What I'm curious about is how the net in services works out. Revenue in a number of these areas has little to do with actual net profit, as Apple gives so much away, and they do have continuing costs.
so, some people think that when Apple takes their 30% cut, that's profit. But it isn't. I've seen estimates that out of every total dollar received in these areas, Apple makes just a 5% net profit, possibly less. So that's just 5% on a dollar's sale. Maybe less. So Apple talks about growth in services, but what's the addition to the bottom line? Is there an addition?
What I'm curious about is how the net in services works out. Revenue in a number of these areas has little to do with actual net profit, as Apple gives so much away, and they do have continuing costs.
so, some people think that when Apple takes their 30% cut, that's profit. But it isn't. I've seen estimates that out of every total dollar received in these areas, Apple makes just a 5% net profit, possibly less. So that's just 5% on a dollar's sale. Maybe less. So Apple talks about growth in services, but what's the addition to the bottom line? Is there an addition?
Does it matter? What would Apple be without its services -- except a Samsung with its own OS? ... Those services (both the paid & so called "free" services) create the eco system that separates Apple from the wanna-be's.....
What I'm curious about is how the net in services works out. Revenue in a number of these areas has little to do with actual net profit, as Apple gives so much away, and they do have continuing costs.
so, some people think that when Apple takes their 30% cut, that's profit. But it isn't. I've seen estimates that out of every total dollar received in these areas, Apple makes just a 5% net profit, possibly less. So that's just 5% on a dollar's sale. Maybe less. So Apple talks about growth in services, but what's the addition to the bottom line? Is there an addition?
Apple's gross margins on its Services category are, based on what's been said in conference calls, better than its company-wide gross margins. That means better than 40%-ish. I'd guess they're something like 50%, though we can't really pin that number down with much precision. We also can't really figure out exactly what that means in terms of operating margins, i.e. pre-tax profit margins. But company-wide Apple is at around 10% of total revenue for operating expenses. So, maybe 40% operating margins on Services revenue? It could be a little higher or a little lower.
We should keep in mind that Apple recognizes revenue from the App Store on a net basis. It doesn't count the 70% that developers get as part of its Services revenue, it only counts the 30% that it gets. That's not the case with some other content from the iTunes Store.
It's really hard to say. Some of those services will have high margins in all categories, and some will have poor margins. I expect that Apple Music will be poor.
Yes. Some of the components of Apple's reported Services revenue are higher margin and some are lower margin. But in the aggregate the gross margin for Apple's Services revenue is higher than Apple's company-wide gross margin.
What I'm curious about is how the net in services works out. Revenue in a number of these areas has little to do with actual net profit, as Apple gives so much away, and they do have continuing costs.
so, some people think that when Apple takes their 30% cut, that's profit. But it isn't. I've seen estimates that out of every total dollar received in these areas, Apple makes just a 5% net profit, possibly less. So that's just 5% on a dollar's sale. Maybe less. So Apple talks about growth in services, but what's the addition to the bottom line? Is there an addition?
Apple's gross margins on its Services category are, based on what's been said in conference calls, better than its company-wide gross margins. That means better than 40%-ish. I'd guess they're something like 50%, though we can't really pin that number down with much precision. We also can't really figure out exactly what that means in terms of operating margins, i.e. pre-tax profit margins. But company-wide Apple is at around 10% of total revenue for operating expenses. So, maybe 40% operating margins on Services revenue? It could be a little higher or a little lower.
We should keep in mind that Apple recognizes revenue from the App Store on a net basis. It doesn't count the 70% that developers get as part of its Services revenue, it only counts the 30% that it gets. That's not the case with some other content from the iTunes Store.
It's really hard to say. Some of those services will have high margins in all categories, and some will have poor margins. I expect that Apple Music will be poor.
Yes. Some of the components of Apple's reported Services revenue are higher margin and some are lower margin. But in the aggregate the gross margin for Apple's Services revenue is higher than Apple's company-wide gross margin.
I don't know if Apple does in many of their "services", or only for the App Stores, where they only book "net" revenues - meaning minus the 70% that goes to developer. Traditional retailers don't do this - which is why Walmart has very high revenue but operating profit is much, much lower. Does anyone know if they do this in iTunes sales?
When looking at the total "billings" (what the consumers pay), the margin is low, but when looking at that Apple books, the margins are much higher. If the profit averaged across an app is 15c on the dollar spent, that is a 50% margin for Apple based on their reporting (15c of their 30%), but only 15% on the Walmart reporting method.
What I'm curious about is how the net in services works out. Revenue in a number of these areas has little to do with actual net profit, as Apple gives so much away, and they do have continuing costs.
so, some people think that when Apple takes their 30% cut, that's profit. But it isn't. I've seen estimates that out of every total dollar received in these areas, Apple makes just a 5% net profit, possibly less. So that's just 5% on a dollar's sale. Maybe less. So Apple talks about growth in services, but what's the addition to the bottom line? Is there an addition?
Apple's gross margins on its Services category are, based on what's been said in conference calls, better than its company-wide gross margins. That means better than 40%-ish. I'd guess they're something like 50%, though we can't really pin that number down with much precision. We also can't really figure out exactly what that means in terms of operating margins, i.e. pre-tax profit margins. But company-wide Apple is at around 10% of total revenue for operating expenses. So, maybe 40% operating margins on Services revenue? It could be a little higher or a little lower.
We should keep in mind that Apple recognizes revenue from the App Store on a net basis. It doesn't count the 70% that developers get as part of its Services revenue, it only counts the 30% that it gets. That's not the case with some other content from the iTunes Store.
It's really hard to say. Some of those services will have high margins in all categories, and some will have poor margins. I expect that Apple Music will be poor.
Yes. Some of the components of Apple's reported Services revenue are higher margin and some are lower margin. But in the aggregate the gross margin for Apple's Services revenue is higher than Apple's company-wide gross margin.
I don't know if Apple does in many of their "services", or only for the App Stores, where they only book "net" revenues - meaning minus the 70% that goes to developer. Traditional retailers don't do this - which is why Walmart has very high revenue but operating profit is much, much lower. Does anyone know if they do this in iTunes sales?
When looking at the total "billings" (what the consumers pay), the margin is low, but when looking at that Apple books, the margins are much higher. If the profit averaged across an app is 15c on the dollar spent, that is a 50% margin for Apple based on their reporting (15c of their 30%), but only 15% on the Walmart reporting method.
Apple hasn't been specific about which digital content, sold through the iTunes Store, it accounts for on a net basis. It has, however, said that certain digital content sold through the iTunes Store is accounted for that way in addition to the (third-party) applications sold through the App Store and the Mac App Store.
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Does it matter?
What would Apple be without its services -- except a Samsung with its own OS?
... Those services (both the paid & so called "free" services) create the eco system that separates Apple from the wanna-be's.....
When looking at the total "billings" (what the consumers pay), the margin is low, but when looking at that Apple books, the margins are much higher. If the profit averaged across an app is 15c on the dollar spent, that is a 50% margin for Apple based on their reporting (15c of their 30%), but only 15% on the Walmart reporting method.