Text 9474, 572 rader
Skriven 2006-01-31 23:35:10 av John Oellrich (1:379/45)
Kommentar till text 9469 av Glenn Meadows (1:379/45)
Ärende: Re: iPod business
=========================
From: "John Oellrich" <john@oellrich.us>
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Glenn,
25 cents per download to cover internal costs is HUGE! The mind boggles! = That
is two to two and one-half what I would have guestimated they = needed to cover
costs (of course what your C.O.O (or his sources) is = including as an
"internal" cost). And if it includes all of Apples = costs, including
royalties. It still means they are getting a 10 percent = profit off every
download. You can send me 500 million dimes any time = you want ;->
--=20
john
john@oellrich.us
"Glenn Meadows" <gmeadow@comcast.net> wrote in message =
news:43df946a$1@w3.nls.net...
Again, I'm not privy to their costs and internal overhead to support =
the=20
store(s), so it's hard to say. Our C.O.O. just today, mentioned that =
the=20
best guestimate is that Apple gets now, about 25 cents per download to =
apply=20
to internal costs. Most feel that they're not making their money =
there, but=20
that at some point, when/if the market saturates on the player sales, =
that=20
they'll have to re-vamp the pricing on the stores to make more there.
As to the amount an artist gets, it's all based on their existing =
contracts,=20
and that varies from artist to artist, what the rate is, how they're =
paid=20
and how the payments are calculated. It's not a "one size fits all" =
model,=20
by a long stretch.
--=20
Glenn M.
"John Oellrich" <john@oellrich.us> wrote in message=20
news:43ded817@w3.nls.net...
Glenn,
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,=20
the question remains how much of one. But Apple selling the iPod Nano =
at a=20
clear loss would seem to indicate Apple believes that iTunes does (or =
will=20
in the near future) spin off enough cash to allow them to subsidize =
iPod=20
sales.
I used to believe that Jobs was an idiot when it came to both =
technology and=20
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=20
then returning to Apple. In fact the coup he just pulled off with =
Disney=20
appears to be beyond brilliant. Talk about the tail wagging the dog! =
So I=20
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=20
making out better than you thought, at the expense of the artists. At =
least=20
from the articles I read, the artists get 12% from CD sales, but only =
6%=20
from iTunes sales. OUCH!
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=20
for $70 a month (or ~7T1s on the download side). And the carriers =
really=20
discount on the commercial side if you make a reasonably long term =
commit=20
for a lot of bandwidth. But I think a bigger key issue is that iTunes=20
effectively doesn't have any carrying costs, one copy of every tune in =
its=20
library. If it is a loser, no big deal, if it is a winner, that single =
copy=20
can be downloaded millions of times for very little expansion of its =
server=20
farms or its network.
--=20
john
john@oellrich.us
"Glenn Meadows" <gmeadow@comcast.net> wrote in message=20
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
large staff, large data infrastructure. I don't know what bandwidth =
costs
are at that level either.
BUT, I do know for a fact that we get 66/67 percent of the sale of =
each=20
item
sold. I see the sales reports every month.
Their percentage they keep is actually LESS than Wal-Mart/Target get =
on=20
the
physical good sale markup for standard retail.
--=20
Glenn M.
"John Oellrich" <john@oellrich.us> wrote in message
news:43dbfbde@w3.nls.net...
Glenn,
I'm pretty sure I read that Apple has been getting a much larger =
chunk of
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
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,=20
$1.7B
for the Macs (or $207 per iPod and $1,724 per Mac). I would argue =
that the
margins are much different for an iPod than a Mac. The Mac benefits =
from
using truly commodity components (other than the CPU, but going =
Intel will
solve that nasty little problem) where Apple benefits from the =
volumes of
the entire PC industry. The same is not true for the iPod, a lot of
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
of the components) showed that it was in fact being sold at a loss. =
The=20
cost
of the flash in the device alone was around 40% of its list price. =
The=20
total
BOM for a device should only be roughly 33% of its list price is the =
old
rule of thumb. The speculation was Apple priced it as it did for one =
reason,
boost iTunes downloads.
The revenue from iTunes last quarter was $491M (not a pure number, =
Apple
rolled up some other revenue sources in the number as well, but =
iTunes is
probably the lion's share). Let's ignore the fact that this isn't a =
pure
number and go with your 2/3's back to the studio (oops just did a =
Google,
Apple gets a tad over 34%). 34+% of $491M is $168.4M or $56.1M per =
month.
How much do you really think it costs Apple to run iTunes per month?
Whatever, it is not going to be anywhere close to $56.1M. Overall in =
Apple's
profits, yep iTunes is small potatoes, but a potato that is growing =
very
rapidly.
--=20
john
john@oellrich.us
"Glenn Meadows" <gmeadow@comcast.net> wrote in message
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=20
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=20
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=20
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
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
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
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
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
for
the purchased media which is where the real money is.
--=20
john
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<DIV>Glenn,</DIV>
<DIV> </DIV>
<DIV>25 cents per download to cover internal costs is HUGE! The mind =
boggles!=20
That is two to two and one-half what I would have guestimated they = needed
to=20
cover costs (of course what your C.O.O (or his sources) is including as = an=20
"internal" cost). And if it includes all of Apples costs, including =
royalties.=20
It still means they are getting a 10 percent profit off every download. = You
can=20
send me 500 million dimes any time you want ;-></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=20
=
href=3D"news:43df946a$1@w3.nls.net">news:43df946a$1@w3.nls.net</A>...</DI=
V>Again,=20
I'm not privy to their costs and internal overhead to support the=20
<BR>store(s), so it's hard to say. Our C.O.O. just today, =
mentioned that=20
the <BR>best guestimate is that Apple gets now, about 25 cents per =
download to=20
apply <BR>to internal costs. Most feel that they're not making =
their=20
money there, but <BR>that at some point, when/if the market saturates =
on the=20
player sales, that <BR>they'll have to re-vamp the pricing on the =
stores to=20
make more there.<BR><BR>As to the amount an artist gets, it's all =
based on=20
their existing contracts, <BR>and that varies from artist to artist, =
what the=20
rate is, how they're paid <BR>and how the payments are =
calculated. It's=20
not a "one size fits all" model, <BR>by a long stretch.<BR><BR>--=20
<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:43ded817@w3.nls.net">news:43ded817@w3.nls.net</A>...<BR>Glen=
n,<BR><BR>But=20
I think you see my point, even after the labels get their 66%, Apple =
<BR>still=20
has plenty of cash flow to cover operating expenses and turn a profit, =
<BR>the=20
question remains how much of one. But Apple selling the iPod Nano at a =
<BR>clear loss would seem to indicate Apple believes that iTunes does =
(or will=20
<BR>in the near future) spin off enough cash to allow them to =
subsidize iPod=20
<BR>sales.<BR><BR>I used to believe that Jobs was an idiot when it =
came to=20
both technology and <BR>business (what he did during the gestation of =
the Mac=20
and then at NeXT <BR>should be proof enough), but it seems he finally =
got=20
grounded with Pixar and <BR>then returning to Apple. In fact the coup =
he just=20
pulled off with Disney <BR>appears to be beyond brilliant. Talk about =
the tail=20
wagging the dog! So I <BR>also tend to believe that he has his shit =
together=20
when it comes to iTunes.<BR><BR>In my research on this subject I also =
found=20
that the major labels may be <BR>making out better than you thought, =
at the=20
expense of the artists. At least <BR>from the articles I read, the =
artists get=20
12% from CD sales, but only 6% <BR>from iTunes sales. OUCH!<BR><BR>Oh =
couple=20
of other points about the iTunes model. One the cost of bandwidth =
<BR>is=20
obviously plummeting. I now have the equivalent of a 10BaseT to the =
house=20
<BR>for $70 a month (or ~7T1s on the download side). And the carriers =
really=20
<BR>discount on the commercial side if you make a reasonably long term =
commit=20
<BR>for a lot of bandwidth. But I think a bigger key issue is that =
iTunes=20
<BR>effectively doesn't have any carrying costs, one copy of every =
tune in its=20
<BR>library. If it is a loser, no big deal, if it is a winner, that =
single=20
copy <BR>can be downloaded millions of times for very little expansion =
of its=20
server <BR>farms or its network.<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:43dd28be$1@w3.nls.net">news:43dd28be$1@w3.nls.net</A>...<BR>=
=20
I really don't know what it costs for them to run it, but I know it's=20
a<BR> large staff, large data infrastructure. I don't know =
what=20
bandwidth costs<BR> are at that level either.<BR><BR> BUT, =
I do=20
know for a fact that we get 66/67 percent of the sale of each=20
<BR>item<BR> sold. I see the sales reports every=20
month.<BR><BR> Their percentage they keep is actually LESS than=20
Wal-Mart/Target get on <BR>the<BR> physical good sale markup for =
standard retail.<BR><BR> -- <BR><BR> Glenn M.<BR> =
"John=20
Oellrich" <<A =
href=3D"mailto:john@oellrich.us">john@oellrich.us</A>> wrote=20
in message<BR> <A=20
=
href=3D"news:43dbfbde@w3.nls.net">news:43dbfbde@w3.nls.net</A>...<BR>&nbs=
p;=20
Glenn,<BR><BR> I'm pretty sure I read that Apple has been =
getting a much=20
larger chunk of<BR> the music sale than that. But now I can't =
remember=20
where I read it.<BR><BR> As Apples revenues on iPods, of course =
it is a=20
major contributor. The sold<BR> over 11 times more iPods than =
Macs of=20
all flavors (14 million vs. 1.25<BR> million) in the last =
quarter. And=20
for revenue its $2.9B for the iPods, <BR>$1.7B<BR> for the Macs =
(or $207=20
per iPod and $1,724 per Mac). I would argue that the<BR> margins =
are=20
much different for an iPod than a Mac. The Mac benefits from<BR> =
using=20
truly commodity components (other than the CPU, but going Intel =
will<BR> =20
solve that nasty little problem) where Apple benefits from the volumes =
of<BR> the entire PC industry. The same is not true for the =
iPod, a lot=20
of<BR> comparatively low volume and expensive (smaller ain't =
cheaper)=20
components.<BR><BR> When the iPod Nano was released a study of =
its Bill=20
of Materials (the cost<BR> of the components) showed that it was =
in fact=20
being sold at a loss. The <BR>cost<BR> of the flash in the =
device alone=20
was around 40% of its list price. The <BR>total<BR> BOM for a =
device=20
should only be roughly 33% of its list price is the old<BR> rule =
of=20
thumb. The speculation was Apple priced it as it did for one=20
<BR>reason,<BR> boost iTunes downloads.<BR><BR> The =
revenue from=20
iTunes last quarter was $491M (not a pure number, Apple<BR> =
rolled up=20
some other revenue sources in the number as well, but iTunes =
is<BR> =20
probably the lion's share). Let's ignore the fact that this isn't a=20
pure<BR> number and go with your 2/3's back to the studio (oops =
just did=20
a Google,<BR> Apple gets a tad over 34%). 34+% of $491M is =
$168.4M or=20
$56.1M per month.<BR> How much do you really think it costs =
Apple to run=20
iTunes per month?<BR> Whatever, it is not going to be anywhere =
close to=20
$56.1M. Overall in <BR>Apple's<BR> profits, yep iTunes is small=20
potatoes, but a potato that is growing very<BR> =
rapidly.<BR><BR> =20
-- <BR> john<BR><BR> <A=20
=
href=3D"mailto:john@oellrich.us">john@oellrich.us</A><BR> &nbs=
p;=20
"Glenn Meadows" <<A=20
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. =20
Apple does NOT make any appreciable<BR> profit on =
the=20
store. 2/3 of the revenue from the sale of a track goes=20
<BR>to<BR> the label who owns the copyright =
(actually it's=20
going up another few<BR> percent<BR> =
shortly). =20
Then from that, Apple has to pay the full staff that runs=20
the<BR> store, does all the previewing of the music, =
etc.=20
Plus, they pay the<BR> (Apple<BR> 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
<BR>majors,<BR> they do all the encoding and =
processing of=20
the new material (at least <BR>they<BR> did for the =
first=20
year to get it going).<BR><BR> Within the industry, =
it's=20
fairly well known, that Apple makes virtually<BR> =
nothing on=20
the sale of the music, it's the drive of the content to=20
sell<BR> iPods. I believe that a recent news =
story I=20
read said that they're <BR>making<BR> as much, or =
more on=20
iPod sales, than they are on computer hardware=20
<BR>sales.<BR><BR> The iPod profit is a very large =
margin=20
all the way through the retail<BR> chain<BR> =
is=20
suspect.<BR><BR> -- <BR><BR> Glenn =
M.<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: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=20
probably make a profit on<BR> the<BR> iPod, =
but it has=20
no where near the margin of iTunes.<BR><BR> --=20
<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<BR> =20
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<BR> =20
they<BR> will try to make it up in the volume=20
;-><BR><BR> =20
...<BR><BR> I would suggest =
that MS=20
might be better off working with Creative if<BR> =
they want=20
to blunt Apple's dominance in this arena. Get Windows Media=20
10<BR> ported to the device, and then MS could use =
MSN for=20
the delivery vehicle<BR> for<BR> the purchased =
media=20
which is where the real money=20
is.<BR><BR> --=20
<BR> =20
john<BR><BR><BR><BR><BR></BLOCKQUOTE></BODY></HTML>
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