Apple TV Cost Breakdown

[MacRumors]

BusinessWeek is reporting on research firm iSuppli's analysis of how much it is costing Apple to assemble the Apple TV.

According to the report, Apple's margins on the product appear to be uncharacteristically slim from a consumer electronics product. While Apple is used to margins in excess of 50% on such products, iSuppli estimates the 40 GB Apple TV's bill of materials at $237, leaving a margin of $62 (approximately 20%). The newly released 160 GB version of the Apple TV is estimated to have a better margin at 30%.

Of all component suppliers, Intel stands to make the most off the Apple TV. The Intel under-clocked Pentium M is the most expensive component at $40. Intel also supplies a chipset valued at $28, bringing Intel's material share to 28% of the total bill of materials.

iSuppli's numbers do not account for research and development or marketing costs, and actual material costs may vary depending on special deals Apple may have acquired.

 

[CrackedButter]

Apple did say that this was going to be a hobby. Why make it more expensive if they are trying to find a way to make this market work? For a product, I thought it was unusually cheap anyway.

 

[irahodges]

That is still more than I would want them to make from an apple TV.

I love apple, but large businesses can make too much money!

 

[mkrishnan]

What kind of validation does iSuppli have suggesting that these predictions are correct? It seems doubtful to me that Apple would be selling these with such a small margin (by their standards).

 

[emotion]

I guess they're following how the games machine people sell machines (low margins).

I never believe these figures though and they're a nonsense anyway as the R&D/marketing is never factored in.

 

[arn]

That is still more than I would want them to make from an apple TV.

I love apple, but large businesses can make too much money!

We go through this discussion every time there is a breakdown. People need to understand that margins don't equal profit.

arn

 

[xUKHCx]

That is still more than I would want them to make from an apple TV.

I love apple, but large businesses can make too much money!

This is stupid logic, this $62 doesn't include, shipping costs, marketing, research, support, further development, list goes on.

Any company needs to make money to progress, the more money they can make the more progression they can make. If apple didn't make as much money as they did previously then the appleTV probably wouldn't have been made.

 

[longofest]

We go through this discussion every time there is a breakdown. People need to understand that margins don't equal profit.

arn

exactly... as stated in the story:

iSuppli's numbers do not account for research and development or marketing costs, and actual material costs may vary depending on special deals Apple may have acquired.

So:
A) its just an estimate. However, its probably a decent estimate, as thats what these guys do for a living.
B) as arn said, margin does not equal profit. You still have to account for the cost to research and develop the device, as well as market it, plus any overhead expenses the company maintains.

 

[gwangung]

This is stupid logic, this $62 doesn't include, shipping costs, marketing, research, support, further development, list goes on.

Any company needs to make money to progress, the more money they can make the more progression they can make. If apple didn't make as much money as they did previously then the appleTV probably wouldn't have been made.

No kidding.

20% margin in manufacturing is basically breaking even. Wanna make money? Have higher margins; it's not uncommon in other, stable segments to see 35-40% margins.

 

[milo]

Doesn't surprise me at all.

Despite all the whining about this product, nobody seems to be able to find a competing box that has all the ATV features at the same price.

Sure, apple could have added more stuff like DVR. But they would have had to raise the price. This is about the upper limit of what consumers are willing to spend on a box like this.

 

[Eraserhead]

Maybe they want to grow the segment, they could hardly charge more than $299 without it costing too much for people to buy.

EDIT: milo has said it so much better .

 

[emotion]

Doesn't surprise me at all.

Despite all the whining about this product, nobody seems to be able to find a competing box that has all the ATV features at the same price.

Sure, apple could have added more stuff like DVR. But they would have had to raise the price. This is about the upper limit of what consumers are willing to spend on a box like this.

Are people actually buying it though? I don't know anyone who's even remotely interested.

I'm in the UK though we don't have the same choice on iTMS (for media). So maybe that's why.

 

[xUKHCx]

Doesn't surprise me at all.

Despite all the whining about this product, nobody seems to be able to find a competing box that has all the ATV features at the same price.

Sure, apple could have added more stuff like DVR. But they would have had to raise the price. This is about the upper limit of what consumers are willing to spend on a box like this.

Well adding a DVR would change the type of box it is and thus the price i would be willing to spend on it. For the appleTV £200 is about right but for an appleTV with built in DVR I would be willing to pay £300.

 

[Project]

Wow. Thats much more expensive than I figured the bill of costs would be. And as mentioned above, doesnt include R&D, marketing, distribution, sales etc.

Thats why it was smart for Microsoft to push the Media Center Extender concept on the OS/software level, and let other hardware vendors make the hardware. Though they ripped this playbook up with the 360, it has other things such as games, DVD/HDDVD playback, Marketplace etc to suppliment the negative margins.

 

[Much Ado]

I'm in the UK though we don't have the same choice on iTMS (for media). So maybe that's why.

I wondered that too.

I'm still amazed they're selling them in Korea, where they don't even have an iTunes Store at all!

But as Steve Jobs said- it's a hobby, not a business.

 

[clevin]

30% is slim... how nice

 

[Project]

Well adding a DVR would change the type of box it is and thus the price i would be willing to spend on it. For the appleTV £200 is about right but for an appleTV with built in DVR I would be willing to pay £300.

While not the same I have an EyeTV (the Freeview one) plugged into my Mac via a USB port to record the shows I want, and it exports to iTunes in an Apple TV supported format when recording has finished. I can then watch it on the HDTV via the 360 or AppleTV interface.

The Vista/360 combo is much further along in the DVR concept and I honestly dont think that Apple has any interest in competing in that area. Shame really.

 

[mkaake]

30% is slim... how nice

Yeah. It's a good thing it doesn't cost them anything to build it either, or they'd really be looking at slim pickins.

Oh, wait...

 

[pgwalsh]

We go through this discussion every time there is a breakdown. People need to understand that margins don't equal profit.

arn

Exactly. Gross Margins are not equal to Net Profit.

 

[mikeinternet]

like steve said TV is just a "hobby"

 

[milo]

Are people actually buying it though? I don't know anyone who's even remotely interested.

I'm in the UK though we don't have the same choice on iTMS (for media). So maybe that's why.

They're selling some, nobody really knows how many yet. I think we can all agree that they'd be selling less if the box was more expensive and they had a higher profit per box.

This box is an exception to the usual profit margins: with this they want to lock up market share, at first that is more important than making money.

Well adding a DVR would change the type of box it is and thus the price i would be willing to spend on it. For the appleTV £200 is about right but for an appleTV with built in DVR I would be willing to pay £300.

You would. But I doubt there are enough willing customers at that price to make it a viable product.

 

[jim.arrows]

Are people actually buying it though? I don't know anyone who's even remotely interested.

I'm in the UK though we don't have the same choice on iTMS (for media). So maybe that's why.

I bought one a couple of weeks ago to try it out, and I'm diggin' it... I just wanted my music collection from my desktop PC in the den available in the bedroom, and this does that perfectly and in an easily accessible way; I had absolutely ZERO need for a mini based htpc in the bedroom, I just wanted my music & podcasts in there, so I saw no need to spend the extra cash for the mini. It's connected via a single hdmi cable for both audio & video and is great at it's intended function. I wasn't sure if I'd keep it, but it's staying... it's the 40GB model, and while I could still return it (until Friday) I see absolutely no need for the larger hard drive for my intended use, so again I'm just sticking with the base model and saving the extra cash.

 

[jettredmont]

Well adding a DVR would change the type of box it is and thus the price i would be willing to spend on it. For the appleTV £200 is about right but for an appleTV with built in DVR I would be willing to pay £300.

That's insane. DVRs these days are less than $100, stand-alone. When our DirecTV box went on the fritz this Spring (well, you can hardly blame it after the plant-overwatering incident ...) we replaced it with a $99 DVR instead of a $49 plain box. $50 premium for the DVR (dual tuners) seems about right.

 

[Eraserhead]

You would. But I doubt there are enough willing customers at that price to make it a viable product.

I'd probably be prepared to pay £225 to add a DVD player to it, maybe a little more, I suspect £300 would be OK with DVR as those things are really expensive (at least in the UK) so it'd be worth the extra, though if you could plug an EyeTV in the back that would certainly be good enough.

 

[mklos]

I hope this shuts up all the people to whine and complain about the AppleTV being too expensive. Like others have said, and also hinted in the article, Apple actually makes less off each AppleTV sold as it doesn't show shipping costs, marketing, and the development costs.