I suspected Apple sold the HomePod at a loss. There is literally no other speaker at that price point with that kind of technology in it.
Got a tip for us?
Let us know
Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.
Gruber: Apple TV is Sold at Cost, HomePod at Slight Loss
- Thread starter MacRumors
- Start date
- Sort by reaction score
I don’t care what anyone says, the HomePod is an AMAZING speaker. Siri could use some improvement, but for an audio device, the HomePod is absolutely stellar.
Hardly. Have you heard him talking about the new apps in macOS Mojave?
I suppose it depends on what you mean by considerably higher.
Using numbers for this past quarter, the aggregate iPhone gross margin would have been about 48.5% if the aggregate gross margin for all of Apple's other products was 0%. If the gross margin for all other products was 20%, then iPhone gross margin was about 40.2%. I think that's about the upper limit of what it might have been.
Apple's R&D and SG&A expenses amounted to about 10.2% of its total revenue. How those expenses might fairly be allocated to different categories (whether Services versus Products or, e.g., iPhones versus Macs) could, of course, vary a great deal. But if Apple's non-iPhone products only see an aggregate gross margin of 20%, then it isn't really making much money off of them in the aggregate - something like 10%. So Apple might be making a fair bit of money off of some things (e.g. MacBook Pros) while effectively not making anything off of other things (e.g. HomePods). Anyway, a 20% gross margin in the aggregate for Apple's non-iPhone products is about as low as I'd think they would have - and that would mean that there are some products in there which Apple isn't really (directly) making much money off of.
And, again, that would mean a 40% aggregate gross margin for iPhones. It's just not reasonably possible, based on what Apple reports, that it's much more than that. Some models (e.g. 512 GB models) likely have significantly higher gross margins, but that also means that other models have lower gross margins.
You are arguing the finer points of the accounting...totally legitimate, but likely only a small factor. This was not the spirit of the original argument, however and also doesn’t pass the smell test. iPhones having significantly higher margin than the average 38% doesn’t make sense.
Also, the total GM for the business would have to be higher than 38% if the engine for sales was somehow secretly high margin. No fancy accounting would be able to hide the iPhone having 55% GM, for example.
As an investor, I wish it did, but it doesn’t.
Last edited:
Build cost is only part of the total cost. Depending on how Apple allocates costs it may or may not be profitable. Revenue from a product does not mean it is making a profit on paper, it's all about how costs are allocated. Look at movies, because of the way they do accounting a movie never makes money. Return of the Jedi, for example, still has not turned a profit; of course that doesn't mean a lot of money was made off of it.
Is this true? At the Apple store in london I was told I could not just airplay my iTunes library!? It seemed beyond ridiculous but that's what the Apple employee told me. He said it doesn't have airplay.
You can airplay any audio to the HomePod. I’m not sure why you were told that.
My thoughts exactly! Then an Apple store salesman told me the HomePod has no airplay??!!
Haha OK. Thank you for the correct info
Do you have an Apple TV? Because it doesn’t work like IOS. No doubt some code is shared, but its not as trivial as you make it sound. You show lack of understanding when you tried to suggest IOS’s costs are kept down because once upon a time it started partially in macOS. These are all different development efforts now. And cost real dollars.
My Apple TV 4K is by far my best buy last year. The device is used daily for hours by the entire family and eliminated the need to replace the tv when the apps on the tv got outdated or became way too slow. With my Roku I can do pretty much the same, actually quite a lot more. But the Roku is no match for the ATV in ease and smoothness of use. So the Roku got stored away, just to be used as a media player playing videos in a loop at exhibitions. And the ATV is the #1 device in our houshold.
At the Apple Store I felt € 180 was quite a steep price for just an ATV but then again, I remembered our old ATV-3, remembering the good job it had done for years and still does in our sleeping room.
But relating the price back to the actual hardware costs? As I got schooled as a computer electronics designer myself I cannot care less about the actual hardware costs. It's not the hardware which defines the value of the product. The design and sofware cannot be ignored here. But the most important part is: what challenges does the device meet, what problems does it solve, how does it make my life easier? Impossible to relate that to just the stupid hardware costs.
The ATV is worth a lot to me. The HomePod isn't. I won't buy it. To me it's not even worth € 50, no matter the hardware inside. But over time my opinion might change.
At the Apple Store I felt € 180 was quite a steep price for just an ATV but then again, I remembered our old ATV-3, remembering the good job it had done for years and still does in our sleeping room.
But relating the price back to the actual hardware costs? As I got schooled as a computer electronics designer myself I cannot care less about the actual hardware costs. It's not the hardware which defines the value of the product. The design and sofware cannot be ignored here. But the most important part is: what challenges does the device meet, what problems does it solve, how does it make my life easier? Impossible to relate that to just the stupid hardware costs.
The ATV is worth a lot to me. The HomePod isn't. I won't buy it. To me it's not even worth € 50, no matter the hardware inside. But over time my opinion might change.
Don’t worry Gruber, your Apple goodies will be coming to your front door this spring and fall.
True. To the extent there is a shared codebase, part of the cost from iOS development (and maybe MacOS too) would very likely be allocated to the HomePod’s AudioOS according to a method acceptable to the accounting standards board to correctly apportion the costs among products.
OP also mentioned the A8; again, a portion of R&D and other non-recurring manufacturing costs (the 20nm process of the A8 likely approaches $100m while 7nm chip development design costs are estimated at $300m) in addition to device cost would be properly allocated to the HomePod product. Cost accounting is sometimes tricky, but HomePod wouldn’t be allowed to free-ride development costs on the back of iPhone 6 and other products that use the A8. Luckily, at Apple’s scale these costs are amortized across a rather large quantity.
Last edited:
I don't think so. That wouldn't convince me, though I've had my HomePod a year now and am still stoked every time I use it.
It's probably to counter all of those here who moan-n-whine on and on about Apple and TC being greedy with their overpriced products, enormous margins, and profits?
Last edited:
He criticized the marzipan apps? Oh. Well, I guess you just proved he's not a shill. Thanks for clearing that up!
Give me a break---he's a hack and an Apple shill. He's an Apple PR flunky. I was just listening to the tech writers on The Verge talk about how his job is to carry Apple's water.
John Gruber = PR Hack.
Anyone who can't see it is a fool.
[doublepost=1549153682][/doublepost]Apple is a luxury goods company, anything they sell they price above the competition because they know people will pay the Apple premium. It’s plastic, it’s ******** but it’s fact.
On the latest episode of The Talk Show, Daring Fireball's John Gruber discusses Apple TV and HomePod pricing and whether Apple is charging too much for some of its products.
According to Gruber, Apple is actually selling the 2017 Apple TV 4K at cost, suggesting the device costs Apple $180 to make. As for the HomePod, Gruber said he believes Apple sells it at a loss.
Apple sells the 4K Apple TV for $180, and the HomePod for $349, though the HomePod at least is often available at a discount from third-party retailers. When the HomePod was released, estimates suggested it cost $216 to make in raw components, which does not factor into account other costs like research and development, software creation, and more.
Both the Apple TV 4K and the HomePod are priced higher than competing products from other companies like Amazon and Google, and rumors have suggested that Apple is working on lower-cost versions of both devices. For the Apple TV, Apple is said to be developing a stick-style Apple TV device, and for the HomePod, rumors suggest a smaller, cheaper model is in the works.
Gruber said that he also suspects the AirPods are priced close to cost as well, though he's not sure and can't prove it. And, of course, over time, things become less expensive to manufacture as component costs come down. Something that cost $180 in 2017 might not cost the same in 2019, as an example.
Overall, Gruber says that Apple isn't pricing its products too high, it's developing products that are too good.
"If you think it's a problem that these products are so expensive compared to their competition, that too few people buy them, it's not because Apple is charging too much, it's because Apple engineered and designed too good of a product," said Gruber.
(Thanks, Ryan Jones!)
Article Link: Gruber: Apple TV is Sold at Cost, HomePod at Slight Loss
Consider the prices Apple charge for cables, adapters and straps and think again on these being sold at a loss, that’s only possible if they’re flop products. A lot of experienced, highly paid people did the forecasts on these products.
Gruber, like so many of these ‘pseudo tech guru influencers’ drops nothing but waffle and the obvious, if he knows when the new iMac will arrive i’m all ears.
In all fairness, this forum once scoffed at the idea that the Airpods and Apple Watch were underpriced as well. As it turned out, the competition hadn’t been able to offer an equivalent product at a comparable price.
I will say that this forum generally has a very poor track record of accurately evaluating the value of a product beyond the sum of its individual component costs. It seems to me that tech people simply don't consider tools able to save people's lives as something belonging to their gadgetry world, let alone having the potential to be the next big thing.
Meanwhile, Alexa saying a joke is elevated above a small computer on the wrist which can constantly monitor one's health (plus do the same things as Alexa).¯\_(ツ)_/¯
Nor does Apple get enough credit for making technologies seamless. Critics don't appreciate how hard it is to actually make face id work, that the heart beat sensor on your wrist is actually accurate, or that the sound from airpods/homepod actually has high fidelity.
It's all taken for granted and not counted as "innovation". Of course, many change their tune when they experiment with other devices that don't work.
Ultimately, I think it boils down to tech people not caring about people. They don't care about products improving people's lives but merely for being entertained by cool new tech and features.
That’s the main issue.
I will say that this forum generally has a very poor track record of accurately evaluating the value of a product beyond the sum of its individual component costs. It seems to me that tech people simply don't consider tools able to save people's lives as something belonging to their gadgetry world, let alone having the potential to be the next big thing.
Meanwhile, Alexa saying a joke is elevated above a small computer on the wrist which can constantly monitor one's health (plus do the same things as Alexa).¯\_(ツ)_/¯
Nor does Apple get enough credit for making technologies seamless. Critics don't appreciate how hard it is to actually make face id work, that the heart beat sensor on your wrist is actually accurate, or that the sound from airpods/homepod actually has high fidelity.
It's all taken for granted and not counted as "innovation". Of course, many change their tune when they experiment with other devices that don't work.
Ultimately, I think it boils down to tech people not caring about people. They don't care about products improving people's lives but merely for being entertained by cool new tech and features.
That’s the main issue.
There’s no such thing as Apple selling something at loss and certainly not under Cook. If he can increase the price more, he would do that and when they start losing money they’ll blame China. Poor Apple starts using people to mis-inform the customers so we would feel sorry for them. And maybe when we feel sorry for them as if their greedy investors then we start giving them to make them happy.
Steve when he unveiled the Apple TV said it was a "hobby" and wouldn't be too profitable for however long. Not sure how far it was come along since then. Although we all know they are about to move billions of dollars of services through it.
I agree with you, Siri does pretty well on my HomePod at voice recognition. Where I see the biggest difference in "intelligence" between Siri and Alexa is in understanding a question then finding and communicating an appropriate response. I've asked Alexa numerous, factual questions (heights of mountains, actors in movies, dates of historic events, etc.) and Alexa usually provides a correct, spoken response within a couple of seconds. When I ask those type of questions of Siri, I sometimes get a correct spoken answer but more often I will get "Here is what I found on the web" on the screen of my iPhone or words to the effect of "I can't do that on this device".
It just seems Alexa is better at parsing the words it recognizes to get to the intent of the question being asked, then understanding the information it finds well enough to provide me with a succinct response rather than just giving me a website that MIGHT contain the answer.