Getting ready for the iPod coming to an Apple store near you, iTunes TV show downloads is about to happen. Apple will be offering US TV shows for $1 each, as reported by the Financial Times. This coincides with the scheduled release of the iPad sometime in April in an attempt to pull adoption. TV episodes are normally $1.99 for standard-definition and $2.99 for high-definition through iTunes.

There was talk before the iPad launch that Apple might at last introduce an iTunes TV show subscription service, but it never happened. I am sure that is still on the table, but there are no further details about when this could come together.

Some wonder how much money can Apple make with the iPad, obviously the higher end model is usually more profitable for Apple. I’ve done some quick and dirty research with OEM suppliers and whipped up some estimate. The high end model 64 GB with 3G retailing at $829 will produce a profit of $455 for Apple (and retailers) while the low end 16GB with no 3G retailing at $499 will bring a profit of $213. Assumption for marketing and customer support cost total $15. I have not included in the calculations for those that are sold with corporate discount.

I have yet to confirm the components configuration but are using industry’s current suppliers' prices. These costs will come down when volume increases. And memory price fluctuates. Display is the most expensive followed by the NAND flash memory. If you drop your iPad, I am guessing the replacement cost or that would be $250-$270 although the net cost is $76 excluding labor. I also include a quick comparison with the Kindle, which is not an apple-to-apple comparison, so it is just there for reference. Kindle doesn’t have many of the expensive components as the iPad but is elegantly designed as a book reader. Remember the basic rule of design? Make sure you do at least one thing really really good. Kindle makes the downloading experience so easy, anywhere in the world your 3G is working in the background.

All cost calculations here are based on our estimates only, not sources from Apple of Amazon and no one confirms if these numbers are close or off. I think they are close.

Considering the Kindle DX selling for $489 produces a profit of $297. There are costs for some free content I’ve not included in the cost. There will be many iPad look-alike in the market selling at the $180-$250 range, the margin for these will be as thin as $30-$40, but you can’t really compare iPad with those poor cousins. Let’s see what iPad's net contribution to Apple will be by the end of the year.

Original Post:

Leave a Comment