Text 9462, 430 rader
Skriven 2006-01-30 22:26:20 av John Oellrich (1:379/45)
Kommentar till text 9453 av Glenn Meadows (1:379/45)
Ärende: Re: iPod business
=========================
From: "John Oellrich" <john@oellrich.us>
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Glenn,
But I think you see my point, even after the labels get their 66%, Apple =
still has plenty of cash flow to cover operating expenses and turn a = profit,
the question remains how much of one. But Apple selling the iPod = Nano at a
clear loss would seem to indicate Apple believes that iTunes = does (or will in
the near future) spin off enough cash to allow them to = subsidize iPod
sales.=20
I used to believe that Jobs was an idiot when it came to both technology = and
business (what he did during the gestation of the Mac and then at = NeXT should
be proof enough), but it seems he finally got grounded with = Pixar and then
returning to Apple. In fact the coup he just pulled off = with Disney appears
to be beyond brilliant. Talk about the tail wagging = the dog! So I also tend
to believe that he has his shit together when it = comes to iTunes.
In my research on this subject I also found that the major labels may be =
making out better than you thought, at the expense of the artists. At = least
from the articles I read, the artists get 12% from CD sales, but = only 6% from
iTunes sales. OUCH!
Oh couple of other points about the iTunes model. One the cost of = bandwidth
is obviously plummeting. I now have the equivalent of a = 10BaseT to the house
for $70 a month (or ~7T1s on the download side). = And the carriers really
discount on the commercial side if you make a = reasonably long term commit for
a lot of bandwidth. But I think a bigger = key issue is that iTunes effectively
doesn't have any carrying costs, = one copy of every tune in its library. If it
is a loser, no big deal, if = it is a winner, that single copy can be
downloaded millions of times for = very little expansion of its server farms or
its network.
--=20
john
john@oellrich.us
"Glenn Meadows" <gmeadow@comcast.net> wrote in message =
news:43dd28be$1@w3.nls.net...
I really don't know what it costs for them to run it, but I know it's =
a=20
large staff, large data infrastructure. I don't know what bandwidth =
costs=20
are at that level either.
BUT, I do know for a fact that we get 66/67 percent of the sale of =
each item=20
sold. I see the sales reports every month.
Their percentage they keep is actually LESS than Wal-Mart/Target get =
on the=20
physical good sale markup for standard retail.
--=20
Glenn M.
"John Oellrich" <john@oellrich.us> wrote in message=20
news:43dbfbde@w3.nls.net...
Glenn,
I'm pretty sure I read that Apple has been getting a much larger chunk =
of=20
the music sale than that. But now I can't remember where I read it.
As Apples revenues on iPods, of course it is a major contributor. The =
sold=20
over 11 times more iPods than Macs of all flavors (14 million vs. 1.25 =
million) in the last quarter. And for revenue its $2.9B for the iPods, =
$1.7B=20
for the Macs (or $207 per iPod and $1,724 per Mac). I would argue that =
the=20
margins are much different for an iPod than a Mac. The Mac benefits =
from=20
using truly commodity components (other than the CPU, but going Intel =
will=20
solve that nasty little problem) where Apple benefits from the volumes =
of=20
the entire PC industry. The same is not true for the iPod, a lot of=20
comparatively low volume and expensive (smaller ain't cheaper) =
components.
When the iPod Nano was released a study of its Bill of Materials (the =
cost=20
of the components) showed that it was in fact being sold at a loss. =
The cost=20
of the flash in the device alone was around 40% of its list price. The =
total=20
BOM for a device should only be roughly 33% of its list price is the =
old=20
rule of thumb. The speculation was Apple priced it as it did for one =
reason,=20
boost iTunes downloads.
The revenue from iTunes last quarter was $491M (not a pure number, =
Apple=20
rolled up some other revenue sources in the number as well, but iTunes =
is=20
probably the lion's share). Let's ignore the fact that this isn't a =
pure=20
number and go with your 2/3's back to the studio (oops just did a =
Google,=20
Apple gets a tad over 34%). 34+% of $491M is $168.4M or $56.1M per =
month.=20
How much do you really think it costs Apple to run iTunes per month?=20
Whatever, it is not going to be anywhere close to $56.1M. Overall in =
Apple's=20
profits, yep iTunes is small potatoes, but a potato that is growing =
very=20
rapidly.
--=20
john
john@oellrich.us
"Glenn Meadows" <gmeadow@comcast.net> wrote in message=20
news:43db9005$1@w3.nls.net...
John,
I've got to side with Rich on this. Apple does NOT make any =
appreciable
profit on the store. 2/3 of the revenue from the sale of a track =
goes to
the label who owns the copyright (actually it's going up another few =
percent
shortly). Then from that, Apple has to pay the full staff that runs =
the
store, does all the previewing of the music, etc. Plus, they pay the =
(Apple
pays) the CC processing fees from their portion, as wall as all the
bandwidth costs, customer support calls,etc. And, for most of the =
majors,
they do all the encoding and processing of the new material (at =
least they
did for the first year to get it going).
Within the industry, it's fairly well known, that Apple makes =
virtually
nothing on the sale of the music, it's the drive of the content to =
sell
iPods. I believe that a recent news story I read said that they're =
making
as much, or more on iPod sales, than they are on computer hardware =
sales.
The iPod profit is a very large margin all the way through the =
retail=20
chain
is suspect.
--=20
Glenn M.
"John Oellrich" <john@oellrich.us> wrote in message
news:43db849c$1@w3.nls.net...
Rich,
Nope it is the other way around. Well they do probably make a profit =
on=20
the
iPod, but it has no where near the margin of iTunes.
--=20
john
john@oellrich.us
"Rich" <@> wrote in message news:43db18e3$1@w3.nls.net...
Doesn't apple make money on the ipod hardware and little to =
none on=20
the
itunes store?
Rich
"John Oellrich" <john@oellrich.us> wrote in message
news:43da8441@w3.nls.net...
Talk about stupid! Yet another money losing piece of hardware =
where=20
they
will try to make it up in the volume ;->
...
I would suggest that MS might be better off working with =
Creative if
they want to blunt Apple's dominance in this arena. Get Windows =
Media 10
ported to the device, and then MS could use MSN for the delivery =
vehicle=20
for
the purchased media which is where the real money is.
--=20
john
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<DIV>Glenn,</DIV>
<DIV> </DIV>
<DIV>But I think you see my point, even after the labels get their 66%, =
Apple=20
still has plenty of cash flow to cover operating expenses and turn a = profit,
the=20
question remains how much of one. But Apple selling the iPod Nano at a =
clear=20
loss would seem to indicate Apple believes that iTunes does (or will in = the
near=20
future) spin off enough cash to allow them to subsidize iPod sales. =
</DIV>
<DIV> </DIV>
<DIV>I used to believe that Jobs was an idiot when it came to both =
technology=20
and business (what he did during the gestation of the Mac and then at = NeXT=20
should be proof enough), but it seems he finally got grounded with Pixar =
and=20
then returning to Apple. In fact the coup he just pulled off with Disney =
appears=20
to be beyond brilliant. Talk about the tail wagging the dog! So I also = tend
to=20
believe that he has his shit together when it comes to iTunes.</DIV>
<DIV> </DIV>
<DIV>In my research on this subject I also found that the major labels =
may be=20
making out better than you thought, at the expense of the artists. At = least
from=20
the articles I read, the artists get 12% from CD sales, but only 6% from =
iTunes=20
sales. OUCH!</DIV>
<DIV> </DIV>
<DIV>Oh couple of other points about the iTunes model. One the cost of =
bandwidth=20
is obviously plummeting. I now have the equivalent of a 10BaseT to the = house
for=20
$70 a month (or ~7T1s on the download side). And the carriers really =
discount on=20
the commercial side if you make a reasonably long term commit for a lot = of=20
bandwidth. But I think a bigger key issue is that iTunes effectively =
doesn't=20
have any carrying costs, one copy of every tune in its library. If it is = a=20
loser, no big deal, if it is a winner, that single copy can be = downloaded=20
millions of times for very little expansion of its server farms or its=20
network.</DIV>
<DIV><BR>-- <BR>john</DIV>
<DIV> </DIV>
<DIV><A href=3D"mailto:john@oellrich.us">john@oellrich.us</A></DIV>
<BLOCKQUOTE=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV>"Glenn Meadows" <<A=20
href=3D"mailto:gmeadow@comcast.net">gmeadow@comcast.net</A>> wrote =
in message=20
<A =
href=3D"news:43dd28be$1@w3.nls.net">news:43dd28be$1@w3.nls.net</A>...</DI=
V>I=20
really don't know what it costs for them to run it, but I know it's a=20
<BR>large staff, large data infrastructure. I don't know what =
bandwidth=20
costs <BR>are at that level either.<BR><BR>BUT, I do know for a fact =
that we=20
get 66/67 percent of the sale of each item <BR>sold. I see the =
sales=20
reports every month.<BR><BR>Their percentage they keep is actually =
LESS than=20
Wal-Mart/Target get on the <BR>physical good sale markup for standard=20
retail.<BR><BR>-- <BR><BR>Glenn M.<BR>"John Oellrich" <<A=20
href=3D"mailto:john@oellrich.us">john@oellrich.us</A>> wrote in =
message=20
<BR><A=20
=
href=3D"news:43dbfbde@w3.nls.net">news:43dbfbde@w3.nls.net</A>...<BR>Glen=
n,<BR><BR>I'm=20
pretty sure I read that Apple has been getting a much larger chunk of =
<BR>the=20
music sale than that. But now I can't remember where I read =
it.<BR><BR>As=20
Apples revenues on iPods, of course it is a major contributor. The =
sold=20
<BR>over 11 times more iPods than Macs of all flavors (14 million vs. =
1.25=20
<BR>million) in the last quarter. And for revenue its $2.9B for the =
iPods,=20
$1.7B <BR>for the Macs (or $207 per iPod and $1,724 per Mac). I would =
argue=20
that the <BR>margins are much different for an iPod than a Mac. The =
Mac=20
benefits from <BR>using truly commodity components (other than the =
CPU, but=20
going Intel will <BR>solve that nasty little problem) where Apple =
benefits=20
from the volumes of <BR>the entire PC industry. The same is not true =
for the=20
iPod, a lot of <BR>comparatively low volume and expensive (smaller =
ain't=20
cheaper) components.<BR><BR>When the iPod Nano was released a study of =
its=20
Bill of Materials (the cost <BR>of the components) showed that it was =
in fact=20
being sold at a loss. The cost <BR>of the flash in the device alone =
was around=20
40% of its list price. The total <BR>BOM for a device should only be =
roughly=20
33% of its list price is the old <BR>rule of thumb. The speculation =
was Apple=20
priced it as it did for one reason, <BR>boost iTunes =
downloads.<BR><BR>The=20
revenue from iTunes last quarter was $491M (not a pure number, Apple=20
<BR>rolled up some other revenue sources in the number as well, but =
iTunes is=20
<BR>probably the lion's share). Let's ignore the fact that this isn't =
a pure=20
<BR>number and go with your 2/3's back to the studio (oops just did a =
Google,=20
<BR>Apple gets a tad over 34%). 34+% of $491M is $168.4M or $56.1M per =
month.=20
<BR>How much do you really think it costs Apple to run iTunes per =
month?=20
<BR>Whatever, it is not going to be anywhere close to $56.1M. Overall =
in=20
Apple's <BR>profits, yep iTunes is small potatoes, but a potato that =
is=20
growing very <BR>rapidly.<BR><BR>-- <BR>john<BR><BR><A=20
href=3D"mailto:john@oellrich.us">john@oellrich.us</A><BR> "Glenn =
Meadows"=20
<<A href=3D"mailto:gmeadow@comcast.net">gmeadow@comcast.net</A>> =
wrote in=20
message <BR><A=20
=
href=3D"news:43db9005$1@w3.nls.net">news:43db9005$1@w3.nls.net</A>...<BR>=
=20
John,<BR><BR> I've got to side with Rich on this. Apple =
does NOT=20
make any appreciable<BR> profit on the store. 2/3 of the =
revenue=20
from the sale of a track goes to<BR> the label who owns the =
copyright=20
(actually it's going up another few <BR>percent<BR> =
shortly). Then=20
from that, Apple has to pay the full staff that runs the<BR> =
store, does=20
all the previewing of the music, etc. Plus, they pay the =
<BR>(Apple<BR> =20
pays) the CC processing fees from their portion, as wall as all =
the<BR> =20
bandwidth costs, customer support calls,etc. And, for most of =
the=20
majors,<BR> they do all the encoding and processing of the new =
material=20
(at least they<BR> did for the first year to get it=20
going).<BR><BR> Within the industry, it's fairly well known, =
that Apple=20
makes virtually<BR> nothing on the sale of the music, it's the =
drive of=20
the content to sell<BR> iPods. I believe that a recent =
news story=20
I read said that they're making<BR> as much, or more on iPod =
sales, than=20
they are on computer hardware sales.<BR><BR> The iPod profit is =
a very=20
large margin all the way through the retail <BR>chain<BR> is=20
suspect.<BR><BR> -- <BR><BR> Glenn M.<BR> "John =
Oellrich"=20
<<A href=3D"mailto:john@oellrich.us">john@oellrich.us</A>> wrote =
in=20
message<BR> <A=20
=
href=3D"news:43db849c$1@w3.nls.net">news:43db849c$1@w3.nls.net</A>...<BR>=
=20
Rich,<BR><BR> Nope it is the other way around. Well they do =
probably=20
make a profit on <BR>the<BR> iPod, but it has no where near the =
margin=20
of iTunes.<BR><BR> -- <BR> john<BR><BR> <A=20
=
href=3D"mailto:john@oellrich.us">john@oellrich.us</A><BR> &nbs=
p;=20
"Rich" <@> wrote in message <A=20
=
href=3D"news:43db18e3$1@w3.nls.net">news:43db18e3$1@w3.nls.net</A>...<BR>=
=20
Doesn't apple make money on the ipod hardware and little to none on=20
<BR>the<BR> itunes store?<BR><BR> =20
Rich<BR><BR> "John Oellrich" <<A=20
href=3D"mailto:john@oellrich.us">john@oellrich.us</A>> wrote in=20
message<BR> <A=20
=
href=3D"news:43da8441@w3.nls.net">news:43da8441@w3.nls.net</A>...<BR>&nbs=
p; =20
Talk about stupid! Yet another money losing piece of hardware where=20
<BR>they<BR> will try to make it up in the volume=20
;-><BR><BR> =20
...<BR><BR> I would suggest that MS =
might be=20
better off working with Creative if<BR> they want to blunt =
Apple's=20
dominance in this arena. Get Windows Media 10<BR> ported to the =
device,=20
and then MS could use MSN for the delivery vehicle <BR>for<BR> =
the=20
purchased media which is where the real money=20
is.<BR><BR> --=20
<BR> =20
john<BR><BR><BR><BR></BLOCKQUOTE></BODY></HTML>
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