Here’s Why Apple is a Media Monster

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Apple (NASDAQ:AAPL) is not in the business of creating any content and hawks music, movies, TV shows, newspapers, and books created by others. But incredibly, the company’s iTunes and app stores by themselves earn enough revenue to be ranked among the world’s biggest media firms, outpacing the very companies that provide to them.

Why Should Apple Be Counted Among the Biggest Media Earners?

“Apple’s media storefronts took in more than $8.5 billion for the fiscal year ending in September,” Bloomberg said in a blog post. In contrast, the revenue of The New York Times (NYSE:NYT), Simon & Schuster (NYSE:CBS), Warner Bros. (NYSE:TWX) film studios, and Time Inc. combined adds up to $8.2 billion, about $300 million less than Apple.

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While a large amount of these sales include apps that are unrelated to entertainment or media, the biggest draw for Apple’s consumers has long been iTunes’s media library. Owing to that, the company’s collection of more than 435 million iTunes accounts gives Apple a huge influence over media markets, according to Credit Suisse analyst Talal Khan. “That’s what gives Apple the power to come into media companies and ask for terms,” Khan told Bloomberg.

What Made Apple So Huge?

Apple’s media income primarily comes from the 30 percent commission it charges content providers for sales through iTunes and app stores. Needham & Co. analyst Charles Wolf told Bloomberg that this division is a “modestly profitable business” since the primary cost to Apple is the credit card transaction fee. Wolf estimates that Apple takes about 30 cents for every 99-cent song downloaded from its store, while paying credit card companies around 25 cents for each transaction. What has really turned things around for it, though, is the increase in sales of higher-priced media, such as $15 books, $20 movies, and $500 annual newspaper subscriptions.

How Does it Compare to the Industry’s More Prominent Names?

There are media behemoths that Apple doesn’t come anywhere close to. News Corp. (NASDAQ:NWSA), which owns Fox News and FX, saw $33.88 billion in sales during Apple’s fiscal year 2012, while Disney (NYSE:DIS), which owns ESPN and ABC, brought in more than $42.28 billion. However, Apple’s media business is growing faster than any of those names at a 35 percent annual rate. Bloomberg estimates that at that pace, iTunes will be bigger than Viacom (NASDAQ:VIA) by 2014. Look out for the Apple juggernaut.

Don’t Miss: Here’s Why Jim Cramer Picks Apple Over Google.

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