Apple’s annual report, filed today, confirmed the obvious: music sales through its iTunes Store have declined. The company did not give a figure, noting only that the drop was more than compensated for by growth in app sales, but a recent WSJ report put the decline as high as 14%.
Growth in net sales from the iTunes Store was driven by increases in revenue from app sales reflecting continued growth in the installed base of iOS devices and the expanded offerings of iOS Apps and related in-App purchases. This was partially offset by a decline in sales of digital music.
The fall in music downloads was of course the primary motivation behind the company’s largest acquisition, the purchase of Beats, as it moves towards a full music streaming service of its own. Apple is expected to rebrand Beats Music as an Apple product, with a rumored launch in February of next year …
Even without Beats, Apple almost doubled its spend on acquisitions this fiscal year, from $496M to $957M. The company more than doubled its investment in research and development over the past three years, from $2.4B to $6B. While some of that increased spend will undoubtedly have been on the Apple Watch, it does seem to suggest that tales of the death of innovation in Apple are somewhat exaggerated.
Hiring is also up, from 80,300 full-time equivalent employees to 93,600, with most of that growth in corporate rather than retail.
There were some cautionary notes in its filing. The company revealed that average revenue from its retail stores had fallen slightly across the past couple of years, from $51.5M in 2012 to $50.6M this year. It also warned that the Irish tax investigation may lead to both a bill for back-taxes and higher taxes in the future, and that its insurances may not fully protect the company against the growing threats from cyber attacks.
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