Apple TV Can't Bring Home the Bacon

Dennis Faas's picture

Some tech critics believe Apple TV will be nothing less than a flop.

How bad could it be?

Recent reports suggest it might hurt the company behind the device more than they ever imagined.

The components and materials to make Apple TV cost $237 apiece. Apple is selling the product for $299, leaving a gross profit of only $62, or about 20 percent. And that's before marketing costs. (Source:

The razor thin profit margin is especially uncharacteristic for Apple, which is used to gross margins above 50% for products outside its computer line. The iPod has proven to be a high margin revenue stream for Apple, and it looks like the iPhone will follow suit. But somehow, Apple TV got off track. (Source:

Further hampering Apple TV's ability to affect the bottom line is the way in which the company plans on recording the costs and revenue of the product. Since costs and profits are going to be split over eight quarters, only $7.75 of each Apple TV sold will be booked as profit for a given quarter. (Source:

Andrew Rassweiler, an analyst with iSuppli, the company which generated these calculations, warns that Apple TV may not be leading the company in the right direction. "This is certainly a departure for Apple, or at least it's approaching a departure," he said. "We made some very aggressive assumptions with this device, and by that I mean we assumed low prices on the components." He explained that if the costs were much higher, "we'd be looking at a device that Apple was subsidizing." (Source:

So there you have it: the future looks a little bleak for Apple's new product. But, it's pretty hard to count out the maker of the iPod, just yet.

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