yes apple understands the market, but you got that market all wrong, Apple makes their money on the ipod sales, not itunes sales, they hardly make anything on selling music because the big studios have a monopoly grip on the music, and Apple had to hand all those profits over to get them to even try the itunes experiment...

the studios are so stupid from being monopolies that they have to have someone else show them how to sell their music and at what price... people have to actually convince them to do things correctly and make money through pure will.....

jon.

You stated that "The retail store base, 173 strong, will be the focal point for iPhone sales and services." By my calculation, Apple currently has 177 stores open throughout the world, with #178 opening in Birmingham, Alabama this Saturday.

Jon, you may want to check your facts but Apple makes at least 50 to 60% on iTunes music sales. Why would they sell music on iTunes if they weren't going to make any money. That would be pointless.

It's not like they wouldn't sell iPods if they didn't have the iTunes Store.

Ben, I'm pretty sure the iTunes store first opened so that iPod owners (Mac users only back then) could access digital music sold online. At that point, it was all Microsoft-only - and in fact mostly still is bar iTunes and a few smaller joints. Any profit on the revenue is sure to be welcomed but I thought it was of secondary importance and from what I hear it still isn't much more than break-even. You sure it's 50% - 60% ?

Ben -

Apple makes 50%-60% on iTunes sales? How do you figure that?

On a sale of $.99, the RIAA (i.e. the recording companies et. al.) get $.65 off thetop. That leaves $.34 for Apple (or almost 34% for those mathematically inclined). Of that $.34 Apple pays for web site (design, maintenance, support, etc), micro-processing of credit cards, salaries, PR, and who know what-all-else.

Bottom line is that Apple is making about $.06 profit per song sold.

@jon,

apple may not make much money on itunes songs right now, but that will change as more consumers move to an all digital purchase cycle. digital downloads currently represent about 3-5% of the total music purchases at that rate apple is selling about half a billion tracks per year -- that's $150 million a year. now consider that apple won't be able to maintain their 85% market share of the download market. let's knock them down to 30%, that's roughly 600% to 1000% their return now or roughly between $1 and $1.5 billion dollars a year. not all of that will be profit, they have to pay for servers, storage and bandwidth, but all three of those items are rapidly coming down in price.

then let's throw in the television and movie side of itunes. if they can capture say 10% of 2005 sales/rentals and you can count on another $2 billion.

personally i think those figures are conservative and apple will see $5 billion in annual revenue from downloads by 2012.

I am so glad for Apple, but proprietary markets tend not to last, especially when none of the profits from the residual revenues are put back in the hands of the music lovers. I became a retailer on burnlounge www.burnlounge.com/LighthousePTmusic as has many of my friends, and althought I bought an iPod from Apple, I now buy the digital music for my MP3 player from myself, as do all of my family.

The next step the Apple I-Pod that would be revolutionary is make that device wireless. Gone would be the cubersome, tangled-mess the earbud wire. This could be done via a transmitter,or molded into a headphone in a self-contained unit over the head.

"The Secret" has many references to positive thinking, I agree with Scott, why continue to support proprietary when you can get compensated for your own purchases and those of your family, friends and communities and social networks. Check out mine www.burnlounge.com/TheSecret