Excluding capital costs, iTunes costs around $1 billion a year to run

Running the world's most successful application store doesn't come without operation costs attached.

Apple has never been completely transparent about how much it costs to keep iTunes and the App Store going, other than commenting it's non profit making.

Taking this at face value, and combining it with the 30 percent margin on app downloads and around 10 percent for music sales, and freely available sales data, asymco - the self-styled curated market intelligence website - has come up with some guestimate figures.

It reckons iTunes costs Apple around $75 million per month and rising, meaning iTunes' annual expense will be over $1 billion in the coming year.

Reading the small print

However, there is something of the cart before the horse about the calculation, which assumes iTunes has and always is running at breakeven.

This is likely wrong because the cost of such operations consists of an initial large capital investment in data centers and then the ongoing costs of bandwidth and operations (electricity etc), and credit card transaction fees.

Hence it's not correct to assume that as Apple sells more apps and music, its costs will rise in keeping with the margin Apple makes on each sale. Each additional sale will, in fact, cost only a tiny amount more, until Apple has to sink more capital investment into a new data center.

That's something it's currently doing, spending $1 billion in the process.

Copping a feel

Still, this sort of calculation does provide an insight into the complexities of running a digital business, and as asymco points out, the purpose of the exercise isn't to come up with an exact cost figure, but to demonstrate how much it's likely to cost to run a successful app store.

To date, around 12 billion songs, 6.5 billion apps, 450 million TV episodes, 100 million movies and 35 million books have been downloaded from iTunes.

And, for the record, further analysis (again working off some broad assumptions), suggests Apple does actually does make a small profit off iTunes and the App Store.

Piper Jaffray's Gene Munster reckons the App Store has made around $200 million in profit since its launch in June 2008, while the entire iTunes store has made around $429 million during the same period.

These profit figures don't include the capital costs of new data centers though.

[source: asymco]