his year, when you buy a 11Pro, Apple ONLY recognizes $940 in hardware revenue and now recognizes an additional $60 in Services. So, Apple's hardware sales goes down and services go up an equal amount. So, yes you are right, their total revenue is the same, but Apple is still highly leveraged to their Hardware sales. So, a drop in revenue will be noticed.[/I]
You've made three key errors. First, you're conflating "hardware sales" with "revenue from hardware sales." Hardware sales don't go down because you move a portion of the revenue to another revenue category. You're even bigger mistake is assuming that hardware revenue will be static every quarter such that any reapportionment to services will result in a decrease in hardware revenue reported. But Apple is going into it's best quarter for sales, and has many new products coming out. The most likely scenario is that reported hardware revenue will increase from increased sales, higher ASP, etc. Finally, your theory also assumes that any competent analysts will ascribe any significance to the financial health of Apple from the neutral accounting step of moving revenue on a balance sheet from one spot to the next.
2) First of all, there is always going to be incremental cost in delivery costs (hardware, bandwidth, processing, etc.) While not huge, it is also not ZERO.
Next, you should read up on the impact of the internet on distribution costs. There are a number of good articles that explain the concept that, as Ben Thompson describes it:
"The key economic change introduced by the Internet is the effective elimination of marginal distribution and transaction costs."
Apple, Amazon, Google, etc., can offer their services so much cheaper because of this concept. Here's how to understand it. If you decide to sign up for Apple TV plus, there's already the infrastructure in place for you to click on the link on the Apple Website and instantly start streaming. Apple doesn't need to write an app, create an account for you, set up a billing service, lay fiber, buy a server, etc., or since Apple owns the original content, pay a royalty. In contrast, with music streaming, Apple, Spotify, and others incur royalties for every song you play.
3) In addition, without knowing the terms of the deals Apple has made with Studios/Actors/Directors, you can't assume that there isn't some revenue sharing based on views. Very likely, much like streaming music, there is some payments based views.
You're conflating things again. Music streaming is a licensing business, where Apple, Spotify, Amazon, etc., have to pay a royalty to the companies that own the license/rights to the music. Ditto, with video streaming if you don't own the content. The whole point of what Netflix, Amazon, Apple, etc., are doing with original content is pay people up front and then own the rights.
In sum, if Apple, Netflix, etc., were giving actors and such a cut, it would be reported by the industry like the salaries, etc., that the industry reports. Beyond that, See #2 above. Their models are based on eliminating marginal distribution costs, not increasing them every time they sign up another customer. LOL. If your theory was correct, then Apple adding 200-300 million subscribers to AT Plus would be a huge hit to their bottom line as they paid the actors and directors based on views.
