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Gruber: Apple TV is Sold at Cost, HomePod at Slight Loss

Mmmm... dunno about this Apple is selling at cost or at a loss. The company NEVER does that. Steve jobs wouldn’t stand for it. It’s in the DNA. He believed that you should pay proper money for stuff they’d spent energy working on. Of all companies Apple believe in MARGINS!

I think what gruber doesn’t put in the mix is that Apple products are not siloed off. You cant divorce the Apple TV from the content it sells and makes money on. Content they wouldn’t be able to sell if the Apple TV didn’t exist.

It’s the same with HomePod. They want to keep people in Apple Music services and add to their 50m+ users. So the HomePod revenue is the device revenue plus whatever Apple Music subscribers you attracted or kept.

Finally, when you are reusing the same chips and operating system accross all your devices it’s hard to actually price in how much anything actually costs to make for apple.

So how much does it cost to supply 1m A10 chips when you’ve already supplied 50m to make phones and iPads? It’s probably pretty dirt cheap.

So I don’t buy the whole, apple is being benevolent or charitable. Their overall margins are still among the highest in the industry, year on year. Focus on that.
 
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Aside from the fact that on a recent episode of The Talk Show that had Deiter Bohn as the guest they spent a rather large section of the show discussing the Pixel 3 and its camera, and Gruber was actually very complimentary of it overall.[/QUOTE]
Wow yeah, one time out of how many? Come on man, how often does that happen?
 
That home speaker has a build cost of about $200. Even that number seems about $100 too high.
 
iSayuSay said:
Agreed, Apple TV and Homepod is the kind of device to lure you into the ecosystem

People forget that at some point, Apple TV costs $99 (2nd and 3rd gen) and I must say you get a nice quality build for that price. A $99 tv box from roku or xiaomi would be crap.

I don’t know just how much Apple’s margin for that Apple TV back then?

But Apple TV was the hub into iTunes and lots of purchase happened because of Apple TV.

There’s also this mid 2018 9.7” iPad that costs $349 and works with Apple Pencil. Every once and a while, Apple makes low margin products for business advantage.
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I don’t think the HomePod would lure anyone in. Due to it only working with Apple Music I think you’d have to be heavily in the ecosystem to even consider it. If I was a neutral consumer and I wanted a high quality speaker I’d rather pick a Sonos because it supports google play music, Spotify and amazon music. Works with Alexa and google Assistant and supports Airplay 2. However being someone heavily invested in the Apple ecosystem I went with HomePods.
 
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I deliberately bought an Apple TV 4K because I knew It was the only think I knew would give a true UHD 4K picture when streaming. Money well spent. And complements the TV set brilliantly.
 
The target market for the HomePod is likely someone who owns an iPhone and is already subscribed to Apple Music. As such, I don’t think the purpose of the HomePod is to sell more music streaming subscriptions. The HomePod is likely still profitable, while serving to lock users in to the iPhone.
 
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dumastudetto said:
John and Rene are always fair and honest. Their commentary is always bang on the money. They are completely respected and I regard them as 100% trustworthy.
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Rene has apologised very very hard for Apple on multiple occasions.. he is nothing but an Apple stooge I’m afraid and not fair in the slightest. He runs his own Apple fan website.
Mac Rumors writers, and certainly 9to5mac are far far far more critical of Apple then Rene ever has been.
John Gruber is just a worst example of Rene IMO, he’s only good for leaks sometimes.
 
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Gruber has been consistently wrong about everything with regards to BOM cost.

I mean, seriously, if you have zero expertise in that field don't try to speculate. And NO, the AirPods are not sold at cost.

And now after all these website publishing, we have zillion of idiots who would argue for Apple saying they sold at cost, without going through a little research or googling how this is far from truth.

Apple's pricing has been extremely simple, and their BOM cost reverse calculation has been straight forwards for nearly a decade I have no idea why these Apple's fellows still don't get it.
 
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This first Apple TV was sold close to cost as it was a small Tiger-based computer with a hard drive. So even Steve gave up profit to gain market share.
 
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PickUrPoison said:
Apple isn’t perfect by any means. But if you want a computer, cellphone, watch and tablet, what manufacturer offers a better option? Keep in mind, in no way am I saying any of those products don’t have issues, or couldn’t be improved.

But what I am saying is that for me, I’d rather have a Mac than any Windows or Linux PC. I’d rather have an iPhone than any Android phone (even if it were given to me free.) I’d rather have a Series 4 Apple Watch than any other smart watch. And I’d rather have an iPad than any other tablet. I could throw AirPods and HomePod in there as well.

But by all means, I’d like a “better” iPhone, Mac, Watch, etc. And by better I mean more reliable, faster, longer lasting, etc. And sure, cheaper would be great too :)
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Samsung.. not saying better but they will sell you a computer, smartphone, tablet, watch.
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chatin said:
This first Apple TV was sold close to cost as it was a small Tiger-based computer with a hard drive. So even Steve gave up profit to gain market share.
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And IMO it is legendary for being a tiny PC, and it’s why many love using the Mini as a home theatre PC server.
 
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Rogifan said:
Then how come Apple’s gross margins are consistently around 38%? And this is with a higher percentage of revenues coming from services which have a 62% gross margin. If Apple’s hardware was overpriced wouldn’t its gross margins be going up ?
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That type of logical and rational analysis is never going to fly here in the MacRumors forums.
 
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Abazigal said:
The target market for the HomePod is likely someone who owns an iPhone and is already subscribed to Apple Music. As such, I don’t think the purpose of the HomePod is to sell more music streaming subscriptions. The HomePod is likely still profitable, while serving to lock users in to the iPhone.
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I subscribed to Apple Music after I got my first HomePod, hadn’t even taken up the free trial. However I agree it’s for someone who already owns an iOS device, most likely an iPhone as you need an iOS device to set it up and it won’t work with an android phone or tablet even if you are subscribed to Apple Music.
 
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Look, I like Gruber and Apple products. I purchased a HomePod right out of the gate. I got Sonos in my house as well for my basement theatre.

I just added a Sonos beam and the new play ones in our bedroom and those are miles better (in my opinion) than the HomePod.

The sound is clear, crisp, and bass is excellent. I don’t use the Alexa, and probably won’t use the Google Assistant if it shows up.

I’m not expert, but most consumers shop with their wallets and Sonos offers a much more compelling value and I think better sound (again, my opinion).

Additionally, there is no eco system lock in. Which, I never used to worry about at all. I’m starting to hedge on that aspect.

AirPods - nothing comes close.
 
Gruber has been pushing this Apple stuff is over engineered theory for a while so these birdies aren't that surprising.
He even bothered with Windows.
The truth as usual probably is somewhere in the middle.
In the iPhone for example the only justifiable extra cost is face ID. The SoC is also proprietary (and awesome) but others also develop SoCs and while they lag behind they certainly drop their fair amount of money into that. I have doubts face id alone makes the hundreds iPhones are costing is excess.
 
BlargKing said:
I dont see how a Apple TV 4K can cost that much to make when Google has a 4K Chromecast for 80$
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The chromecast is a lot more stripped down. It doesn’t have an interface, doesn’t have an included remote, doesn’t have voice control without buying another device like a google home mini. It doesn’t have a dedicated App Store with apps built specifically to run on the chromecast. So in that respect the higher price is expected. I think the Apple TV should be compared to something like the fire tv box, or the Nvidia shield tv.
 
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Relentless Power said:
I see this said a lot, and it’s not necessarily true in respect to the HomePod. Siri does really well with the HomePod in terms of user commands and it’s responsiveness is actually better than most probably expect. Even the microphone can pick up your voice with Siri from a distance and very few times has it been inaccurate for my usage. Where Siri needs the most improvement, is further development with dictation and deciphering phrases/words, but for in-house commands, Siri does really well.
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I have both Siri and Alexa. For my family Siri has been far better. So much so that we’ve given up with Alexa. Now, it could be that we are just more familiy with Siri, or that Siri has gotten accustomed to our voices. But for our usage it is miles better. I can’t comment on Google.
 
I like Apple but I am not in love with them as Gruber is. He defends everything they do no matter how stupid. Do take this into consideration when reading his assessments and texts.
 
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ksec said:
<snip>

And now after all these website publishing, we have zillion of idiots who would argue for Apple saying they sold at cost, without going through a little research or googling how this is far from truth.

Apple's pricing has been extremely simple, and their BOM cost reverse calculation has been straight forwards for nearly a decade I have no idea why these Apple's fellows still don't get it.
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Ok then let’s ignore Gruber and apply your methodology.

iPhone 6S Plus BOM cost: $232, selling price $749. 31%

iPhone 7 BOM cost: $220, selling price $649. 34%

iPhone 8 BOM cost: $248, selling price $699. 35%

iPhone 8 Plus BOM cost: $288, selling price $799. 36%

iPhone X BOM cost: $370, selling price $999. 37%

So although BOM cost has been edging up slightly over the years, it’s roughly 35% of selling price (for iPhone).

What does that tell us about HomePod? Well the BOM cost has been estimated at $216. If you use typical iPhone margins, the HomePod should be selling for about $615.

We know Apple’s hardware gross margin—not to be confused with BOM cost—is about 34%. So total cost of HomePod would be about $406 (66% of $615).

So regardless of Gruber, it does appear that Apple sells HomePod at a loss. BOM cost would have to be about $119 (34% of $349) for Apple to be making their average gross margin on HomePod.
 
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Lol... If the HomePod was too good of a product, it would have the ability to play my iTunes library. It doesn't and that is a total joke. I simply couldn't and still can't believe Apple released a speaker i can't just play my own music through?
 
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