How Much Money Did Apple Make In 2018

Analogy by Alex Castro / The Verge

How Apple tree makes billions of dollars selling services

Breaking downwardly Apple'southward new focus — from Apple Music to accounting tricks

By Mar 20, 2019, ix:00am EDT

Apple tree'due south focus is shifting. In recent years, iPhone sales have begun to plateau, and now Apple'south services business — which encompasses everything from the App Store to licensing deals — is beingness positioned as its next big borderland for revenue growth. More than ever, Apple wants to sell people constant, ongoing subscriptions for things they can do on their phones.

That new direction is going to exist thrust into the spotlight next calendar week at Apple'southward "It's Testify Time" result, where the company is expected to unveil two big new subscription services: a TV service for original shows and movies, and an Apple tree News service that will bundle together premium news sources and magazines.

Apple'south services business brought in over $10.9 billion during the about recent quarter, setting records in "every geographic segment" in the process, according to Apple CEO Tim Melt. Cook also said that Apple is on track to double its services business from 2016 to 2020. Terminal quarter saw a xix percent increment yr over year.

It's a substantial figure compared to Apple tree's other business segments: services already brings in more per quarter than the Mac ($7.four billion terminal quarter), iPad ($6.seven billion), or the nerveless "Wearables, Habitation, and Accessories" group of products ($7.iii billion). And that balance will likely only continue to shift as Apple starts to push button services harder and introduces new services to which people can subscribe.

So what'due south already bringing in all that services revenue, and how salubrious are those businesses? Apple doesn't suspension down how much money individual services make, then there's a large extent to which nosotros merely can't say. But we exercise know what businesses the segment is composed of, how much they charge, and whether they're any good. With the services business organisation entering a new era, here'southward an overview of where it stands today.

Photo by Amelia Holowaty Krales / The Verge

Apple Music

Apple Music is arguably the highest-profile entry in Apple's new services business, due to information technology being 1 of the most modern (it launched in 2015, after Apple tree bought and rebranded Beats Music) and i of the most interesting (deplorable, extended warranty programs).

The music subscription service had 56 million customers every bit of December 2018, according to the Fiscal Times. For comparison, Spotify had 96 million paid customers as of Feb 2019.

It's unclear how many of Apple Music'south customers are actively paying. The company offers free trials, and its service likewise comes bundled with some Verizon wireless plans.

Bold all customers are paying $10 per month (with family plans, annual discounts, bundles, and student deals, they're non, but this is ballpark numbers hither), that puts Apple Music at a high-ball judge of $6.vii billion per year brought in.

Price: $10 per calendar month ($v per month for student plans, $15 per month for family plans)

How Apple tree makes coin: Subscription fees, carrier partnerships.

App Store / Mac App Store

Probably ane of the biggest contributors to Apple tree's revenue is the massively popular App Store, which was estimated equally of May 2018 to take seen upward of 170 billion downloads in its x-year history.

Most of those aren't directly-up paid purchases — a massive per centum of the App Store's revenue comes from in-app purchases in free-to-play games like Fortnite and Processed Trounce and subscription apps like Netflix, Tinder, and YouTube. According to App Annie's latest estimates, every single one of the 50 top grossing apps on the platform is either a major service that relies on subscription fees or a free-to-play game. Fifty-fifty the about popular paid apps similar Minecraft or Facetune simply don't make the same kind of money as costless apps that rely on in-app purchases, fifty-fifty with in-app purchases to assist bolster their numbers. And Apple tree takes a cut of each of those in-app purchases and subscriptions.

Those "gratuitous" apps accept resulted in some pretty big sales: as of June 2018, Apple had paid out $100 billion to developers from the App Store. If you lot work off of Apple'south 70 / xxx revenue separate (which is unremarkably, but non e'er, the cut it takes from purchases), you get total sales of roughly $142 billion, with $42 billion of that going to Apple in the decade information technology'due south been running the App Store.

That said, Apple has recently come up nether burn down for the App Store model in the past few months: the Supreme Count is hearing an iOS App Store antitrust lawsuit that alleges Apple tree has an unfair monopoly on iPhone apps. And Spotify has filed another antitrust complaint over Apple'due south xxx percent cut with the European Union, complaining that information technology gives Apple an unfair advantage when promoting its own streaming service, Apple Music.

Cost: Depends on content purchased.

How Apple makes money: in-app purchases in games, app sales, app subscriptions.

iCloud

Theoretically, every single Apple customer who owns an iPhone, iPad, or Mac is an iCloud user, considering Apple gives a paltry 5GB of storage to all customers for gratuitous. But for revenue, the important part here is the paid plans, which requite users boosted storage for a monthly cost.

iCloud may not have the same brand recognition equally Dropbox or Google Drive when information technology comes to storing and sharing files, but it does have some large advantages in getting users to subscribe: it'south the only way to back upwardly iPhones and iPads to the net. And that storage puddle counts toward nearly everything on your phone. Take too many pictures, for instance, and your phone stops backing upwardly, which creates a real incentive to shell out for more than than the scant 5GB Apple gives for gratuitous.

Apple seems to know that, too: the cheapest iCloud plan is just 99 cents per month for 50GB of storage, making it an easy sell to users, but that $12 per customer per year starts to add up across the billion-plus iOS devices out in the earth, even if but a fraction of them subscribe. A 2016 interview with Apple tree SVP Eddy Cue revealed that at the time, at that place were 782 million iCloud users, simply Cue's comments referred to all users — Apple has never broken out how many paid subscribers information technology has.

Cost: $0.99 per month (50GB), $2.99 per month (200GB), $9.99 per month (2TB). The 200GB and 2TB plans can exist shared as a family program.

How Apple tree makes money: subscription fees.

iTunes / Apple Books

The iTunes shop isn't the juggernaut information technology one time was — with streaming services like Spotify, Apple Music, Netflix, and Hulu, people just tend to buy fewer songs, TV shows, and movies nowadays. But it still does bring in money: it's a one-finish-shop for a huge range of content, and like all of Apple's other services, it's front and heart on all its devices. Want to rent a movie on your Apple tree TV for a movie night? iTunes is correct there, ready and waiting. And with Apple expanding iTunes to other devices, like Samsung smart TVs, it seems like iTunes is still a big part of Apple's revenue strategy going forward.

Also included here is Apple Books, which is basically iTunes, but for books. Apple tree Books has the issue of Amazon and its massive Kindle library as contest, which Apple infamously tried to solve in a price fixing scandal that toll the company $450 meg. Even so, it's still 1 of the biggest ebook stores effectually, and is another easy source of service revenue.

Lastly, iTunes also includes Apple tree'south less popular iTunes Match subscription service, which costs $25 per yr and syncs users' iTunes music across their devices, sort of like a individual cloud music service where you take to buy all the music.

Cost: Depends on content purchased; $24.99 per year for iTunes Match (iTunes Match is included with Apple Music).

How Apple makes money: Purchased content, subscription fees.

Apple tree Pay

Apple Pay is Apple'south overarching payments system — information technology includes using Apple Pay to brand purchases on websites and inside apps, conducting contactless payments at retail stores, and sending money using Apple Pay Greenbacks (Apple'south Venmo-fashion person-to-person payment arrangement).

Apple says it doesn't charge "users, merchants, or developers" to use Apple Pay, but reports betoken that it withal receives a small fee from each transaction. That cut appears to come up from the bank that issued the menu with which Apple tree Pay is being used. Reports from 2014, when Apple Pay launched, said the fee for US banks was 0.15 percent, or 15 cents on every $100 spent.

Last quarter, Apple tree said at that place were one.8 billion Apple Pay transactions, more than than twice as many as the same quarter a year earlier. We don't know how much those transactions are worth, and it's likely that the vast majority of them happened outside the US, in countries where mobile payments are more popular. But that's still a large volume of transactions where Apple takes a cut.

Apple tree as well makes money off of Apple Pay Greenbacks. The service is costless to utilize when sending money with a debit bill of fare, but information technology charges a 3 percent fee for any funds sent using a credit bill of fare.

Cost: Three percent of any funds sent using Apple Pay Cash tied to a credit card.

How Apple tree makes money: Transaction fees from users, banks.

Photo past Chris Welch / The Verge

AppleCare

AppleCare+ is Apple's extended warranty service: it lets customers go longer and more than comprehensive warranties for their Apple products, ordinarily with things like discounted screen or device replacements, depending on the device.

AppleCare+ is also included as role of the monthly price of Apple'south iPhone Upgrade Plan. Like many of the other Apple services, the company hasn't said how many users opt to purchase the extended warranty.

Cost: Depends on product, ranges from $129 to $199 for iPhones, $249 to $369 for MacBook laptops, and $99 to $249 for iMac and Mac desktops.

How Apple makes money: Warranty fees.

Licensing

This isn't quite a consumer-facing service like everything else on this list, but it'south a big business organization. Apple sells licenses to companies to go their services congenital into iOS, like how Google is the default search engine or The Conditions Aqueduct provides weather condition data. That kind of front row real estate on all of Apple tree'south devices is worth a lot, and it provides a large chunk of Apple'southward services acquirement.

Licensing agreements are a especially opaque area of Apple'southward business. The concluding articulate numbers we have are from 2014, when courtroom documents revealed that Google paid Apple $1 billion to stay the default search bar on iOS as office of the visitor's revenue sharing agreement. Just recent estimates from analysts have put Apple'south fee at roughly $9 billion — a number that, if true, would go far one of the biggest parts of Apple's entire service group all on its ain.

Cost: Zero, unless yous prefer Bing for search.

How Apple makes money: Licensing payments from companies like Google to be featured on Apple products.

Maps, Siri, free iCloud

This is where things get weird: Every bit of its near recent quarter, Apple now takes part of the sale price of every iPhone, iPad, and Mac and converts it into money for services, which information technology so spreads out across multiple quarters. Basically, Apple counts "free" services like Maps, Siri, and parts of iCloud (like iMessage), and considers them to exist built into the toll of its devices.

It's a meaningful shift, besides: when Apple tree started factoring in payments for these costless services, its full service revenue for Q1 2018 jumped 7.7 percent, from the originally reported $8.47 billion to $9.13 billion.

Price: Free? But also you lot're technically paying for it when yous buy your iPhone.

How Apple makes coin: Hardware purchases.

Correction: Only Samsung smart TVs will accept the iTunes app, not LG TVs (although those will accept AirPlay two and HomeKit).

Source: https://www.theverge.com/2019/3/20/18273179/apple-icloud-itunes-app-store-music-services-businesses

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