Apple's iTunes adding 500,000 users each day

Should investor start considering the service as one of the tech giant's key drivers to future growth?

By Benzinga Jun 14, 2013 11:01AM

The Apple Inc. logo is displayed on the back of the new MacBook Pro David Paul Morris/Bloomberg via Getty ImagesBy Tim Parker


iTunes is adding 500,000 new accounts each day, according to Appleinsider.


This week, Apple (AAPL) CEO Tim Cook announced that iTunes now has 575 million users, equating to an average of a half million new accounts per day. At current rates, the company will add 100 million accounts by the end of 2013.


This puts Apple second only to Facebook (FB) in total number of user accounts, and while Facebook may have nearly two times as many users as iTunes, Apple is growing at a faster pace. In 2012, the iTunes account base grew about 55%. Interestingly, Pandora (P) grew its user base by 39%, while Facebook came in third, growing its user base by 25% last year.


Half a million users a day is good as a headline but does nothing for revenue. Investors looking for signs of life in Apple aren't interested in how many accounts the company can set up unless those accounts are making money.


The good news for Apple -- bad news for Facebook -- is that although Apple isn't close to winning the quantity of users battle, it's crushing the competition in quality. Apple generates an average of $329 per account while Facebook generates only $5. Amazon.com (AMZN) is a close second. generating $305 per user.


In April, NPD Group reported that iTunes has a 63% share of the U.S. digital music market -- three times higher than second place Amazon.com's 22%. The company also has a 67% share of digital TV and 65% share in digital movies.


In the latest quarter, iTunes revenue was $2.4 billion -- an all-time high and it's a segment of the business that continues to grow rapidly.


That's a lot of facts but what is the takeaway?


It's fair to scrutinize iPhone sales and claim margin compression and other negative effects from formidable opponents like Samsung, but even those numbers don't look bad. In its latest release, Apple reported that it sold 47.8 million iPhones in the quarter compared to 37 million the year-ago quarter.


It's easy to look past all of those $0.99 purchases and forget that iTunes is another one of Apple's cash cows and its growth rate, along with the prospects of iRadio, would indicate that iTunes will continue to become an even larger part of the company's revenue -- even if the wow-factor of the iPhone continues to wear off.


That doesn't mean the stock is a buy, but it does mean that investors should look at more than iPhone metrics when developing a thesis for Apple's future growth prospects.


Disclosure: At the time of this writing, Tim Parker was long Apple.


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1Comment
Jun 14, 2013 11:22AM
avatar
According to the article, hopefully iTune will hep raising the profit margin for Apple which also help
bringing AAPL upward. :)
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