Apple’s iTunes is one of those happy ironies. Begun as a way to boost sales of Macs and other hardware and content with breaking even, the service now rakes in $20 billion per year selling digital warez such as video, books, apps and music – a whole lot of music. In fact, Apple now sells 75 percent of all digital music, according to a new analysis.

In a series of peeks into how iTunes earns all that revenue, independent analyst Horace Dediu paints a picture where more than a half-billion users are pointing to a future where apps surpass digital music sales…

When Apple announced Thursday the addition of HBO and ESPN to its Apple TV lineup, the usually tight-lipped firm provided a detailed picture of what’s selling on iTunes. The highlight: Apple controls $6.9 billion of the $9.3 billion spent annually on digital music, Dediu pointed out.

While this explains why music labels want an Apple competitor in this sector, another number shows why Apple wants its own streaming music business.

According to the analyst, each of the 575 million iTunes users spend $2 per year on books, $4 per year on video, $9 per year on software, $12 per year on music and $16 per year on apps.

Focus on those last two numbers.

In 2007, iTunes users were spending triple what they do on digital music.

iTunes (500000 new accounts each day, Asymco 001)
On average, iTunes is adding 500,000 new accounts each day. Source: Asymco.

Likewise, apps have increasingly become a larger revenue-generator for Apple.

Why is per-user iTunes purchases of digital music falling?

While in the beginning, anyone wanting digital music had to go to iTunes (remember all the failed attempts to compete?), now there are several streaming-music options, where you can listen to tunes without having to buy an album from Apple.

This explains why the iPod maker is so hot on the idea of introducing its own streaming-music service, iRadio, later this year.

Can Apple prevent the escape of more digital music revenue, or is the spending shift towards apps a done deal?

Whatever the outcome, iTunes will never return to its roots as just a way to sell more hardware – it is now a massive high-revenue, low-margin business on its own.

  • cordell

    They mean the own most music sale borows

    • Raul Henriquez

      english please

      • cordell

        lol my bad.. apple own most borrowed music you can’t take it anywhere else besides itunes

      • Raul Henriquez

        Actually that is not true, iTunes does not sale DRM music anymore. You can play iTunes AAC files anywhere. The limiting factor is if your device doesn’t support AAC.

      • cordell

        its kinda like drm if devices dnt play that format and user dnt have a idea of how to get it out of iTunes

      • Raul Henriquez

        No DRM means you can’t play it on anything other then where it was purchased. Whatever hardware you buy that doesn’t support AAC is dead on arrival. All mp3 players support AAC. Sorry you cant win this argument because there is no arguing it. The fact is you are spouting bs info that was only relevant many years ago. Today iTunes does not have DRM an any modern device should play its collection of songs. Now Video is completely different.

      • cordell

        arguing ? you telling me something i didn’t know so who is arguing ?

      • Raul Henriquez

        its called discussion now move along

      • Qiren_94

        Looks like someone doesn’t know what DRM means, lol.
        I have purchased an album from iTunes once. And now that album is in my laptop, dekstop, iPhone and even in my Galaxy S2. Can you do that if DRM is present? lol

      • Raul Henriquez

        Absolutely not : )

  • MarcPhilippeB

    500’000 accounts a day, thats crazy.

    • Biken Dangol

      But still have doesn’t have control over their users,I’m like in social way.

  • Alain Vasquez

    I need help, so my iPhone 5 broke from the lighting connector and its not letting me charge or connect to the CPU is there any way I can restore with out using iTunes ? “I want to get rid of Cydia”

    • Mykel Monroe

      If the connector is broken there is no way to connect it physically. I’m not sure if you can restore over wifi as I’ve never had to or tried.

    • YzMENTALzY

      Save on icloud go settings and reset the phone 😉 should work

  • Falk M.

    They need to fix pricing on videos and TV shows…
    Totally nuts here in Germany…

  • Gorgonphone