Apple likes to have at least a 50% profit margin on most of the hardware it sells but that’s not happening with the company’s AppleTV.  The price on the 40GB model was dropped from $299 to $229 and on the 160GB model from $399 to $329.  There is a greater profit for the company in selling the 160GB model.  Both models still have a lower profit margin than some of its other products.

Apple is taking a different strategy with the AppleTV.  While iTunes may sell iPods, the hope is that iTunes will now sell AppleTVs.  If it doesn’t work out like that, Apple may just have to discontinue the AppleTV.  Gizmodo received information from iSuppli that shows Apple doesn’t make much profit on the AppleTV.

The total cost of materials involved in making the 40GB model come to $208.20 and for the 160GB model come to $235.70.  That means there is about a 10% profit in selling the 40GB model and about a 30% profit in selling the 160GB model.  So, the next time you walk into an Apple store and you want to buy the 40GB model, don’t be surprised if the salesperson tries to steer you towards the 160GB model.

It’s still better for any company to sell more of its products at a smaller profit than fewer at a larger profit margin.  An analyst with iSuppli says, “if they [Apple] were giving it away before, they’re definitely giving it away now.”

That may be the case but the Vudu media box still offers a better value if you can live without iTunes.  Apple will have to make back it’s “lost profit” from iTunes sales and from the way things look, that should not be a problem.

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Entry was posted on Tuesday, January 29th, 2008 at 10:11 am under Apple, Apple TV, iTunes.  Print This Post

Read more entries by Jonathan Schlaffer.
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