iTunes now costs $1.3 billion/yr to run

And what good is a marketplace with some of the worst discovery ever? I mean, there are now hundreds of thousands of apps. Finding high quality apps on the app store is like finding a needle in a Utah sized haystack.

I much rather do my own marketing, have a user download the app off my website or heck, Amazon (which actually has a decent recommendation engine).

And keeping junk out? Have you seen most of the apps? I mean the number of them that haven't been updated in years is staggering. The number that are essentially clones churned out by some make-an-app framework is ridiculous. The signal-to-noise ratio on the app store is awful.

Credit card processing? Not having to do anything is worth 4-5%.

AFAIK only if they're large enough to make a dent in overall AAPL financial picture.

Saying that iTunes is run a bit over break even – which Apple did during their conference calls – while making something like 300 million is very likely illegal and not something Apple would do.

If we add the content margins from music and apps ---> and assume the store runs at break even <--- we can get an idea of what it costs to operate the store.

Asymco's analysis always seems to have some completely unsupported claim at the center of its logic, thrown in almost as an aside. The portion marked with arrows is the questionable bit this time. While the numbers aren't broken out directly in their market filings, it is both obvious from their behavior, and support by quite a number of analysts that the App Store(s) return significant operating profit to Apple.

Cook suggests they run the service "just a bit ahead of break even" which would suggest that they're up instead of down, but even that presumably dubiously includes a large swath of media buys that are arguably more promotional for the ecosystem as a whole than simply getting iPhone users to go buy an album or app today. There's a reason that they don't break it out: pissing off their content partners.

Think about it. You don't fight tooth and nail for 30% on bringing content in house (ebooks, etc.) if you're somehow only going to break even on it or worse.

Just on the face of it, it's wildly improbable that you could spend over a billion dollars operating ITMS.

In other words, "the infrastructure for the store and payments to everyone other than artists and app creators costs $1.3b a year, but Apple's 30 percent cut of everything produces about $1.3b a year in revenue, so it all works out."

Free apps still need a $99/yr developer fee, though one could submit a whole lot of free apps.

iTunes TV, on the other hand, is probably more profitable, due to higher unit cost. Books almost _must_ be profitable, because they're in the same range as Kindle books, and Amazon wouldn't be pushing ebooks (and thus damaging their traditional book market) so hard if they couldn't make a profit on them.