Apple’s bread and butter, despite developing superior software, has always been hardware. It brings in the money that makes Apple profitable. That includes Macs and iPods, but according to iSuppli, not on the Apple TV. According to their figures, each $299 model brings in only 20% profit before marketing costs.
Apple’s other hardware products feature profit margins exceeding 50% (gross, neglecting any other costs). According to Business Week, this means that Apple is trying to make money off its video offerings in the iTunes Store and through partnerships, such as the YouTube one that was recently announced.
I’m personally not a big subscriber to this theory. While the profitability of these units may be less than other products, it’s getting a free ride off Apple’s iPod and iTunes marketing. Further, as time wears on, these components will cost less. I’m not saying Apple won’t upgrade components, but the price drops are going to outpace hardware upgrades. I just don’t see this as Apple leaving its winning profit generating hardware strategy.
