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I don't believe it for a second when Apples suggests that their 30% cut merely will cover their costs. There is money to be made from the App Store, both for Apple and for the developers.
How much does people spend on mobile content?
Example: Norway is a small country in northern Europe with 4.5 million people. There is 4 million mobile subscribers in Norway, about the same as the number of iPhones sold. The total market for mobile content is about $200M. (These numbers are a couple of years old and were growing.) So on average every subscriber purchased mobile content for $50 yearly. The figure is the total turnover on the two available billing mechanisms, "Premium SMS" and "wap-billing" for all Norwegian operators. The figure is gross payout (including sales tax) from the operators to the content providers. Mobile content billed otherwise is not included but is probably negligible.
The revenue was divided in these categories:
- $20M Directory services (people looking up phone numbers via SMS)
- $30M TV-interactivity (typically voting by SMS for televised competitions and reality shows)
- $30M Adult
- $80M Phone Content (40% ringtones, 40% games and 20% other content)
(The last couple of years ringtones have lost share while games and other has increased.)
Average spending was $50 per year, but that does not mean that every subscriber spends the same amount. For example, the age group 20-29 spends twice as much as the average. In fact, most people don't buy content at all. I don't have exact numbers, but our educated guess was that around 15% of the subscribers did ALL the shopping. That of course makes each buying customer even more valuable.
So, are iPhone owners "big content spenders"?
You can argue that the iPhone is a luxury item sold in fashion stores to people that just want to flash their elite status. Or you may argue that the iPhone is every geek's dream come true, and that that they can't wait to stuff their phone full of fun, useful, bizarre and/or interesting applications. Apple probably knows, but I don't, so I won't make a guess. No, I won't. No.
Ok, ok: I think iPhone owners will purchase more music, video and applications than other phone owners. The reasons I believe this are many, probably the subject for a separate blog post. Basically, the demographics align. And shopping phone content on most operator portals is a deeply broken experience: not receiving what you pay for, unethical business practices (like inadvertently being signed up for a subscription that you can't cancel without changing phone number) etc, etc, etc. Compare with iTunes. Apple knows how to move goods smoothly and quickly past the checkout counter without hassle or unwanted surprises.
App Shop revenue
Of the above $50 per user mobile content revenue, only "Phone Content" would be sold through the App Store. So let's say $22 is a reasonable revenue per iPhone owner. (Compare this to music sales on iTunes. Each iPod owner buys $15-$30 worth of music per year on iTunes.) On what will the $22 be spent? Mainly on games.
By the end of this year, if Apple has sold 10 million iPhones, this would mean a $220M turnover and a $66M contribution for "running the store". By next year end, if Apple has sold 25 million iPhones (analysts prediction) Apple would receive $165M for running the store.
Man, this was easy! I could become an financial analyst. He-he. Maybe not. If you think Norwegians in general are very different from iPhone owners in general, adjust the numbers to your liking. But I believe a $22 per user turnover is likely for the iPhone App Store.
Good analysis. I found this rather old post accidentally as I'm researching similar stuff at the moment. Where did you get the numbers for Norwegian mobile content consumption?
Posted by: Teemu Kurppa | January 07, 2009 at 16:01