updated 09:20 am EST, Tue January 29, 2008
Low margin on Apple TV
Apple is currently making little to no money on each Apple TV sold, a teardown analysis suggests. The research firm iSuppli has conducted a estimate of the manufacturing costs of the new 40 and 160GB set-tops, and found that after Apple's $70 price cut, the 40GB Apple TV has a margin of just 10 percent, while the 160GB version has a more reasonable 29 percent. Apple normally has product margins closer to 50 percent, and even this does not account for secondary costs such as marketing or distribution.
iSuppli admits that its figures may not be wholly accurate, as Apple is using a custom processor for which iSuppli cannot evaluate the true dollar figure. Analyst Andrew Rassweiler comments though that he "doubts it would be anymore expensive than what we've assumed."
It is suggested that this could mark a shift in Apple strategy, focusing on revenue from content such as music and video over hardware, at least outside of the Mac realm. The difficulty for Apple here may be that again, much of the revenue from its media sales must go towards expenses, specifically profit sharing with record labels, TV networks and movie studios.
iSuppli notes that when the Apple TV originally launched last year, some of the parts were more expensive, but margins were more favorable. Approximately 21 percent was earned on the 40GB set-top, while the later 160GB model generated 31 percent.