Roku CEO speculates Apple loses money on $99 Apple TV, analyst says it's break-even

Posted:
in iPod + iTunes + AppleTV edited April 2014
Though he offered no evidence to prove it, the CEO of Roku said this week that he believes rival set-top streamer Apple TV is a money losing product, though one analyst believes the device is more likely a break-even business for APple.

Apple TV vs Roku


"Apple TV is essentially an accessory for the iPad. They lose money, which is unusual for Apple," Roku's Anthony Wood said at the Re/code conference, according to Cnet. "If you're losing money, why would you want to sell more?"

After Wood's comments began gaining attention, analyst Horace Dediu of Asymco was asked via Twitter whether he believes the Apple TV does in fact lose money. Dediu said he considers the Apple TV to be a "Kindle-like product" for Apple that breaks even.

The Apple TV was Apple's fastest growing hardware in 2013, with sales estimated to have grown by 80 percent, reaching around 10 million units for the calendar year. That means Apple sold about $1 billion worth of set-top boxes to end users.




The disparaging comments from Wood aren't entirely surprising, as Roku and Apple TV are in a two-horse race for leadership in the set-top streaming accessory business. Data from the NPD Group shared with AppleInsider last year revealed that the two platforms dominate with approximately 80 percent market share between them.

The Apple TV has continued to see strong sales despite the fact that Apple has not updated the hardware in two years. There have been rumors that Apple is looking to introduce a new model in the coming months, with expectations that the platform might be expanded to allow a full-fledged App Store with downloadable channels and even games.

Apple TV


Competition is also expected to grow even more next week, when Amazon will hold an event where the company is likely to show off its own streaming device at an event in New York City. Amazon already serves up content through its Amazon Prime subscription and Amazon Instant Video services, and it will reportedly allow for delivery of that content to users' TVs with a new streaming accessory.

Google also entered the fray last year with its $35 Chromecast, a budget-minded simple HDMI dongle that works with apps on both Apple's iOS and Google's Android.
«13456

Comments

  • Reply 1 of 110
    mubailimubaili Posts: 385member
    Well, let's see. It would enable Apple to sell more iPhone, iPad, iMac, MBA, rMBP, iPod Touch, more iTunes etc etc.
  • Reply 2 of 110

    Wait a minute?  A CEO is spreading FUD about a competitor's product?

     

    How strange...

  • Reply 3 of 110
    I'm in the UK where it sells for £99. It's great value for what it does and I'll be the first to buy an updated version. I'm sure they make money on it - it's only a little box with a few electronics inside!!
  • Reply 4 of 110
    philboogiephilboogie Posts: 7,435member
    [quote]"Apple TV is essentially an accessory for the iPad. They lose money, which is unusual for Apple," Roku's Anthony Wood said at the Re/code conference, according to Cnet. "If you're losing money, why would you want to sell more?"[/quote]

    Wow, another CEO with shit for brains.
  • Reply 5 of 110
    iaeeniaeen Posts: 588member
    So what does that say about Roku, whose prices are generally lower than the Apple TV?
  • Reply 6 of 110
    muaddibmuaddib Posts: 41member
    A breakdown of costs involved with the Apple TV 2 back in 2010 show it to cost apple approximately $64.00

    Prices have no doubt decreased since then. I think the Apple TV is very profitable for Apple if you use the costs.

    https://technology.ihs.com/388826/isuppli-teardown-reveals-apple-tvs-inner-ipad

    The costs are for the Apple TV 2 but the 3 can not be much more, plus its two years old. Old tech A5 not cutting edge A7 processor. Memory prices have also decreased as well.

    Roku boss has no idea what he is talking about.
  • Reply 7 of 110
    j1h15233j1h15233 Posts: 274member
    I don't see Apple selling anything at a loss or even at break even. I'm sure they make a nice little profit on the Apple TV, especially as time has gone on and they haven't updated it.
  • Reply 8 of 110
    thttht Posts: 3,063member
    My workplace bought a bunch of Apple TV devices for the conference rooms. No streaming media use here. Just used as wireless connectors to the projectors.

    It is like a gazillion times easier.

    And yeah, very likely to me that Apple has something like 15 to 20% margins on them. No more than $60 for the hardware and $25 for the cost of selling them.

    The 2013 Apple TV uses a single core Cortex-A9 CPU and a single SGX 543 MP1. It's like a 6x6 mm SoC. What, $5 per chip for that? Wouldn't be surprised if the BOM is $40.
  • Reply 9 of 110
    neilmneilm Posts: 574member

    I'd be very skeptical about any third party analysis that claims to know what Apple's costs are, and even more so when the third party is clearly not impartial.

     

    Either way we'll never know, since Apple isn't going to reveal anything.

  • Reply 10 of 110
    razorpitrazorpit Posts: 912member
    Quote:

    Originally Posted by iaeen View Post



    So what does that say about Roku, whose prices are generally lower than the Apple TV?

    You beat me to it.  Roku makes nice hardware and has some great features but the ecosystem surrounding the iOS universe trounces everything else at the moment.  Manufacturing costs are next to nothing, its a board in a plastic case.  The major components are ~ 3 years old, the R&D has long been recouped.

     

    These are words of a nervous CEO.

  • Reply 11 of 110
    The AppleTV is a perfect companion device for me and my family. I own the 1st and two 3rd gens. I have had family members purchase AppleTV's based on my experiences. It will stream all my media, allow me to purchase what I need, give me access to the best Netflix user experience and let me watch and keep up with my sports. I have ditched my cable, and even with paying for content, my TV watching is of a better quality and still far cheaper. I spend more quality time watching vs quantity of time. Most network television programming is not for me (reality nonsense) so apart from of few programs I am not really interested in basic cable network content apps. If I had to ask for more from Apple, it would be nice to have an option to subscribe to the specialty channels ie. HBO, Showcase, Star etc. without having a cable bill. More access to new weekly shows (I always buy the latest episode of Walking Dead), and a return to the rent TV shows for 99 cents format that the US had for a while (I hardly ever watch twice a purchased TV show. and I never purchase movies). I would also like iTunes radio and NBA in Canada where I live. Thank you Apple :)
  • Reply 12 of 110
    macxpressmacxpress Posts: 4,761member

    Hmmm and when/if Apple releases a real AppleTV I bet they'll be shitting their pants. I think their CEO knows this and is scared so he's spewing out FUD. If Apple releases what everyone wants I think its game over for the rest of the competition considering it can easy integrate with any Mac or iOS device (ecosystem). 

     

    To a customer, they could care less if its a money maker. If its a good quality product, they're going to buy it. 

  • Reply 13 of 110
    mcarlingmcarling Posts: 1,106member
    I think Apple may have been breaking even on the Apple TV two years ago, when it was last updated, but now they are probably earning profit on each sale due to lower component costs and a fully developed production capability. If Apple keep the $99 when they update the Apple TV with an A6 or A7, 1GB of DRAM, 16GB or 32GB of flash, 802.11ac Wifi, and Gigabit Ethernet in order to support an App Store (including games) and 4K movies, then I believe Apple would be struggling to break even for the first several months. Regardless, I guess that Apple's margins on the Apple TV are lower than for most of their hardware.
  • Reply 14 of 110
    jkichlinejkichline Posts: 1,328member
    It's not an accessory for an iPad, although AirPlay is f'n awesome. We use one everyday to stream Netflix Amanda iTunes at home. Works great. Roku is super clunky and ugly. Sorry little CEO dude. It will be sad to watch Apple bury you with the next iteration of the product.
  • Reply 15 of 110
    macxpressmacxpress Posts: 4,761member
    Quote:

    Originally Posted by mcarling View Post



    I think Apple may have been breaking even on the Apple TV two years ago, when it was last updated, but now they are probably earning profit on each sale due to lower component costs and a fully developed production capability. If Apple keep the $99 when they update the Apple TV with an A6 or A7, 1GB of DRAM, 16GB or 32GB of flash, 802.11ac Wifi, and Gigabit Ethernet in order to support an App Store (including games) and 4K movies, then I believe Apple would be struggling to break even for the first several months. Regardless, I guess that Apple's margins on the Apple TV are lower than for most of their hardware.

     

     

    Hmmm...will the A6 or A7 even support 4k resolution? This would be very nice to see and would put it out in front of its competition in that respect. I don't think any of its competition has 4k at this point and depending on what processor/video they have in it, it could take a little bit for them to catchup. The biggest thing if Apple gets 4k, is it needs to get content on the AppleTV in 4k or else obviously its worthless. 

  • Reply 16 of 110
    haarhaar Posts: 563member
    the utilite computer, has approx. the same internals, and it is sold by compulab at 99 dollars. this co mpany, of course, is making them for a profit.
    Apple , of course, sells a magnitude more of the appleTV which is the "same" as the utilite, thus apple at a minimum is covering all of it's costs on the appleTV.
    (they are most likely breaking even at the start if the manufacturing of the Apple TV, now profit!)

    So it took two years for compulab to get the components at a cost that it is worth making the utilite, thus The Apple TV is making a profit.

    the utilite that i am referring to is the single core freescale i.MX6 cortex-A9, compulab also makes a dual core model, and a quad core 1.2Ghz freescale i.MX6 cortex-A9 model at 219$
  • Reply 17 of 110
    Another doofus CEO who'll probably be eating his words and licking his wounds at some point soon....
  • Reply 18 of 110
    Mr. Wood,

    You're not very smart if you state you don't know why Apple would want to sell more of something that they don't make money on. This practice is very common throughout business.

    Why do ink jet printers almost give away the printers?

    Why does Keurig sell their coffee machines for next to nothing?

    My last question is most important. How did you every become CEO of a company?
  • Reply 19 of 110
    dasanman69dasanman69 Posts: 12,973member
    macxpress wrote: »
    Hmmm and when/if Apple releases a real AppleTV I bet they'll be shitting their pants. I think their CEO knows this and is scared so he's spewing out FUD. If Apple releases what everyone wants I think its game over for the rest of the competition considering it can easy integrate with any Mac or iOS device (ecosystem). 

    To a customer, they could care less if its a money maker. If its a good quality product, they're going to buy it. 

    Roku has their own TV on the way.

    http://blog.roku.com/blog/2014/01/05/introducing-roku-tv/
  • Reply 20 of 110
    mazda 3smazda 3s Posts: 1,562member
    Quote:

    Originally Posted by razorpit View Post

     

    You beat me to it.  Roku makes nice hardware and has some great features but the ecosystem surrounding the iOS universe trounces everything else at the moment.  Manufacturing costs are next to nothing, its a board in a plastic case.  The major components are ~ 3 years old, the R&D has long been recouped.

     

    These are words of a nervous CEO.


     

    I agree that the iOS universe pretty much trumps everything else out there... but I don't agree that the Apple TV trumps everything out there -- it's too limiting in its scope. I mean, it doesn't even have access to Amazon Prime and I can't use things like Plex Media Server or even the Time Warner Cable app (we don't have a cable box in our bedroom, and running the straight cable to it only gives us the first 71 or so channels and only the local channels are in HD). With the TWC app, I can watch pretty much the full lineup; all in HD.

Sign In or Register to comment.