Content sales predicted to near 30% of iPad hardware revenue
The sale of applications, e-books, newspapers and magazines for the iPad is predicted to equal nearly 30 percent of the revenue Apple will earn from selling the hardware by the end of 2011.
Analyst Brian Marshall with Broadpoint.AmTech issued a note to investors Tuesday forecasting the "sticky" nature of the iPad and content purchases for the new device. He believes content revenue will top 10 percent of total iPad hardware revenue by December of 2010, and a year later that number will nearly triple.
"We believe the iPad offers a rich media experience that will translate into a content-based recurring revenue stream over time," Marshall wrote.
If true, it would be a significant change for Apple, which had long maintained that both the App Store and iTunes do not create much profit for the Cupertino, Calif., company. In January, Apple Chief Financial Officer Peter Oppenheimer said the company runs "a bit over break even" for both the App Store and iTunes stores. Apple has said for some time that those businesses are not meant to be profit generators, but rather a means of attracting customers to the products they represent.
The analyst has also increased his forecast for iPad shipments in the 2010 calendar year to 4 million units, up from a previous prediction of 2.2 million. He said that "if the device lives up to its potential," he could see it shipping more than 7 million in this year alone, a number that skews higher than most Wall Street estimates.
Accordingly, Marshall has also raised his earnings per share estimates for 2010 by 6 percent, to $12.75. That's up from his previous prediction of $12, and above the Wall Street consensus of $12.14.
Marshall said he believes the general view of the iPad, particularly in the media, is overly pessimistic.
"We note the vast majority of the naysayers have not yet had the opportunity to use the iPad on a firsthand basis," he wrote. "As we stated in the past, we were hooked after the first 15 minutes of use. In our view, the true genius of the device is its media/content aspects (e.g. eBooks, newspapers/magazines, Apps/games, movies/TV episodes, etc.) which we believe will be recurring in nature."
Broadpoint.AmTech has increased its price target for AAPL stock to $280, from $264, and reiterated its "buy" rating. The iPad, which starts at $499, goes on sale in the U.S. April 3, while pre-orders begin on Friday.
Analyst Brian Marshall with Broadpoint.AmTech issued a note to investors Tuesday forecasting the "sticky" nature of the iPad and content purchases for the new device. He believes content revenue will top 10 percent of total iPad hardware revenue by December of 2010, and a year later that number will nearly triple.
"We believe the iPad offers a rich media experience that will translate into a content-based recurring revenue stream over time," Marshall wrote.
If true, it would be a significant change for Apple, which had long maintained that both the App Store and iTunes do not create much profit for the Cupertino, Calif., company. In January, Apple Chief Financial Officer Peter Oppenheimer said the company runs "a bit over break even" for both the App Store and iTunes stores. Apple has said for some time that those businesses are not meant to be profit generators, but rather a means of attracting customers to the products they represent.
The analyst has also increased his forecast for iPad shipments in the 2010 calendar year to 4 million units, up from a previous prediction of 2.2 million. He said that "if the device lives up to its potential," he could see it shipping more than 7 million in this year alone, a number that skews higher than most Wall Street estimates.
Accordingly, Marshall has also raised his earnings per share estimates for 2010 by 6 percent, to $12.75. That's up from his previous prediction of $12, and above the Wall Street consensus of $12.14.
Marshall said he believes the general view of the iPad, particularly in the media, is overly pessimistic.
"We note the vast majority of the naysayers have not yet had the opportunity to use the iPad on a firsthand basis," he wrote. "As we stated in the past, we were hooked after the first 15 minutes of use. In our view, the true genius of the device is its media/content aspects (e.g. eBooks, newspapers/magazines, Apps/games, movies/TV episodes, etc.) which we believe will be recurring in nature."
Broadpoint.AmTech has increased its price target for AAPL stock to $280, from $264, and reiterated its "buy" rating. The iPad, which starts at $499, goes on sale in the U.S. April 3, while pre-orders begin on Friday.
Comments
The 'Pad will be the bestest way to buy stuff from the iSore. Beyond that, it doesn't seem bestest to me in any other respect.
It's not a surprise that content will be one of the big driving forces behind the iPad's popularity. Who isn't amazed by the content presentation and intuitiveness of an iPad?
IMO, with respect to movies, the content presentation is horrible. The device uses the 20th century 3:4 aspect ratio, while most modern video fits better on 16:9. And the 'Pad will not display in HD.
Additionally, the lack of flash kills it as a 'web browser. So far today, I've watched two videos on news sites, the latest being an Al Jazeera piece on the mideast peace talks. With a 'Pad, that would not have been possible.
So for content consumption, IMO, the 'Pad is so deficient as to be unacceptable.
No real surprise. The cheap initial price was telling. This is a razor-and-blades strategy.
The 'Pad will be the bestest way to buy stuff from the iSore. Beyond that, it doesn't seem bestest to me in any other respect.
I couldn't disagree more. Contrary to the naysayers, I think this product has real potential. I like the form factor, I love the apps that have been demo'ed, and I'll buy one in an instant. I think the win is the simplicity, the idea of making an appliance ... something one can leave around the house and just grab when you need it. The form factor, not to mention the interface, of a traditional computer is far less accessible.
There are lots of things I'd like it to do, but for a first flurry into this space, I think this is good. I'd like web-cam, of course; I hate the thick bezel; and whilst I like finger driven input, it would also be cool to be able to use a pen for drawing and taking notes --- perhaps with character recognition. At present, my impression is that the resolution of the touch sensing technology will not make pen writing feasible. I think they said something like a 1000 sensors on the glass ... that's ok for fingers but not for pens.
I also really wanted MacOS X, but in the context of an appliance the iPhone OS may make most sense. I like the idea of killing off general access to the file systems, and instead sharing data implicitly across compatible applications using some form of tagging. I would also have liked multi-tasking to be made generally available, and I'm not sure I understand the rationale for limiting this.
So ... roll on the launch, I think its a great product.
...
So for content consumption, IMO, the 'Pad is so deficient as to be unacceptable.
Well there is a battle going on and I'm not sure who will win. I like the idea of open standards and lighter weight technologies than flash, but there is no doubt in my mind that this is a commercial fight between apple and adobe. The former do not want to provide an alternate execution platform on the iPhone and iPad, as it will undermine Apples control.
In the long run it wont matter. If Apple win, and they may, then content providers will adapt to use the prevailing open standards. They want people to visit their sites, after all. If they Apple lose, then you'll get your flash ... in some form.
So ... roll on the launch, I think its a great product.
IMO, there are two things I'd like a tablet for: Media consumption and 'web browsing.
The 'Pad has the wrong aspect ratio for media consumption. And it will not display HD.
For the 'web, there will be huge frustrating holes in the content, given that the 'pad will not work with most popular embedded video content.
I'll pass. I'm hugely disappointed with the 'Pad. I thought it would be exactly what I've wanted, but now I find that the two most promising uses are each fatally compromised.
But it will be the best iSore portal ever made. They will sell a zillion of them, and iSore revenue will go through the roof.
IMO, with respect to movies, the content presentation is horrible. The device uses the 20th century 3:4 aspect ratio, while most modern video fits better on 16:9. And the 'Pad will not display in HD.
Additionally, the lack of flash kills it as a 'web browser. So far today, I've watched two videos on news sites, the latest being an Al Jazeera piece on the mideast peace talks. With a 'Pad, that would not have been possible.
So for content consumption, IMO, the 'Pad is so deficient as to be unacceptable.
You've posted the same anti-iPad nonsense numerous times now. I doubt that you are incapable of reading or comprehending the many many responses that have talked about the logic for 4:3 aspect ratio (Hint: Portrait mode).
Therefore, one has to conclude that your obtuseness on this is 100% trolling. You are frankly adding nothing to the discussion -- please stop.
In the long run it wont matter. If Apple win, and they may, then content providers will adapt to use the prevailing open standards. They want people to visit their sites, after all. If they Apple lose, then you'll get your flash ... in some form.
I don't care about flash. Instead, I care about watching 'web video. And if the 'Pad will not do it, I'll wait for a product that does.
That might be because the world moves into Apple closed-off space, of it might be because a rival comes out with a nice tablet that is not missing important functionality. Time will tell.
You've posted the same anti-iPad nonsense numerous times now. I doubt that you are incapable of reading or comprehending the many many responses that have talked about the logic for 4:3 aspect ratio (Hint: Portrait mode).
This dismissive misunderstanding is insulting.
I've specifically noted that the antique aspect ratio might make the 'Pad better for reading books. But it fatally compromises the use that I would put it to: Media consumption.
Therefore, one has to conclude that your obtuseness on this is 100% trolling. You are frankly adding nothing to the discussion -- please stop.
Go fuck yourself. I'll make my points no matter how badly you misunderstand them.
?Marshall said he believes the general view of the iPad, particularly in the media, is overly pessimistic.
"We note the vast majority of the naysayers have not yet had the opportunity to use the iPad on a firsthand basis," he wrote. "As we stated in the past, we were hooked after the first 15 minutes of use. In our view, the true genius of the device is its media/content aspects (e.g. eBooks, newspapers/magazines, Apps/games, movies/TV episodes, etc.) which we believe will be recurring in nature."
I concur with most of the responders that this is no surprise that the iPad will generate more revenue for Apple than just from hardware sales. The question was just how much.
On a different issue I was struck by the statement that the users were ?hooked? after using the iPad. Knowing how some people I know are ?CrackBerries? or intense iPhone users made me do some online research. The following is the result:
Stanford Survey
http://www.macworld.com/article/1469...addiction.html
http://www.livescience.com/technolog...on-100308.html
Addiction to Technology
http://www.livescience.com/technolog...h-addicts.html
Paying for content
http://www.technewsdaily.com/will-co...t-online-0216/
IMO, there are two things I'd like a tablet for: Media consumption and 'web browsing.
The 'Pad has the wrong aspect ratio for media consumption. And it will not display HD.
The iPad will display HD (and 720p is HD) in the correct aspect ratio for it. It may not use up the whole screen but so what as it didn't on most laptops before it.
For the 'web, there will be huge frustrating holes in the content, given that the 'pad will not work with most popular embedded video content.
Those "holes" haven't bother iPhone or iPod touch users much. By June, there could be about 100 million such users, most of whom use the web. It won't be much longer before most web sites that matter will be converting over.
I'll pass.
That's great; now there will be one more for someone who wants it.
This dismissive misunderstanding is insulting.
I've specifically noted that the antique aspect ratio might make the 'Pad better for reading books. But it fatally compromises the use that I would put it to: Media consumption.
Go **** yourself. I'll make my points no matter how badly you misunderstand them.
You're not just an obtuse troll, but a crass one too. So what else is new.
IMO, with respect to movies, the content presentation is horrible. The device uses the 20th century 3:4 aspect ratio, while most modern video fits better on 16:9. And the 'Pad will not display in HD.
Additionally, the lack of flash kills it as a 'web browser. So far today, I've watched two videos on news sites, the latest being an Al Jazeera piece on the mideast peace talks. With a 'Pad, that would not have been possible.
So for content consumption, IMO, the 'Pad is so deficient as to be unacceptable.
Watching movies is only one of the uses for the iPad. Before HD TV people rented movies from the likes of Blockbusters to watch movies on their TVs. Even widescreen movies were ok if you didn't mind the black lines above and below the screen. The iPad isn't a replacement for your HD TV. If you are away, and you want to watch a movie where you don't have access to an HD TV--then this is an alternative.
Revenue and earnings are very different animals. Revenue is how much money one sold one?s products for. Earnings is the difference between revenue and how much it cost to create/acquire the products being sold. Thus, large revenues do not necessarily translate into large earnings. For Apple, because there is only a small difference between the acquisition/distribution costs of iTunes content and the price it is sold (?a bit over break even?), even though there are very significant revenues (10 billion songs sold), the earnings aren?t as significant.
Which is a long way of saying you can sell a lot of stuff but that doesn?t mean you are making any money.
A final clarification. In the first line, it says ?the sale of applications ... for the iPad is predicted to equal nearly 30 percent of the revenue Apple will EARN [emphasis added] from selling the hardware...? This really means ?app sale revenue will be nearly 30 percent of hardware revenue? ? it doesn?t mean that app earnings will be 30% of hardware earnings. It could be, but the analyst report doesn?t say that.
My two cents on aspect ratios: widescreen is becoming more and more standard for video with HD adoption. But, today, there is still a lot of 4:3 content (older TV shows, kids shows, etc.). And, for text, 4:3 is probably a little more user-friendly. As the mix of media shifts and becomes clearer, I don't think it will be very difficult for Apple to change the aspect ratio of the iPad (and, instead of pointing out the horizontal black bars and wasted screen real estate for wide screen content, we'll point out the vertical bars for 4:3 content). In my case, only the kids will be watching video on the iPad so 4:3 is fine.
Therefore, one has to conclude that your obtuseness on this is 100% trolling. You are frankly adding nothing to the discussion -- please stop.
This dismissive misunderstanding is insulting.
Go f**k yourself. I'll make my points no matter how badly you misunderstand them.
You're not just an obtuse troll, but a crass one too. So what else is new.
Can we have some sense of civility here??
TAKE A DEEP BREATH AND
No real surprise. The cheap initial price was telling. This is a razor-and-blades strategy.
The 'Pad will be the bestest way to buy stuff from the iSore. Beyond that, it doesn't seem bestest to me in any other respect.
Apple uses very much the opposite of a razor and blades strategy. They charge a lot for the razor and sell the blades at cost to encourage the sales of more razors. Actually, they charge a lot for the razor and even more for its accessories.
To be clear, the article doesn?t require an interpretation that Apple has changed strategy, notwithstanding the statement ?If true, it would be a significant change for Apple?.
Revenue and earnings are very different animals. Revenue is how much money one sold one?s products for. Earnings is the difference between revenue and how much it cost to create/acquire the products being sold. Thus, large revenues do not necessarily translate into large earnings. For Apple, because there is only a small difference between the acquisition/distribution costs of iTunes content and the price it is sold (?a bit over break even?), even though there are very significant revenues (10 billion songs sold), the earnings aren?t as significant.
Which is a long way of saying you can sell a lot of stuff but that doesn?t mean you are making any money.
A final clarification. In the first line, it says ?the sale of applications ... for the iPad is predicted to equal nearly 30 percent of the revenue Apple will EARN [emphasis added] from selling the hardware...? This really means ?app sale revenue will be nearly 30 percent of hardware revenue? ? it doesn?t mean that app earnings will be 30% of hardware earnings. It could be, but the analyst report doesn?t say that.
My two cents on aspect ratios: widescreen is becoming more and more standard for video with HD adoption. But, today, there is still a lot of 4:3 content (older TV shows, kids shows, etc.). And, for text, 4:3 is probably a little more user-friendly. As the mix of media shifts and becomes clearer, I don't think it will be very difficult for Apple to change the aspect ratio of the iPad (and, instead of pointing out the horizontal black bars and wasted screen real estate for wide screen content, we'll point out the vertical bars for 4:3 content). In my case, only the kids will be watching video on the iPad so 4:3 is fine.
Agreed on earnings vs revenues.
There had to be a compromise somewhere regarding the screen aspect ratio. If Apple wanted to produce something to watch movies then the iPad would have been long and narrow. Knowing that people would be using the iPad for other media--online books, magazines, newspapers and browsing the Internet this appear to be the best compromise. But then none of us have had a chance to use the iPad yet--have we. See you all at the Apple STORE on April 3 or shortly thereafter.
this got posted in the wrong place. sorry.
When I read the post below this one I thought the poster stoled your quote.