Edible Apple

There was a plethora of information discussed yesterday during Apple’s earnings conference call, but one item that seemingly flew under the radar was the performance of iTunes during Apple’s most recent quarter. Historically, iTunes has been a break-even proposition for Apple and has been positioned largely as a means to sell high margin hardware. The iTunes of today, however, is markedly different from the iTunes of 5 years ago. Whereas music used to be the only content available on iTunes, users today can purchase and download movies, apps, television shows, and books.

The result is that iTunes may slowly but surely be turning into a significant money making item for Apple’s bottom line. Tim Cook noted yesterday that iTunes, during the Q2 of 2011, generated $1.4 billion in revenue. That’s nothing to scoff at, with Cook noting that it represents iTunes’ best quarter in Apple’s history. To boot, Cook also boasted that the iTunes Store handled over 100 million iBook downloads during the quarter gone by. During the same quarter a year-ago, revenue from iTunes came in at $1.1 billion.

While we’re not privy to the cost of running the iTunes Store, and hence unable to extract the profitability of iTunes for Apple, record revenue of $1.4 billion suggests that iTunes may be on the brink of becoming a decent source of revenue for Apple. WIth total revenue of $24.67 billion for the quarter, revenue from iTunes accounted for 5.9% of Apple’s total revenue this past quarter.

Undoubtedly, part of the reason why iTunes is becoming more of a profitable cash cow for Apple is the influx of apps. As opposed to music where Apple makes close to nothing, app sales yield Apple a 30% cut of revenue, which over time must add up to a nice chunk of change.