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Also, given Apple’s famously wide margins on products, it’s interesting to consider profitability and not just overall revenue.

by gdubs 7y ago

awinder 7y ago
Oh if you started getting into profit you'd be able to stuff tons of companies into the "made more than" bucket, considering that Spotify has had 3 profitable quarters ever, twitter ebbs and flows between profitable and loss quarters, snapchat still isn't profitable. Shopify seems to be a bit more dependable with profits though, so hooray for them.
ogre_codes 7y ago
There's never been any disclosure of AirPod margins, it's lumped into a big group of other products including Apple Watch, Apple TV, and Beats. Based on the slow production ramp up of the AirPods (they were selling them as fast as they could produce them) and competitor pricing on competitive hardware, there was a lot of conjecture that for the first year or so AirPods were sold at break even. Of course, that was nearly 3 years ago so it's almost certain margins have improved on what is essentially the same product, but I suspect Apple's margins on these are not as high as for the iPhone or iPad. Spotify's big problem is they sell a product which is 99% commodity. Anyone with enough money can create a music streaming service and all resellers pay very similar rates for the same content. Apple Music, Amazon's music, and Google's music all sell the same essential thing. Spotify's only chance for turning their product into a premium (thus profit generating) service is building a significantly better playlist and music recommendation service.
- deleted 7y ago
  [deleted]
- ksec 7y ago
  >here was a lot of conjecture that for the first year or so AirPods were sold at break even. Oh hell no. That was started by DaringFireball John Gruber. When we talk about margins it is important to note most would refer or implies this as Gross Profit Margin. Which is without the R&D and Marketing Cost, since these are fixed cost, i.e They are the same irrespective of how many unit were sold. All the Audio Gear ( Or Accessories ) sold on the market has some of the highest Gross Profits Margin. Much higher than iPhone or Mac because they were never meant to be sold in huge quantities. Beats, and Apple AirPod were the only two Audio gear that manage to sell in volume. I would be surprised if the BOM cost of AirPods is higher than $20. ( You could get a replica of AirPod without W1 Chip from Shenzhen for less than $10, $8 in thousands of unit, so I am already add lots of headroom in my BOM estimate. ) The major cost is developing W1 Chip and Speaker R&D. Which needs to amortised over unit volume. And AirPods did that spectacularly well.
  - ogre_codes 7y ago
    It's more than 3 years after the original AirPod launch so all your conjecture about modern knock off products is irrelevant. In the years after AirPods were launched, Samsung, Amazon, Microsoft, and Google all tried to replicate the AirPods at the time and wound up priced higher than the AirPods. Samsung, Google, and Amazon in particular are notorious for launching "As good as Apple but cheaper" products with lower margins... yet they weren't able to be price competitive at the time.
    - ksec 7y ago
      First the replica were there from day 1, with improved version 6 months later with the exact pairing. ( They reversed engineered the Apple Pairing system ) for the same price. You could get a Xiaomi version for $30 in early 2018. Second. No Manufacture like to undercut in price ( Even the Chinese brands are getting away from it ). It is much better to follow Apple's price and offer higher margin for retailers, better incentive to 3rd party resellers and sales to push volume. And we all know it somehow didn't work quite as planned. Xiaomi launched their 3rd revision Airdot for $40. Using Qualcomm Chip. Third, All the competitor your mentioned combined would not even come close to Apple's Airpod Shipment. Most of the major competitors, just sell a fairly low quantities.

Also, given Apple’s famously wide margins on products, it’s interesting to consider profitability and not just overall revenue.

by gdubs 7y ago

Also, given Apple’s famously wide margins on products, it’s interesting to consider profitability and not just overall revenue.

awinder 7y ago

Oh if you started getting into profit you'd be able to stuff tons of companies into the "made more than" bucket, considering that Spotify has had 3 profitable quarters ever, twitter ebbs and flows between profitable and loss quarters, snapchat still isn't profitable. Shopify seems to be a bit more dependable with profits though, so hooray for them.

ogre_codes 7y ago

There's never been any disclosure of AirPod margins, it's lumped into a big group of other products including Apple Watch, Apple TV, and Beats. Based on the slow production ramp up of the AirPods (they were selling them as fast as they could produce them) and competitor pricing on competitive hardware, there was a lot of conjecture that for the first year or so AirPods were sold at break even. Of course, that was nearly 3 years ago so it's almost certain margins have improved on what is essentially the same product, but I suspect Apple's margins on these are not as high as for the iPhone or iPad. Spotify's big problem is they sell a product which is 99% commodity. Anyone with enough money can create a music streaming service and all resellers pay very similar rates for the same content. Apple Music, Amazon's music, and Google's music all sell the same essential thing. Spotify's only chance for turning their product into a premium (thus profit generating) service is building a significantly better playlist and music recommendation service.

deleted 7y ago
[deleted]
ksec 7y ago
>here was a lot of conjecture that for the first year or so AirPods were sold at break even. Oh hell no. That was started by DaringFireball John Gruber. When we talk about margins it is important to note most would refer or implies this as Gross Profit Margin. Which is without the R&D and Marketing Cost, since these are fixed cost, i.e They are the same irrespective of how many unit were sold. All the Audio Gear ( Or Accessories ) sold on the market has some of the highest Gross Profits Margin. Much higher than iPhone or Mac because they were never meant to be sold in huge quantities. Beats, and Apple AirPod were the only two Audio gear that manage to sell in volume. I would be surprised if the BOM cost of AirPods is higher than $20. ( You could get a replica of AirPod without W1 Chip from Shenzhen for less than $10, $8 in thousands of unit, so I am already add lots of headroom in my BOM estimate. ) The major cost is developing W1 Chip and Speaker R&D. Which needs to amortised over unit volume. And AirPods did that spectacularly well.
- ogre_codes 7y ago
  It's more than 3 years after the original AirPod launch so all your conjecture about modern knock off products is irrelevant. In the years after AirPods were launched, Samsung, Amazon, Microsoft, and Google all tried to replicate the AirPods at the time and wound up priced higher than the AirPods. Samsung, Google, and Amazon in particular are notorious for launching "As good as Apple but cheaper" products with lower margins... yet they weren't able to be price competitive at the time.
  - ksec 7y ago
    First the replica were there from day 1, with improved version 6 months later with the exact pairing. ( They reversed engineered the Apple Pairing system ) for the same price. You could get a Xiaomi version for $30 in early 2018. Second. No Manufacture like to undercut in price ( Even the Chinese brands are getting away from it ). It is much better to follow Apple's price and offer higher margin for retailers, better incentive to 3rd party resellers and sales to push volume. And we all know it somehow didn't work quite as planned. Xiaomi launched their 3rd revision Airdot for $40. Using Qualcomm Chip. Third, All the competitor your mentioned combined would not even come close to Apple's Airpod Shipment. Most of the major competitors, just sell a fairly low quantities.