Apple has paid over $2 billion to app developers, $12 billion to record labels | Hacker News Reader

Apple has paid over $2 billion to app developers, $12 billion to record labels

asymco.com

71 pointsssclafani26 comments

Think about this rationally: How much software do you actively use on your computer? I use perhaps 20 types of software. In total, I may have used 50 or 60 different software in my life.

In contrast, I have about 4000 songs. One conclusion that one could make from that is that the app market will stop growing at some point because people will have the software they need. Seems like the logical step.

But I'm in the app market, and the market is not what you think it us. People are not buying utilities, they are buying consumable software. For an example of what I mean, take a look at KreciDevs android apps: http://www.kreci.net/reports/android-developer-income-report...

X-Ray Scanner

Daily Beauty Tips

Those are consumable software and they are the most popular. WP Stats, what seems like more traditional software is the least popular.

And I'm not pulling these numbers out of my arse, I write such software also, and I have 40k downloads a day. FourSquare boasts about gaining 100k users in 2 weeks - I do that in 3 days.

I believe the nature of mobile software is fundamentally different from the nature of desktop software, and that growth could indeed follow the same curve as the music store.

> Those are consumable software and they are the most popular.

I've heard from successful app marketers that the target audience for the App Store is 13 to 14-yr old kids, using their parents credit card on their iTunes accounts.

Apps that are better than anything Apple makes will always do well[1]. But I think we should lower our "standards", our hubris and make something of entertainment value. Something that makes 13 to 14-yr olds look cool. Because peer approval and recognition is everything at that age for most people of that age.

The App Market (Android) and App Store (iOS) and Marketplace (Windows 7) let you reach teenage consumers in a way that doesn't require much marketing, just the right product at the right time.

[1] http://www.macrumors.com/2010/12/28/camera-reaches-over-7800...

I suggest you consider games into your model of the app world. Even if you are not a gamer it seems to be a strong component.

Don't forget that at the moment an "App" is also equivalent to a website.

Apps as entertainment, for most of us probably the complete opposite of eating your own dog food.

Your dogfood can be in the back-end analytics systems you build.

Are your apps mostly free or paid?

70% are free I think, and drive traffic to the other 30%.

Is there a page that has links to your apps?

Is there a link that contains list of your mobile apps?

So, app developers are the new rock stars? Finally, revenge of the nerds! :-)

On a more serious note, this is fascinating data. I wonder what the comparison to web apps looks like, but that's a much harder (almost impossible?) number to get at.

I say fascinating, because who would've thought that having a centralized marketplace with a builtin secure payment mechanism would've created so much value/wealth over such little time, kudos to apple.

"who would've thought that having a centralized marketplace with a builtin secure payment mechanism would've created so much value/wealth over such little time"

eBay. Amazon. Valve. Microsoft (XBox Live).

Apple isn't the sole innovator in this area, a lot of businesses have done excellent work in similar veins. Nevertheless, they do deserve a lot of kudos. They helped cement digital music as fully legitimate and accepted by the music industry. They helped push DRM free music. And they've done good work pushing the boundaries, often in the right direction, in mobile phones and apps.

Jobs reported $1,000M to developers in the lifetime of the app store in Jun '10, so that's for the first two years. (~$1,400M gross revenue)[1]

Now asymco has that doubling to $2,000M in the following 7 months. It's possible, I suppose, but seems quite optimistic.

I don't have the numbers in front of me, but I think it's safe to say that iOS installed base hasn't doubled in the last seven months. I think I recall iOS market share being reported as growing 2% in the last 12 months.

That seems to leave the lions share of the revenue acceleration to increased ARPU. Higher ASP on the iPad may account for some but it's hard to believe it would be enough.

In more traditional stock analyst estimates, Citibank has 2011 app store revenue at "up to $2B" [2]. With asymco's estimates he says we're already exceeding that currently, showing $2.5B in yearly revenue with no growth. If you extrapolate asymco's growth curve that puts 2011 at more like $5B in gross revenue.

I just don't see it. I wouldn't be surprised if the estimated/assumed app ARPD of $0.29 is the issue.

[1] http://tech.fortune.cnn.com/2010/06/23/app-store-1-of-apples...

[2] http://www.intomobile.com/2010/12/31/apple-app-store-iphone/

The smartphone market is exploding (esp. in the rest of the world), so even if Apple's market share stay the same, they will sell a lot more iPhones.

The CDMA iPhone will expand the market even more: think China.

iOS market share only growing by 2%? that subjectively feels wrong, and based only on iPhone growth (and it feels too small for that). In June '10, Jobs would have reported on iOS 3-based sales for iPhone, iPod touch, and merely 3 months of U.S. iPad device count.

Fast forward 7 months and you've got iOS 4 devices and iPads worldwide, spurring different sorts of sales at what feel to me like slightly higher price points (I pay a bit more for iPad or Universal apps than iPhone-only apps).

10% gross margin doesn't mean that the labels get 90%. Bandwidth and storage cost a lot too.

I don't think it is fair to include free apps in the analysis and then ignore the revenue that may have been generated with ads. The article does end with a note saying that $2b was paid out in 31 months for apps compared to the music.

The headline seems to make an assertion about $2B paid to developers.

However, it appears that the $2B number is an asymco estimate. It is not clear how they arrived at this estimate. Does anyone know how the they arrived at the $2B number ?

[edit: Thanks for the explanation, Trotsky. His post didn't mention any download numbers.

However, it looks like he discussed download numbers in a different post. Given those download numbers, his estimates make sense - of course, with all the caveats that you've outlined]

He took the June 2010 WWDC numbers of $1B to developers ($1.43B gross) and 5B downloads over the first two years of the app store to come up with $0.29 revenue per download over the lifetime of the app store. Then he applied that $0.29 per download to new download figures. This assumes that the percentage of free downloads or no cost upgrades has stayed static over the app store lifetime.

Not one member joined in to say he was making any serious money from apps. Interesting.

Apple didn't pay anybody; the users paid, Apple skimmed, the developer got what was left over.

I'd like to see the headline: Apple leeches off of millions of developers.

They're a middle man providing a service that has taken different forms in the past. You can be cynical, but realistically their goal is to make a profit by providing a service which has it's own costs to cover. How much would those developers have reaped without their service?

Lots, lots more. If the Apple their devices weren't monopolistically locked down, or the store was an open market.

Really, you think its worth their cut, just to operate the store? How much overhead would it take you to put up a web store? They only get away with it because they aren't Microsoft.

> Really, you think its worth their cut, just to operate the store?

That's not all they do, though. They build the platform and heavily market it, too.

They get paid for their hardware. Everybody else does too - phones, Android. Apple adds to that a 'company store' model that is unjustified.

They do it only because they can get away with it.

That's a really bad attitude to have.

Does your grocery store pay its suppliers, or does it merely skim and give the farmers what's left over?

If Apple provided no value in the equation you might have a stronger case, but as it is they handle an awful lot, from payment processing to marketing to distribution.

Apple is providing you an audience that's ready to buy, that has cash in hand, and all you have to do is bang out an app they'll hit the "Buy Now" button for. Sounds to me like developers are the ones doing the skimming, at least by your definition.

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