s biggest competitor is actually Nokia who is by orders of magnitude the biggest phone maker in the world (and the biggest camera and GPS maker). Despite all the hype, Apple’s phone sales are completely insignificant compared to Nokia’s… a fraction of a percent at best.
In Africa, the biggest growth market in the world, Nokia controls 40% of the phone market. Apple controls less than 0.5%. Today Nokia gave out some impressive stats around the uptake of its iTunes-like service, called Ovi. This online store includes neat maps and navigation tools, and a deep-and-wide music and application store.
Here’s what works: if you want to sell applications on to phones, forget about the iTunes store. For local and global reach you really, really want to be in the Ovi store. Nokia straddles the globe as a runaway market leader in almost every phone market worldwide. Apple? Barely represented in most emerging markets, where all future growth is coming from. Especially true in Africa, where Nokia is the market share leader in almost every single country.
Here’s the clincher. In South Africa, Nokia hands 70% of the money generated back to the application developer and Voda/MTN/CellC takes pretty much all the rest. So Nokia is either running the Ovi store at a loss, or certainly without any possible profit. Nevertheless, Ovi user stats are climbing steadily upwards, which is the desired effect, I guess.
Rumours have never quite gone away about possible Apple iTunes profits. Some are now guesstimating that up to 15% of iTunes $1.80 billion may be pure profit. It’s not just that Apple has managed to hide this revenue source, of course. A far bigger coup is that they may have mislead their biggest competitor, Nokia, into a building a massive, worldwide shop front and to give stuff away for free in a bid to compete with the phone minnow that is Apple.
Internet doyen and my reluctant mentor, Irwin Manoim, always knew content would be king. His analogy was with television. The first mega TV companies were RCA and Magnavox who made the hardware. Today the hardware companies have been wiped out and TV turned into disposable, generic products. What remains are the networks, the content creators.
Thing is, I reckon the smart people at both Apple and Nokia know this, and they’re looking to own the virtual, global hypermarket where you’re going to buy all your content in the future. I think the non-profit play that is iTunes and Ovi today is simply a clever ruse.
Six years ago I saw a prototype CELLPHONE in Korea which had a digital TV receiver, 100GB storage and tiny projector mechanism built-in. Which all fits in your pocket. The revolution will indeed not be televised. It will be downloaded. From a media hypermarket.