Apple: iPhone App and iTunes stores don't make money

Apple's App Store and iTunes Store aren't moneymakers. They're lures for prospective handset customers.

Although Apple's online content and app marts have long been suspected of being more marketing arms than profit centers, CFO Peter Oppenheimer made that belief a certainty on Monday afternoon when speaking with analysts and reporters after announcing Apple's first-quarter financial results for its 2010 fiscal year.

"Regarding the App Store and the iTunes Store, we're running those a bit over break-even, and that hasn't changed," Oppenheimer said. "We're very excited to be providing our developers with just a fabulous opportunity, and we think that's helping us a lot with the iPhone and the iPod touch platforms."

But as a marketing effort, the App Store's long-running, well, "challenges" may have tarnished Apple's rep as much as enticed millions of folks to send their money Cupertino's way.

Examples of the App Store's clunky approvals process are legion: disallowing then allowing Apple-supplied images not once but twice, approving some pointless apps but not others, banning then unbanning streaming 3G TV, rejecting studying but not approving Google Voice and Google Lattitude, refusing then approving then pulling then reapproving a Commadore 64 emulator, and more. Much more.

It hasn't been pretty. But during today's conference call, Apple COO Tim Cook - standing in for Steve Jobs, who was a no-show - defended the App Store approval process.

"I think it's important to keep this in some perspective," he said. "That we have over 100,000 apps on the store, and that over 90 per cent of the apps that we've had have been approved within 14 days of the submission. We created the approval process to really make sure that it protected consumer privacy, to safeguard children from inappropriate content, and to avoid apps that degrade the core experience of the phone."

He also outlined the App Store police guidelines: "Some types of content, such as pornography, are rejected outright. Some things like graphic combat scenes in action games might be approved, but with appropriate age ratings.

"Most of the rejections, however," he continued, "are actually bugs in the code itself. And this is protecting the customer - and the developer to a great extent, because they don't want customers that are unhappy with the apps."

Cook is also of the opinion that reports of the App Store's problems are overstated. "I think what you have here is something that the noise on it occasionally may be much higher than the reality." ®

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More than one analyst asked both Oppenheimer and Cook whether Apple's projections for the next quarter's revenue took into account the launch of the long-rumored iPad, but both execs dodged all such questions. To one questioner, Cook replied: "I wouldn't want to take away your joy and surprise on Wednesday when you see our latest creations."