118 Responses to “Who Is Getting Rich Off the iPhone?”

  1. 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.

  2. 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.

  3. 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?

  4. 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?

  5. 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

  6. 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.

  7. Lanny Heidbreder

    …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.

  8. Lanny Heidbreder

    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.

  9. 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.

    • Karen
  10. 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…

  11. 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.

  12. 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.

  13. Lanny Heidbreder

    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.