Who Is Getting Rich Off the iPhone?
Graphic courtesy of Column Five Media
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Very interesting, I had always wondered how they were making money on the iPhone.
Also, love the format of the post. Like reading a magazine.
+1
+2
+1
+3
+4 !!!
Wow, awesome post! Really love the format! Much more effective than 1000 word post.
Don’t forget that the AT&T customer is not able to leave until after the 24 month period, so the revenue is guaranteed in a sense. Additionally, if you are longer terms customer, they are making money on you in terms of retention and acquisition costs. Think about the $99 iPhone 3G. That is likely making more money than the top of the line model.
I doubt that many app developers are making a hell of a lot. It is a business, but selling apps can be unstable with a hefty up front investment. I tend to think that like the web, we’ll see a shift to more business critical application models. This includes publishing models and sales channels. I am getting a lot of interest as of late in the catalog space now that the urgency surrounded Android has subsided a bit. Although I am agnostic, there has been a shift of perception back towards the iPhone as the primary app platform.
Interestingly the early termination penalty is 180 and goes down every month ..
which means an early termination costs AT&T 170 bucks.
So If we all got our iPhones and terminated the contract immediately AT&T is in ….
I am sure they have some deal with Apple to cover that .. no?
Very interesting/unique post!
thanks.
Surprise, surprise!
Hey, that graphic really turned out well, do you mind me asking what you used to make it? I presume illustrator but I’m not sure
@amen–thanks, the graphic itself was produced by Column Five Media, which specializes in infographics. They use a variety of graphical tools.
Sebastian
note that the profit split between AT&T and APPLE is almost 50/50, each getting about $370. Apple also handles the marketing and advertisement cost. Apple could not trust AT&T when it comes to branding and ad. This is a win-win situation for all involved, users are happy, suppliers are happy, AT&T and Apple are happy, This is how innovation works for the economy!
Aaaaaaagh. Huge moron graphics hurt the brain. Too much screen area, too little content. Also, too chunky, atomic, and powerpointy. Only Iphoners could love this tripe.
+1
-10
I found the presentation refreshing and–more importantly–engaging.
OMG. At first I didn’t realize they were graphics. Why aren’t they HTML. It could have been done just as easy in HTML.
Oh yeah… MSIE can’t do HTML.
Like the graphics, but where is the Apple numbers at the end? Aren’t they getting rich off the iPhone too?
Best Presentation I’ve seen in a long time. It’s a WOW! Oh, the breakdown was excellent!!!! NOW WE KNOW.
I agree completely with the others. Very well designed infographic.
I think there may be a minor mistake, however. In the section that depicts Apple disbursing $179 to manufacturers, etc… the direct sale from Apple to the customer without a contract should show $599 instead of $199. If this was the case, I think I’d own an iPhone (or eight).
The ecosystem and Apple value chain diagram is very useful, thank you. It also shows how technology players work together and for technology investors, this is good to understand.
Ironically, this beautiful infographic is not viewable on an iPhone. It just looks like a big, white box.
ironic! i tried from iphone too
Good experiment, but there is too much variety in sizes and fonts, making this post look immaturely put together!
Oatmeal did it better with “15 Things Worth Knowing About Coffee”: http://theoatmeal.com/comics/coffee .
Notice the consistency of fonts and sizes in Oatmeal’s post, giving it a more professional look.
The iPhone graphic should use dinosaurs ripping each others heads off and poop and pee jokes like oatmeal does too.
immaturely put together? You must be referring to the link you posted.
oatmeal is a web comic, not an infographic designer.
does that mean that AT&T’s data product is sold at ($750-$351)/24 = $15.38 per month? and they are making a profit on that price point?
if by “profit at 17th month”, the profit margin is 1-16/24of 33%. 2B profit at 33% margin is 6B in revenue -> they need to have 6B/24/15.38 paid monthly subs (16.25M).
Very interesting, a real insight. I really like the style of the post in general as some have pointed out, it could have been quite dry with just the info in text format and you have gone the extra mile here, good work and food for thought. thanks G.
Love the format.
Simply put , Apple is getting money from ATT.
ATT is getting from Customer.
and???? this is the same business model used for all phone brands! Is it bad now because it’s apple? How do you think you can purchase a nokia smartphone at 99$ with a plan when the regular price is 399$ or 499$?? Moreover if you look at data usage, iphone users are using between 3 and 5 times more data than another smartphone users…. Actually AT&T is not making a lot of profit from those plans…. But I need to say: very good graphic presentation, it’s clear and synthetic. It just too focused on the Iphone when all phone are subsidized this way by operators ;-)
You forgot to take into account patent royalties paid to companies like qualcomm for 3G technology used in iPhone.
There are no royalties paid to Qualcomm for GSM since it’s an open standard. CDMA (Verizon) has to pay royalties.
Apple uses 3G technology/chips from Infineon and NOT Qualcomm. This is because Qualcomm is a CDMA infrastructure provider and not GSM.
I always new the math behind it ( obviously not the exact math but ball park figures !!) but loved the way you guys have presented data. I wish presentation would have included cost to AT&T for providing data package to customer, median-high-low usage/account etc.
This is neat, but it would be better if it went further. Paint the picture with app sale revenues (both Apple and ISV’s) and accessory sales too, please!
Wow… way to rip off theoatmeal.com…
You guys suck at this format. Please don’t do it again.
many people use this format, not just some stupid gag site that is trying to be like Collegehumor.com
Actually collegehumor.com ripped off theoatmeal too.
cool explanation of why you chose .la, i’d love to hear about your process of choosing .biz
Fire your designer. He sucks.
That might happen in the USA. I hope someone can explain me the same thing but in Mexico where you pay the subsidied price of about 650 dollars for the iPhone and a monthly fee of service of 50 dollars in a two year contract. And Telcel assures the operation with a 300 dollars deposit in advance in cash as guarantee. So you have to pay around a 1000 dollars plus a two year contract of service at 50 dollars a month.
Shame the above GFX doesn’t work on an iPhone browser.
Now thats not funny :)
At first when i saw the headlines i thought to myself , surely it’s the guys who make apps for the iPhone, i was wrong.
Great product, just lowsey servicr provider….
Good information, although I think the numbers underestimate AT&T’s real profit as the presentation only counts incremental data plan revenue ($30/month). Latest figures show that nearly 40% of iPhone customers are new to AT&T and the average monthly bill for iPhone users is about $95. For these “new” customers AT&T is raking in $2280 over the 24 month contract. Sorry, no graphics, but hopefully I got my point across.
its wrong. it doesnt cost apple 170 to manufacture it, much less, u only counted the prices which are for average consumers, im sure they have deals in bundles that make it much much cheaper, 179?thats crazy best computer costs less, id estimate an iphone costs them about $30 to make in mallasia so their profit is much, much higher
There’s some important information omitted between “Yankee Group” and the conclusion. Namely: Is the $2,000,000,000 figure their revenue or their profit? In other words, is that figure
(revenue) × (subscribers)
or
((revenue) – (subsidy)) × (subscribers)
? “Earn” is an ambiguous word.
Best post ever… not only the research and the information, the way was posted.. AWESOME…
Cheers from paraguay…
That had better be a GPS REceiver. The DOD will frown on GPS Transmitters…
I find the figure of 2 billion a little hard to believe. There are other costs that aren’t factored into this. (rent for the store, advertisement costs, payroll.) Also, the data plan isn’t pure profit. AT&T is having to pay for the data that people are using.
I’d very much like to see the same analysis for Macbook Pros.
I think a huge point was missed (unless I missed what someone else said). The money made from an iphone for Apple has nothing to do with the sale of the phone. It has everything to do with the app store. Without the iphone there would be no revenue from the long tail of the consumer driven app store, in the same way that without itunes, there would be no longtail revenue from the music. It was all about the apps … from the very beginning.
That’s one hell of an investment, with a ludicrous return!
Odd that while AT&T is making massive amounts of money off the iPhone, they keep complaining how taxing the iPhone is on their networks. You’d think that they’d invest some of that money they’re making into improving their G3 network.
I’ve been in Japan 4 years. When I first showed up only Softbank has a G3 network, and it wasn’t very big. Now all three major cell networks in Japan has massive G3 networks. I’m living in the countryside and have near full G3 bars on my phone. Doubt I’d be getting G3 back in Wisconsin.
When I head back to the US I don’t plan on using my iPhone on an AT&T network…
So, here’s the scoop…
There is a place in the marketing funnel called the Back End. It’s where all the big profits are made. AT&T and Apple control the back end. The parts guys and manufacturers get just the upfront revenue but lose the lifetime value of the customer. No more sales. Apple and AT&T win the game.
Brett Payne, you couldn’t be more wrong. Let’s say that Apple makes $200 net profit on each iPhone. For Apple to make more money on apps than on hardware, the AVERAGE iPhone user would have to buy more than $660 of apps. I’m pretty sure the average iPhone user is nowhere close to that.
No, Apple is and always has been a hardware company; the software ecosystem is just the primary motivator for (most) people to buy the hardware.
…and even if $200 is too high an estimate, even if the profit is more like $50 per phone, that’s still more than $160 in apps — and that’s not including the costs of maintaining the App Store itself.
So what happens when Apple is able to get the iPhone to other networks? World domination?
I can’t believe people like this format, I prefer lengthy Powerpoint presentations with no pictures and big words that I don’t understand.
Very cool!! It’s more interesting. It’s a very good business model. This post is excellent by the format. I love this article. Ps: I’m french and i’m sorry for my english
would have included cost to AT&T for providing data package to customer, median-high-low usage/account etc…
Very interesting post and I love the layout! I always wondered who made money and how much.
Quick question:
So if AT&T signs up a certain number of contracts and those people are contractually bound to AT&T to use their service for a period of 24 months, if AT&T records that money as revenue or are they in a sense cooking the books?
Seems a bit tendentious. AT&T doesn’t “earn” $2 billion — that is just revenue. Earnings are normally considered to be profit. The parts manufacturers figure is correctly identified as “revenue”.
Also, another clue that it’s tendentious is that the parts manufacturer revenue is specified as-is while AT&T’s “earnings” are rounded up to $2 billion when the actual figure is $1.91 billion). In that case, why not round up the manufacturers’ revenue to $1 billion?
Very interesting… and a brilliant way to put it using such typography… simply awesome
Actually, to go against the grain, this post sucks.
The post started with “Who is getting rich off the iPhone?” and doesn’t finish it’s analysis.
Yes, AT&T get’s $2 Billion in Revenue. But they have variable costs eating in to that. The post said they don’t break even on heavy users until month 17. That means their profit is significantly less than $2 Billion.
On the other hand, do the math and Apple is getting $550/iPhone, less manufactuing of $179 = $371/iPhone * 5.2 million units = $2 Billion in profit.
That’s right. $2 Billion in profit is worth significantly more than $2 Billion in revenue. Not saying AT&T is a good deal, but Apple is the one gouging you. They’re charging $550 for a $179 product, which is a 300% markup. With these economics, there’s no reason the phone isn’t free other than Apple is ripping you off. Even with a free phone they’d make billions.
That data does not represent world market share….
Interesting. Hopefully AT&T can put that 2 billion into there network.
Well apart from this, I think iphone is selling in other countries at premium rates. Take for instance, the example of UAE. The incumbent Etisalat, is offering the phone for around %500 to 700.
Probably the best pictures to make you understand the data plans and the money transactions.
Those figures are startling. It looks like a meager $199 but what comes later is a big hole in the consumers pocket.
I am having a hard time believing the cost for individual parts here. A close family member is a rep for Samsung and he mentioned the prices are off by around 40-70% for the qty that Apple would have ordered.
Wow…u really can make well presentation dudee
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