Apple Inc. (AAPL): Should You Even Pay Attention To This Metric?

More importantly, Apple garners approximately 45% of the profit share in the PC segment due to its high average selling price and margins.

That’s not to say Apple Inc. (NASDAQ:AAPL) is immune to the decline in PC sales, but it’s certainly in a much better position than the competition. As for HP and the rest who are more heavily reliant on PC sales volume, they seem to be waiting for Microsoft to pull a rabbit out of its hat and breathe new life into the industry.

Digital Music

Apple’s iTunes store is still the dominant force in digital music downloads. Last year, the company controlled 63% of the market. But that number is down from 69% in 2010. Its biggest competitor, Amazon.com, has grabbed 22% of the market in recent years by undercutting iTunes prices.

But it’s not other download stores that are cutting into iTunes market share. It’s streaming services like Pandora Media Inc (NYSE:P), Spotify, and Rdio.

In 2012, streaming service subscriptions accounted for over 10% of total digital music revenue. That number’s more like 20% in Europe. That number is growing at a rapid pace. Subscription rates grew 44% last year compared to 12% for digital downloads.

Again, while iTunes digital music downloads aren’t necessarily a profit center for Apple, the company still profits more than anyone else in the space. So, while its market share may be coming under attack, Apple’s profit share is still strong.

Even with an estimated mid-single-digit operating margin on song downloads Apple does better than Pandora, which consistently posts operating losses. More than 60% of Pandora’s revenue goes toward content costs. Spotify’s costs are higher at roughly 70% of revenue.

Now, Apple is looking to enter the streaming music market with content costs significantly lower than the competition. That means higher margins, and higher profit share. In fact, with companies like Pandora Media Inc (NYSE:P) unable to turn a profit, and competition from Google, Amazon, and Microsoft – who aren’t focused on profit in this market – Apple could take more than 100% of the profit share.

The bottom line

I’m not saying market share isn’t important and profits are everything. I’m invested in Amazon.com after all.

I am trying to point out that Apple Inc. (NASDAQ:AAPL)’s position in markets like smartphones and PCs is stronger than many think. That’s due to its high margins*.

*While Apple’s overall margins have been under pressure lately, I believe that’s mostly due to a shift in product mix. Last quarter, iPhones (the company’s highest margin product) accounted for a smaller percentage of revenues as iPad sales grew tremendously.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple.