Piper Jaffray Apple analyst Gene Munster puts a dollar value on Apple’s new iPhone/iPod touch software market: Up to $1.2 billion in retail next year. That doesn’t actually mean much for Apple’s financials: Up to $360 million in revenue, and $250 in operating income next year. But still impressive for a business that won’t exist for another month.
How does he get there? Munster estimates a total market size of 85 million iPhone and iPod touch owners by the end of 2009. (Gene, a longtime Apple bull, assumes Apple will sell 45 million iPhones next year.)
In his “neutral” case, he assumes 91% of those 85 million people will use the app store, and that they’ll spend an average of $10 per year on software — basically, that they’re buying an app or two per year. That’s a $777 million market; Apple’s 30% cut is $233 million. At a 60% operating margin, that’s $163 million in operating income — a 2% addition to his estimate for Apple’s calendar 2009 operating income.
In his “aggressive” case, he thinks 95% of iPhone/iPod touch owners will use the app store, spending an average $15 each. That’s a $1.21 billion market; Apple’s 30% cut is $363 million. At a 60% operating margin, that’s $254 million in operating income — or a 3% bump for Apple.
Plausible? No idea: These mini-programs, while impressive so far, are basically a new market, and we don’t know if a generation used to getting just about anything they want on the Web for free will actually shell out a few bucks for software. And getting them to buy something for their phone is no easy task.
While 45% of smartphone users, for instance, play a game on their phone once a month, only about 9% of overall U.S. mobile subscribers do, according to research firm M:Metrics. Apple’s built-in advantage, which could jack those usage rates: Using iTunes — which already has your credit card info, and which people are already used to using for music downloads — for its mobile apps store.
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