Apple TV selling for razor-thin margins?
updated 09:45 am EDT, Wed June 6, 2007
Apple TV Thin Margins
The Apple TV may be selling near break even or potentially at a loss, according to a new study by iSuppli. A breakdown of the stanard 40GB media hub's component costs suggests that a finished device costs $237 to produce; this leaves just $62, or less than 21 percent, of the selling price to be recouped by Apple. However, the figure is said to omit the necessary marketing costs for the device, suggesting that the actual revenue per device is either slim or may actually incur a slight loss.
"We made some very aggressive assumptions with this device, and by that I mean we assumed low prices on the components," says iSuppli analyst Andrew Rassweiler. "[We might] be looking at a device that Apple was subsidizing."
The costs are distributed relatively evenly across the hardware, according to the research. The 1GHz Pentium M at the center is valued at $40, while the 40GB hard drive is $37. The mainboard is $28 while the key dedicated GeForce Go 7300 graphics and 802.11n Wi-Fi chips cost $15 and $19 respectively.
The recent addition of a 160GB version of the Apple TV is likely an attempt to boost the margins to a higher level, Rassweller says. The larger drive adds $36 to the raw pricing but allows Apple to sell the expanded version for an extra $100, regaining some of the lost revenue.
The price of at least the 40GB model is "a departure" for the company, the analyst says, as many iPods and Macs see significantly higher margins. Apple's yet to be released iPhone may command as much as a 50 percent gross margin that will provide room for split profit between AT&T and Apple as well as the possibility of price cuts.
CEO Steve Jobs recently described the Apple TV as a "hobby" at the D: All Things Digital conference hosted by the Wall Street Journal, citing the relatively unestablished market for network streaming devices. Few companies currently produce hardware that streams computer content to TVs, with Apple's most likely largest competitor coming through the future release of Sling Media's SlingCatcher.
Fresh-Faced Recruit
Joined: Feb 2006
21% slim margins?
You gota be kidding me. Anybody would kill for those margins. So yes, marketing might eat into that but it doesn't have to FOREVER.