Apple subsidizing Apple TV with movie rentals revenue? - Valleywag Comments

Apple subsidizing Apple TV with movie rentals revenue?

BartKela — Mon, 28 Jan 2008 16:58:01 PST

Heh heh, I'm not married.

BartKela

Apple subsidizing Apple TV with movie rentals revenue?

fear_me — Mon, 28 Jan 2008 12:55:58 PST

@BartKela: holy crap, i thought i was the only one with a spousal approval threshold on consumer electronic devices!

fear_me

Apple subsidizing Apple TV with movie rentals revenue?

BartKela — Mon, 28 Jan 2008 11:53:02 PST

Just Google "isuppli apple tv". Market research firm iSuppli calculated the BOM of the 40GB model at $237 in June 2007 (although the parts are probably cheaper now). Also, the analyst speculated that Apple was focusing on market penetration so it was willing to take a smaller profit margin than usual.

So basically, they're probably selling the 40GB box with little or no profit, with the hopes that the device/movie rental service will take off.

The Spousal Approval Threshold for consumer electronics devices is $200, so once Apple can get it down to $199, the device will start to move.

BartKela

Apple subsidizing Apple TV with movie rentals revenue?

gpapilion — Mon, 28 Jan 2008 11:42:20 PST

Having worked at a company that produced this type of product, the BOM cost of the Apple TV was very close to what the original price was. The saving grace for Apple was that they had zero cost in terms of sales channel, allowing to sell the device at a low markup and still make money. As the BOM has dropped I would suspect that the price could drop as well.

I also think that Apple is unlikely to make enough money on rentals of HD content to subsidize the HW. The delivery is not free for Apple, nor is the content. Delivery cost probably range from $0.25 to $0.75 per movie (bandwidth, servers, colo, power, people... and this may still be low).

Apple has always made money on hardware sales, and I suspect they will continue to use harware as their primary source of profits.

gpapilion

Apple subsidizing Apple TV with movie rentals revenue?

franky — Mon, 28 Jan 2008 11:20:17 PST

In the UK they still charge 199GBP (17.5% VAT incl.), little less than $400. Considered that the $199 8GB iPod Nano retails for 129GBP (VAT incl.), one can easily say that UK sales will partly subsidize the US price drop.

franky

Apple subsidizing Apple TV with movie rentals revenue?

lkanthatham — Mon, 28 Jan 2008 08:33:11 PST

Hi, Luck here from Apple TV Source ([appletvsource.com]). My site has been around since Day 1 of Apple TV Release last year. So I think I know a thing or two about the Apple TV.

The number 1 complaint I heard from my readers about the Apple TV last year was that it was underfeatured and overpriced. So, now that Apple is going to eliminate both complaints, I think is great news. To keep up with the competition like VUDU and Archos TV+, Apple really needed to reduce the price of the device anyway. I personally don't think it has anything to do with Hollywood subsidizing it in anyway.

lkanthatham

Apple subsidizing Apple TV with movie rentals revenue?

Jordan Golson — Mon, 28 Jan 2008 08:22:38 PST

@Matt Buchanan: Hooray for economies of scale. But then, why no price drops in other countries?

Jordan Golson

Apple subsidizing Apple TV with movie rentals revenue?

matt buchanan — Mon, 28 Jan 2008 07:44:41 PST

It's actually probably markedly cheaper to produce Apple TVs now than when it was launched. In other words, there's probably no "subsidizing" going on.

matt buchanan