May 28, 2014
Earlier today, Morgan Stanley’s Katy Huberty told investors that Apple's iTunes revenues dropped 24 percent year over year, and suggested ways the company could replace that income stream. Now we know just how bad things have gotten for Apple, in terms of iTunes sales. For the first time, App Store revenue will soon pass that from the iTunes Store, according to AppleInsider. By the fourth quarter of 2014, Huberty expects that 53 percent of Apple’s online services revenue will come from the App Store. This will compare to 47 percent for iTunes. This would represent a significant drop in just a few months. The analyst estimates that during Apple’s second quarter, the App Store accounted for 41 percent of the company’s services revenue, compared to 59 percent for the iTunes store. By the first quarter of 2015, the App Store could lead 56 percent to 44 percent, according to Huberty. I'm really not surprised the App Store is doing so well, as compared to iTunes. Folks are increasingly turning to subscription services for their entertainment. This means people are less likely to buy movie, TV shows, or movies on iTunes. Instead, people are using Spotify, Netflix, Amazon Instant Video, and other services. See also: With Apple On The Sidelines, Amazon Digs In Over Hachette Book Dispute, Apple To Announce Beats Acquisition This Week At Reduced Price Of $3 Billion, and Op-Ed: Apple Under Tim Cook Is On The Defensive And That Isn't Good.