A new research report on Apple helps shed some light on the Cupertino giant’s services business and may offer more insights into its recent Beats acquisition.
The report, authored by Jan Dawson, Chief Analyst with Jackdaw Research, offers an overview of Apple’s position across a variety of categories, as well as it growth prospects in various sectors.
Dawson singles out a category he dubs “iTunes, Software and Services” as a new growth engine for Apple. This area is comprised of content and apps sales made via iTunes, software such as Final Cut X and Logic X and services, such as iCloud, AppleCare and the Made for iPhone program.
Unsurprisingly, iTunes revenue makes up the largest portion of this category. Historically, iTunes revenue has been largely consisted of sales of music and movies. In recent quarter, however, sales of music and movies have slowed and declined, while revenue from iOS apps has sharply increased.
The shift from content to app revenue makes a lot of sense; digital music revenues are down, thanks to consumer shifts to subscription streaming services such as Spotify.
What is notable is that according to Jackdaw Research’s analysis, apps revenues in Q1 2014 is basically where digital content revenues were in Q3 2010. That kind of sharp shift shows huge potential for growth, even if content revenues continue to drop.
Users spending the same on apps as music
Even more telling is a chart that looks at the average amount an iTunes customer spends each year on content or apps.
In Q4 201, the average iTunes customer spent about $25 a year on content purchases. By Q4 2013, that figure was down to under $10. Now, part of this can be attributed to a larger base of users. More users, especially in markets where content offerings may be limited, will lead to a lower per-user average.
What’s interesting, however, is that the average amount of money users spend on apps each year is actually slightly increasing. This could be related to a rise in-app purchases — a trend we discussed in depth last year.
Still, I couldn’t help but be struck by the fact that as of Q4 2013, the average amount of money iTunes users spend on content per-year is almost equal to what they spend on apps.
That tells us two things. First, there is the potential for app revenue to help pick up the slack for declining digital music sales. Second, there is real opportunity for Apple in streaming music subscriptions.
Although I contend that Beats’ hardware business has more intrinsic value to Apple than its streaming service, with the right push, Apple could easily continue to grow its iTunes revenues by double-digits (as it did last year).
Source : Mashable