Xbox, iTunes, and the massive money found in selling entertainment

Xbox, iTunes, and the massive money found in selling entertainment

iTunes is a big, profitable business for Apple. Revenue for the iTunes marketplace rose 32 percent in Apple’s most recent quarter to more than $4 billion. According to the Apple, iTunes is on track to bring in $16 billion in 2013.

That’s exceptionally impressive. However, when those numbers came out, a certain figure component to the news was interesting: According to Asymco’s analysis, each iTunes user spends around $40 per year on the platform. Frankly, I find that number strong.

However it reminded me of a bit of Microsoft arcanea that I wrote about the other week, based on that company’s most recent quarterly report. Microsoft had, in a phone call, informed that transactional revenue on its Xbox platform outstripped that of subscription revenue. Or, among those who pay, they spend more money buying content and the like on the Xbox platform than they do paying the company directly for access.

A year’s subscription to Xbox Live will set you back $60. Therefore, for the 23 million or so paying subscribers to Live, they are generating at least $60 per in additional revenue for Microsoft, per year.

That indicates that Xbox Live subscribers generate, on average, more than $120 per year for Microsoft, in terms of top line. That is roughly $2,760,000,000. Naturally, the aggregate figure pales in comparison to Apple’s titanic $16 billion iTunes sum, but it does help to belie an important point for each company: Control the platform, and you control the marketplace; control the marketplace, and the spoils are yours.

Apple, Microsoft, Google, and Amazon control the lion’s share of the world’s music, app, and book distribution platforms and channels. And they are taking their fee.

This is a reminder of just why each of the above companies both control their own application and other content marketplaces, but also sell hardware to support those shops. The money, is massive.

Top Image Credit: Jo Jakeman

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