Gizmodo
That sweet $70 price chop Steve announced for the Apple TV had to come from somewhere (a question smartly raised by CW) and we know the only thing Apple guards more than closely than its secrets is its bottom line. So, we went to teardown masters iSuppli for a fresh estimate to see how much of it was paid for by falling component costs over the last year. Surprising answer: Not that much. Apple really is subsidizing Apple TV, a significant shift in strategy.
This chart makes the damage pretty clear: Apple barely ekes out a 10 percent profit (a single Jackson) on the 40GB model at the new pricepoint, a far cry from its more typical 50 percent margin.
Andrew Rassweiler, iSuppli's Teardown Services Manager & Principal Analyst, says that while the processor is admittedly the "big unknown for us" because it's not an off-the-shelf component, he "doubts it would be anymore expensive than what we've assumed." The bottom line for Apple's bottom line here is that "if they were giving it away before, they're definitely giving it away now."
This is a marked change for Apple: iTunes content has existed to sell the hardware, not the other way around. iTunes income is incredibly minor compared to hardware sales, not least of which because the majority of each track, album, whatever goes back to the label or studio. Apple TV stands to be the first device Apple makes more money off of the content than the hardware.
Conclusion? Apple is getting aggressive about moving into the living room, looking at the long run of establishing that fourth-leg. Besides, it's better to sell a million at a $20 profit than ten thousand at $60. [iSuppli]
Comments
Hmm... Didn't know they had N Wireless. Guess I was never too interested in the AppleTV.
"Conclusion? Apple is getting aggressive about moving into the living room, looking at the long run of establishing that fourth-leg. Besides, it's better to sell a million at a $20 profit than ten thousand at $60. "
Thats like the best choice they could have made to maximize profits and get the product to the masses.
:) I'm going to learn from Apple when I start my business.
Game console manufacturers have done this for years. Loss-leader the hardware and make a bunch on games. It's not a new model.
I wonder if it is going to do any good, though. Vista Media Center is much more useful and flexible, but also much more expensive to implement and a lot harder to set up. Apple TV could be great for the non-geek.
I wout want one, but a first gen Xbow still does more.
would... not wout
all I know is that thats a pretty expensive paperweight!
Still a piece of shit
@getz76: Console manufacturers get a better cut of video game profits than Apple will be getting from iTunes rentals. Though Apple does save on all the marketing and R&D costs of content, whereas video consoles companies normally have a stake in both the hardware and software risks. Bottom line - iTunes is free money for Apple; but low risk = low reward.
At least, they are still making some dollar off from selling appleTVs.
This is from iSuppli, FFS.
You need to have "proof" in quotes in your title.
@pomophobe: Except play HD. While the xbox is great, it doesn't have the hardware to play HD resolutions, alas.
Sounds like a play out of Microsoft's playbook?
good idea on their part....entrench people further in the itunes system that is, shockingly, tied to apple products
i won't buy one until it either has a PVR, or TV shows are free.
My general dislike of Apple aside, I still don't think the Apple TV will sell. Until they come out with a full-on DVR like TiVo, their success in the living rooms of America will be limited.
i have a fully moed xbox first generation, and its wonderfull, but isnt really so good for HDTV, the Apple TV is wonderfull, and is very moddeable too, is gona be my next puchase.
If you use Mac to manage your photo and music, ATV is actually pretty sweet for the price.
It should however support other encoding formats to shut everybody's mouth up, like xvid, dvix or whatever out there. I don't see the point of not including them.
If piracy is a concern for apple, consider there are many program that rip DVD into MP4 that's compatible with itune, so support MP4 only doesn't mean the device doesn't endorse piracy.
Job-o Steve-o is still off the mark with this product. I'll wait to see version 3.0. I'm afraid others are waiting just like me. Unless they change AppleTV again, they'll continue to see little sales.
Also, they really need to release 16GB Nanos and 32GB iTouches soon. In addition to 3G iPhones. Revamp the MacBook, it doesn't need to be so big and heavy.
while you're bitching at apple about making money on the content, you might as well bitch about every other market with similar revenue structures...printers (ink/toner), cameras (media cards/cases/paper/ink), cars (options, maintenance) movie theaters (concession stand/arcade)
believe it or not, most of the big stuff you buy makes very little (if any) for a co. its the shit you buy with it and afterwards that make the revenue come in
every time isuppli makes a release, it is refuted. Do not use isuppli. jesus christ.
never liked apple tv. never will.
You say "the majority of each track, album, whatever goes back to the label or studio". Read Wired this month, Apple keep 30% of the iTunes money. That could hardly be described as "incredibly minor"
Most people assume Apple is taking a "Microsoft" strategy with the Apple TV: long term.
1st Gen = crap
2nd Gen = better, perhaps matching the competition, but still not enough.
3rd Gen = sell a billion of them.
Microsoft itself is hoping that both the Xbox and Zune follow this strategy. We'll see with Xbox 720 and Zune 3.
And DVR is shooting at the target, not where the target is going to be. Apple won't bother.
The XBox 360 does play HD from an external HD. The only benefit that AppleTV has is that iTunes wants AppleTV. MONOPOLY.
M
Makes sense, eventually these hardware markets will become saturated, and making products that break every two years isn't a great long-term plan for revenue growth. Apple is like a platinum rapper who starts selling a clothing line, energy drink, stuffed animal collection, polio vaccine, etc., to maximize their dollars.
SO MUCH FREE CONTENT! HD podcasts of foreign news shows, plays my ripped DVD's (yea - I wish it played .AVI .MKV .ETC but still) and an easy to use remote that's friendly to 8yo's and 80yo's - I used to think it was the stupidest product ever, till we got an HD set and the refurb AppleTV's dropped to 179.00. I just bit thinking I could return it if it really sucked. Can't wait for the V2.0SW ! I don't and won't pay for iTunes content other than the occasional movie rental to eat some of that otherwise useless iTunes Gift Card credit that's been sitting in my account forever.
I still have no idea what Apple TV is.
I got my 160GB Apple TV last week, and so far I'm loving it! Bring on the free version 2.0 software upgrade!
Why in the hell does it cost 120 bucks for a motherboard that holds an nVidia 7300 Go GPU and an Intel Ultra Low Voltage Pentium M based on the Dothan core, running at 1GHz (max frequency), 400MHz FSB and a 2MB L2 cache? In other words, pieces of shit on a DVD sized platter.
@daftrok
u must not have seen the shiny case, its sooo shiny.
it really is not worth a thing. if apple wants to make something to get in the living room, why not include dvr? it also needs more extensive video codec support.
@the people talking about DVR's,
Do you actually own your DVR, or do you subscribe to the service with it. If you stop your cable or satellite service, will the DVR still be in your house?
@BigDaddyM: No, it's not a monopoly. The real advantage that the AppleTV has over the XBox 360 is that the online content doesn't require a subscription to to access the content. On top of paying for the internet, you also pay to access, THEN pay to download something. Not to mention that iTunes already beats XBL in content.
And the free software upgrade they announced at Mac World is coming when? Seems like they should have been ready to go before they announced it. Still says "coming soon" on the web site.
@Kaiser-Machead:
It's a monopoly.
@Kaiser-Machead:
"The real advantage that the AppleTV has over the XBox 360 is that the online content doesn't require a subscription to to access the content."
That's a false statement. Every person that purchases an XBOX 360 gets a free Silver Membership account. This gives you free access to XBOX Live Market Place.
XBOX 360 and XBOX Live destroys Apple TV. Get a grip folks. Microsoft is killing Apple in this area.
@yoshi: The defining characteristic of a monopoly is that it's leveraged in such a way that you only have this channel to go through to get content online to watch on your television set. Since you can buy TiVo or any other PVR, or an XBox 360, how in the hell is it a monopoly?
Look the 360 fails in three key places, price, shitty DRM, and how and where you can keep your content.
The DRM on the videos sucks you can only play it on a 360 and one that is connected to the internet, the price is a little to high it needs to drop a dollar on all content or drop the dam Points system since thats where we are losing our money.
AppleTV and iTunes wins hands down because your able to have your content on several devices, iPod, iPhone, 5 computers, and AppleTV. And oh yeah you can BUY movies too with apple unlike the 360 store where you can only rent movies and just buy overpriced TV shows.
Does it bother anyone else that with a product named Apple TV, you can watch neither live apples or live TV?
Actually this is starting to be very attractive. Photos and YouTube on the big screen tv are cool. The rental UI is awesome. Its also a great music interface. I think its really getting there. Of course I'd still like it to let me watch live tv and also, I know its old school but it would be nice to have a place to insert a dvd.
@Kaiser-Machead:
I believe BigDaddyM is referring to iTunes and the devices that can access iTunes. Apple is walking a monopolistic fine line by only allowing iTunes to only work with its own devices (iPods, iPhone, Apple TV, etc) thus freezing out competitors.
Recently, Apple is giving customers the option to purchase music DRM free which is the "fine line" I am talking about. This allows customers to play their music on other devices, right? When is the last time you've plugged your sandisk or Zune 2 into your computer and purchased/downloaded music from iTunes? Can this be done?
By the way, you can't purchase music or movies on the XBOX 360. You can only rent movies. However, if you have drm free songs on your iPod, iPhone, etc. you can plug it into your XBOX 360 and listen to them.
I am sure if Apple wanted to develop a gaming console with XBOX Live access, Microsoft would gladly accomodate. That goes for Sony, Nintendo, or any other company for that matter.
By the way, for those of you that haven't tried an XBOX 360 on XBOX Live, you should. It's the best online gaming platform on the market.
@junkie4junk:
Your wish about watching live TV may actually come true. There was an article last year talking about Apple possibly implementing IPTV in Apple TV. This would make Apple TV a settop box that would work with AT&T's U-Verse or Verizon's FiOS. I would love to see Apple TV support IPTV with AT&T as their partner.
@Bantam:
Apple TV doesn't even compare to the XBOX 360. If fact, Apple TV only does about 10% of what the XBOX 360 does. Up until recently, Apple TV was a joke and Jobs knew it.
@yoshi: "I am sure if Apple wanted to develop a gaming console with XBOX Live access, Microsoft would gladly accomodate. That goes for Sony, Nintendo, or any other company for that matter."
Not when I'm drinking soda, please.
Now I'll be smelling Diet Coke for the rest of the evening.
@yoshi: Um, the primary function of the 360 is way off from what the AppleTV is. If all I wanted was a wireless set top box to get rentals and stream my content, why the hell would I spend MORE to get an XBox 360, then pay extra for the wireless adapter, and then deal with that shitty points system which I refuse to be a part of, when I can get the n-draft WiFi standard and deal in real money, and not worry about RROD? :P
Ok, uhm, so how is this superior to a XBMC?
"XBOX 360 and XBOX Live destroys Apple TV. Get a grip folks. Microsoft is killing Apple in this area."
Based on your perceived capability/value, or actual sales/usage? You have statistics on how well XboxLive's movie rentals/sales are doing compared to AppleTV/iTunes?
Mac Mini + EyeTV = AppleTV with DVR capabilities and DVD Player and etc., etc. The price is a little more than a 360 but you ultimately get a lot more.
AAPL's got something MSFT doesn't, and that's millions of iPod and iPhone owners who're iTunes users who're moving to Macs and then filling that already adverted and prepped to AppleTV. Apple's got the customer base already in place and they just need to show 'em the way to video. Sure, there's Xbox, but you can't put it in your pocket and if you're one of those 10 or so Zune owners then you can . . . do what with your Xbox? I'm a purist anyway, games on game players, music on music players and let them watch BluRay (which MSFT will have to cave to along with all you Xbox HDDVD adopters.
Some "proof". By your own calculations they're still making 10% on the 40GB model. Sounds to me like they reduced margins to increase penetration.
Now, if they were selling it for LESS than it cost to produce (like Microsoft and the XBox), then you'd have had a story about it being "subsized". Utill then, the most you can say is in the last sentence of the last paragraph you buried at the end of the article.
iSuppli is not a very reliable source. Next time, why not use somebody more reliable, like some random dude off the streets.
wow a 40GB drive went UP in price 8 months later? how does that happen? that would suck for apple if hard drive technology in the market is increasing so rapidly that its will cost apple MORE to NOT make the next revision have more storage. lmao
@Noobs-R-Us:
Other than turn the ATV into a mini, what could they change? The only thing I can think of is true 1080, yet the bandwidth would kill them..
Enlighten me, please...
@Kaiser-Machead:
That's your personal preference. Why buy an Apple TV when you can buy an XBOX 360 that can play HD games, rent HD movies or tv shows, play regular or HD DVD's, video chat with friends, IM with friends, access and play content from your computer, plug in ANY music device and listen to music, etc...?
Apple has a long way to go with Apple TV if they think they are going to take over the livingroom.
Personally, I think Microsoft is way ahead of them on this. Think about all the IPTV customers AT&T and Verizon are signing up with U-Verse and FiOS. Guess what folks, that's Micrsoft. Also, Microsoft has plans to include an IPTV update that makes their XBOX 360 a settop box.
Now do you understand where Microsoft is going?
@Kaiser-Machead:
Let's get down to one simple basic fact. In order to use an Apple TV, you need an EDTV or HDTV. Apple TV will not work on SDTV. If you're one of these folks that want an Apple TV, you must buy an HDTV.
Now with the XBOX 360, it can play it on any TV. XBOX 360 doesn't discriminate.
Where's the 1080p? Most rentals aren't even 720p. Waiting for next gen.