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The $99 Apple TV is Made of $64 Worth of Parts

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October 6, 2010 10:41:25 PM

I was expecting it to be $20.
October 6, 2010 10:45:17 PM

Same here. Thats about what I guessed the other day in the article they did on the teardown. Guess they wont be making quite as much off them as I thought, but they wont be hurting either.
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October 6, 2010 10:47:10 PM

Doesn't matter what the thing cost apple to make..many are willing to pay too much for it as always.
October 6, 2010 10:57:16 PM

It makes sense though. Because you can only buy directly off the Apple TV through Apple, the user will in turn keep paying Apple every time they purchase a movie or show, and thus they can charge a low(ish) price for the actual device because you are forced to pay them in the end.
October 6, 2010 11:10:14 PM

Generally from the teardowns I see, they price it at how much it would cost the average consumer to purchase the parts. When you think that Apple is buying these parts in the thousands and ten-thousands, the price drops significantly. I suspect that to be the case here.
October 6, 2010 11:10:57 PM

I don't think they plan to profit from the hardware, only from streaming movies or music or rentals.
October 6, 2010 11:17:02 PM

This is based on published prices for parts in large quantities. I bet the price of Apple TV that Apple doesn't pay even close to the published wholesale price. More likely they beat out the suppliers for every last penny worth of discounts resulting in additional 20%, 30% or more savings depending on which part we are talking about. Capacitors and resistors are priced as low as possible because they are commodity items. But all Integrated Circuits have a wider margin of profit and thus more room for negotiation.
October 6, 2010 11:39:14 PM

Don't forget about the R&D costs. The final price factors those in as well so profit isn't just the discrepancy between parts cost and MSRP.
October 6, 2010 11:41:59 PM

I was expecting the profit margin to be in excess of 50%. Kindly surprised.
October 6, 2010 11:57:08 PM

It's worth a lot less since it's practically the same components used in 2 other production devices lines and close to the same as a 3rd.

Mass production discount ftw
October 7, 2010 12:01:53 AM

darkwingz24Don't forget about the R&D costs. The final price factors those in as well so profit isn't just the discrepancy between parts cost and MSRP.

Bingo. I've worked on projects that have maybe a few hundred dollars worth of parts. But when you add in how much labor I spent meshing them and programming them: that's where tons more cost went.
October 7, 2010 12:09:01 AM

Costs of R&D aside I am surprised to see MSRP and part cost this close to together on an Apple product. Also before anyone flames me into oblivion on charges of being anti-apple, I am typing this comment on my MBP.
October 7, 2010 12:09:14 AM

Dont worry, the cost comes later. Steve wouldnt let people pricing their products fairly slide, he'll get to the bottom of it. The cost comes with Apple TV. Its like buying a panasonic and paying panasonic everytime you change the chanel. In a way...
October 7, 2010 12:11:40 AM

This isn't adding labor.
October 7, 2010 12:20:14 AM

This is just another rip off from Apple.

Even if the box cost 60 bux to make, that 39 bux profit is enough to cover all the shipping/rent/labor/R&D already.

anything AFTER is the money maker, cuz a lot of morons will just pay for their *cough*overpriced,outdated garbage shows*cough*. They think they're cool oooooMG its magical I can stream shows off the internet OH MY GOD !!!
October 7, 2010 1:08:30 AM

Apple should be selling that thing for a loss!
October 7, 2010 1:13:47 AM

oh no evil profits! how dare they?!

how to create a job by Linda Mcmahon:

"An entrepreneur takes a risk and starts a business that creates a product or service that fills a need. Then sells that good or service for more than it takes to provide it."
October 7, 2010 1:28:17 AM

Heh... back when it first came out... I said that I MIGHT think about buying it if it cost $65. Looks like I was closer than I thought.

But why the hell does Apple need to make it so expensive? I mean, granted this still doesn't take into account things like labor costs and shipping... but even if they were, I doubt it would be $100. More like $80.

To be honest (and to my dismay), no device like this is really in position to boost this area of entertainment. Therefore, there is practically no competition for this, and Apple could place itself as a front runner when this type of device takes off. So why not attract more people by selling the device at no profit and just rely on iTunes rentals and whatnot to generate revenue?
That way when this type of device takes off in the market, Apple will already have a huge foothold.

BUT, then again, I'm no business analysis, so maybe they see something I don't.
October 7, 2010 2:39:39 AM

Yeah that pretty damn good value actually.

Parts and assembly are only a small portion as everyone knows.

R&D, distribution and advertising are also massive costs. Its kinda why a 20c hands free kit costs $20 in the shops. I wouldn't be surprised if Apple is losing money on these.
October 7, 2010 2:59:31 AM

I'm a big fan of these. Best
October 7, 2010 3:08:56 AM

So... according to that first sentence, Jane loves staring at porn? :D 
October 7, 2010 7:14:36 AM

It always vary. . .
October 7, 2010 8:13:18 AM

Smell like the companys console counterpart... dont cost "that much" to purchase but once you want content from its closed market you get raped!

No Thx!
October 7, 2010 8:37:33 AM

Wholesale list prices even for large quantities mean very little in this business. As a buyer from a large manufacturer like Apple could easily get between 40% and 90% on all of those parts.

Similarly to consoles though these are sold at a lower profit margin than usual because most of the profits will be on usage fees.
October 7, 2010 1:06:39 PM

I'm actually impressed. I would have expected the parts to be around 30-40% of the unit's price. Of course, that's the kind of product where initial profit doesn't matter as much as the profit that will be made when the customer begins to stream stuff.
October 7, 2010 1:43:14 PM

i see what they are doing, start it low and get everyone interested in it, but by the time a new generation comes around and everyone is buying it, BOOM massive price increase.
October 7, 2010 2:39:59 PM

Done caring about anything Apple does. The iPod classics are/were awesome, but they aren't even paying attention to that product line anymore. Cheers Apple. Call me when you start listening to your consumers.

"The views expressed here are mine and do not reflect the official opinion of my employer or the organization through which the Internet was accessed."
October 7, 2010 3:46:51 PM

im with footsoilder, it's kind of like inkjet printers really, you end up paying more for the consumables then the printer itself
October 7, 2010 4:43:09 PM

I'd be curious to see a component cost breakdown of a typical home-brew gaming PC, including the OS. I'd bet we would see similar margins...
October 7, 2010 8:36:20 PM

They need to make money somehow. If you're not okay with that, then don't buy it.
October 7, 2010 9:00:03 PM

Meh, still don't care about Apple TV
October 7, 2010 9:18:18 PM

zachary ki see what they are doing, start it low and get everyone interested in it, but by the time a new generation comes around and everyone is buying it, BOOM massive price increase.

No really. Apple's way is ... keeping the price the same or even drop the price, while only adding new features into the new version or change the design of the new version so people will trash their old one and buy a new one.

October 7, 2010 10:31:28 PM

and I still wouldn't pay 64 for it.
October 8, 2010 6:22:16 AM

Do they take into account volume discounts when apple is ordering bulk shipments or are they considering the cost of if they were to buy the replacement parts them self or a small shipment?
October 8, 2010 6:45:53 AM

Thats apple for you, folks!!
October 8, 2010 6:59:22 AM

Like someone said previously, these prices are based on what a consumer would get. If apple were to buy these parts in bulk by the thousands they could be getting that processor for $10 cheaper or that flash storage for $10 cheaper, in the end they pretty much pay around $20-30 for the whole crappy thing. Which to me is not surprising at all, seeing how their laptops parts would cost $200 but they sell it for $1200 anyway
October 9, 2010 2:12:33 AM

Really? A 'consumer' can buy an A4 chip for $16.55????
Do they sell these on ebay? I couldn't find them anywhere.

Also, have you ever looked at tray prices for cpu's for example?
On anything popular there is hardly a discount.

Again, actual parts are only a tiny portion of what it costs to make something.
There are scientists and engineers designing chips. Industrial design teams to make a pretty form factor. Factories like foxconn to make and assemble components. They have massive overheads to cover. Didn't they spend around a million dollars on prototype production machines just to make the iPhone 4 antenna? Employees there have also received big pay rises recently. Packaging. Some guy to design the packaging and manuals etc. Every product needs to be shipped and insured. There are warehouses and intermediary deliveries along the way, they all get paid too. Then it ends up sitting in an Apple store or delivery warehouse. Store's need to cover their overheads, rent, outgoings wages etc etc. Almost there folks... finally once everybody is paid, the shareholders want some cash, then tax man squeezes your tit, and the table scraps left over are yours to keep.

If all of that doesn't satisfy you, its a free market economy. Shop elsewhere ;) 
October 9, 2010 7:36:33 PM

will the truth hurt apple or not.?