Apple Losing Money on New Movie Sales?
The Wall Street Journal claims that Apple is actually losing money with each new-release movie sold on iTunes. Apple announced yesterday that they would now be offering many movies for sale on iTunes on the same day as their DVD release.
These new movies cost $14.99, but according to "a person familiar with the matter", Apple is actually paying the studios close to $16 per sale for these new releases. While this price may be less than what the studio might charge for traditional retail sales, the actual profit margin on the digital distribution is much larger.
This approach is consistent with Apple's insistence that the iTunes Store has always intended to run at just above break-even in order to drive hardware sales.
These new movies cost $14.99, but according to "a person familiar with the matter", Apple is actually paying the studios close to $16 per sale for these new releases. While this price may be less than what the studio might charge for traditional retail sales, the actual profit margin on the digital distribution is much larger.
This approach is consistent with Apple's insistence that the iTunes Store has always intended to run at just above break-even in order to drive hardware sales.
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49 months ago
i believe it is
1) apple has many economists smarter than any of us on the matter
2) so long as the store runs just above break even, it's fine..only adds to the service provided by apple
1) apple has many economists smarter than any of us on the matter
2) so long as the store runs just above break even, it's fine..only adds to the service provided by apple
49 months ago
It's also somewhat of a humble-pie thing for Apple to do in light of their apparent negative image with the big media companies, no?
49 months ago
This makes sense. It's clear movies have not taken off as well as Apple hoped. they want to drive movie sales on iTunes, and they had to pay a higher price for it. lose a small amount of money on movie sales to build marketshare.
arn
arn
49 months ago
I like their approach, but is that smart financially?
Ignore comment number 2, your Jobness :)
We all like, end of.
I agree, but shouldn't it be above break even, instead of losing money? (even just above). However, if they are using to try to make more people go with a mac/hardware(iPod) sales, and they regroup it (and more) there, than it makes sense.
Edit: arn's reasoning makes a lot of sense too...
49 months ago
I think they are looking more at this as an investment opportunity rather than turning a profit (breaking even). They want to get as many releases and have them available for distribution as soon as they are available on dvd. The traditional movie theaters days are numbered, soon to be replaced by digital distribution. Apple is trying to get as large a foot hold in that as possible and making the lost revenue up by selling Apple TVs and iProducts.
49 months ago
Man, now I feel like I'm screwing Apple out of $1.01 every time I purchase a movie from iTS! I'm sorry Apple! ;)
49 months ago
this makes sense from a strategic point of view, this will help them build more marketshare and help them sell more apple tvs as well
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