Interesting position piece on Apple in BusinessWeek today:
Apple, Tear Down This Wall
One sentence caught my eye:
"IPod sales still account for 40% or so of Apple's revenue, and let's face it, the iTunes Store exists to sell iPods."
I wasn't sure about that one - seems in some ways like iPods exist to sell iTunes. So I took a look at iPod sales compared to iTunes (listed as "Other Products/Services" in Apple's SEC filings. In 2005, revenue in the iTunes category was about 1/5 of iPod revenue. But this year, it looks more like 1/4. As the MP3 player market matures, seems like we should expect music sales to become more of the reason to get players into the market. MP3s also have fantastic margins, no inventory, no logistics, etc. I dare say you might see certain brands (probably not Apple) dropping device prices to the floor.
It wouldn't be the first time we've seen this strategy, with Microsoft
losing big bucks on XBOX360 in support of more profitable game sales.
What do you think?