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The Almighty Buck Businesses Communications Apple

Apple Makes $831 On Each AT&T iPhone 547

Posted by kdawson
from the minting-it dept.
Ponca City, We Love You writes "The NYTimes reports that Gene Munster, an analyst at Piper Jaffray, has studied Apple's financial statements and come to the conclusion that AT&T is paying Apple $18 a month, on average, for each iPhone sold by Apple and activated on AT&T's network — up to $432 over a two-year contract. This shows how much incentive Apple has to maintain its exclusive deal with AT&T rather than to sell unlocked phones or cut deals with multiple carriers. Last week Apple disclosed that 250,000 iPhones had been purchased but not registered with ATT that Apple thinks are being unlocked so Apple has now taken action to curb unauthorized resellers by limiting sales of the iPhone to two per customer and requiring that purchases must now be made with a credit or debit card — cash will not be accepted." The latter article links to a US Treasury page explaining the incorrectness of the widely-held belief that cash cannot be refused for any transaction.
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Apple Makes $831 On Each AT&T iPhone

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  • by rolfwind (528248) on Sunday October 28, 2007 @03:54PM (#21150247)
    They make money, good for them. As long as they give what the customer wants, they'll get sales (I don't have one. At most, I'll get an iPod Touch one day. Mostly because of the limitations of AT&T service rather than the cost).

    I just find it amusing that some people get upset that a hardware manufacturer makes money or a lot of it. Maybe they are so accustomed to the subsidized Xbox model where MS supposedly loses money on each sale only to try to salvage it later (MS couldn't afford it if Xbox was their business like Windows/Office is anyway). It is no way to say that Apple has to be doing things that way and there is a lot of competition out there for these devices if you don't like their way of business.

    I still think Apple is being rather silly about the cash issue. Many people I know don't have credit cards because that's how they control their spending. This isn't to say that they don't have money though.... their probably more affluent than average and can afford these gadgets.
    • by omeomi (675045)
      I still think Apple is being rather silly about the cash issue.

      I agree. I wouldn't ever pay cash for something that expensive, but I can see where other people would want to be able to. And I don't really understand how refusing cash makes it easier for Apple to stop people from hacking iPhones. If it's to track sales so you can only buy 2 iPhones per year per credit card or something, just use another credit card...
      • the idea is to prevent people from mass-buying the phones, unlocking them, then selling them unlocked.

        They are less concerned about the few people doing it, and more about the number of companies who have stated they would do it for a profit on the phone.

        • by DavidShor (928926) *
          Sounds more likely that they will just drive these already shady companies further underground. Expect Iphones to "fall out of a truck".
    • by timeOday (582209)

      They make money, good for them.

      Knowledge of Apple's fat profit margin is useful to customers in a few ways. First, if you believe in market economics, it means competitors should be offering similarly useful products for less money soon, so you can probably save a lot of money by waiting a short while. Second, would-be unlockers considering buying an iPhone for use with another carrier can use this information to judge how likely Apple is to look the other way.

      Market economics are fundamentally adver

    • by hedwards (940851)

      I still think Apple is being rather silly about the cash issue. Many people I know don't have credit cards because that's how they control their spending. This isn't to say that they don't have money though.... their probably more affluent than average and can afford these gadgets.

      I think that if they don't start behaving they're going to piss off their core market. It amazes me that every time they seem to fix one of my objections to the way they're handling the iPhone, they seem to come up with an even more outrageous way of screwing it up.

      I'm beginning to have a hard time remembering why I hate MS and want Apple to do well.

    • by DavidShor (928926) *
      "They make money, good for them."

      Most of the time, the collective actions of profit maximizing firms lead to rather efficient distributions of resources for the general population. But exclusivity contracts are not an example of this.

      Apple and AT&T are better off, but everyone else is worse off. This is not even a case of income redistribution, because the total gain to Apple and AT&T is less than the total loss from everyone else. This is a case of resource destruction, of wide scale theft from

    • by v1 (525388)
      They're doing it so they can cap you if you try to buy 2 ipods in every store that sells them in your city, every day, using the same credit card number. I'm sure there were a few going around doing just that.

    • Re: (Score:3, Interesting)

      by dave420 (699308)
      All console manufacturers effectively subsidise their consoles to begin with, as consoles are supposed to be affordable to children, one of their major markets. It's not just an MS thing.

      Making money doesn't automatically make the business behind the money acceptable to the consumer, regardless whether the consumer is happy in their purchase or not. If the consumer knew they were being violently ripped-off by their latest purchase, no matter how great it was, they'd be upset.
  • business...simply because their rebates are in the form of 'pre-charged debit cards' which I still haven't found a method of depositing the value of into my bank account without incurring a fee.

    Thus..if Apple wants to play some stupid 'credit card only' purchasing game...I'm sure 99% of american's have MORE THAN ONE credit card, and it is quite trivial to order from different locations. Or a single credit card with multiple authorized users Myself/Mywife/etc..

    Apple's stock is skyrocketing...but their busine
    • I'm sure 99% of american's have MORE THAN ONE credit card...
      I don't think that's true anymore. Many people choose to live within their means these days when Credit Card Companies screw everyone but the very wealthy with astronomical percentage rates and draconian fee structures. It doesn't mean people don't have money, it means they don't want to give it to Credit Card Companies.

      Now, most people have Debit Cards, which may be acceptable to Apple...

    • by AHumbleOpinion (546848) on Sunday October 28, 2007 @08:47PM (#21152545) Homepage
      business...simply because their rebates are in the form of 'pre-charged debit cards' which I still haven't found a method of depositing the value of into my bank account without incurring a fee.

      The card I received from cingular/att was equivalent to a VISA check/debit card, I spent the full amount without fees at the grocery store. Surely you buy things at some place that accepts VISA cards?
  • by registrations_suck (1075251) on Sunday October 28, 2007 @03:57PM (#21150281)
    It's worth pointing out that you can still avoid having to use a personal credit card with your name on it by getting one of those re-loadable Visa cards. Yeah, there is a small cost involved, but it can be worth it if you value having the ability to buy without using your own, named card.
    • by porcupine8 (816071) on Sunday October 28, 2007 @07:47PM (#21152099) Journal
      My husband and I were given a couple of MasterCard debit cards for Christmas last year. We had a HELL of a time spending them. They wouldn't work at Ikea, Target, or a nice restaurant we went to. They did work at K-Mart and Borders Books. No rhyme or reason, tried running them through every which way and backwards, with various amounts often far below the amount left on the card. So we bought more stuff at K-Mart than we normally do this year, and I won't be using those again. Oh, and you can only check your balance via phone twice without getting charged for it - but the website to check balances doesn't work on anything but IE on Windows. And that same website is necessary for activating it if you want to make online purchases. All in all, I don't know if it was just this particular type of card or what, but I was thoroughly unimpressed.
  • if AT&T is having to hand over $18 a month to Apple, they're going to make damn sure they're going to separate every iPhone user of at least $18 a month extra.
    Or alternatively keep iphone users attached to their phone for longer than they would for a conventional handset - which I assume means AT&T would not be happy to see an upgraded handset (e.g. a 3G one) launch any time soon as then they'd have to deal with users wanting to upgrade.
    • by frdmfghtr (603968)

      if AT&T is having to hand over $18 a month to Apple, they're going to make damn sure they're going to separate every iPhone user of at least $18 a month extra.
      Or alternatively keep iphone users attached to their phone for longer than they would for a conventional handset - which I assume means AT&T would not be happy to see an upgraded handset (e.g. a 3G one) launch any time soon as then they'd have to deal with users wanting to upgrade.

      AT&T does charge that additional amount per month, in the

    • by eggnet (75425)
      They already do charge extra with every customer. How do you think they give away phones with subscriptions without increasing the monthlies?
  • Well this explains why they went haywire on the iPhone unlocking, even though they still made enough money on the hardware that they shouldn't break compatibility with an "update"
  • by snl2587 (1177409) on Sunday October 28, 2007 @04:05PM (#21150371)
    The greatest piece of legislation that could be passed would be one requiring that software and hardware manufacturer's could not impose restrictions on how it is used. Not only would the iPhone situation be a non-issue, but the way would be clear for Linux developers to provide drivers without fear of prosecution by hardware manufacturer's. Of course, given greed, this is nothing more than a pipe dream...
    • by thbb (200684) on Sunday October 28, 2007 @04:32PM (#21150611) Homepage
      This is the legislation in France, where the iPhone will be sold by Orange before the end of the year.

      The legislation says that "linked sale" (vente lie'e) is forbidden: if you offer some good for sale, you are not allowed to force the buyer to buy a service together with this good.

      There has been a debate in the press about whether Apple would renounce selling iPhones in France or find a workaround.

      The trick Orange will use is to propose the iPhone at a prohibitive price (1000 euros?) and offer a massive discount for any plan purchased with it. But consumer watch organizations are quite powerful here, and they could sue if they show the price is too high and the scheme is actually a disguised "vente lie'e". The consumer watch organization are allowed to use surveys and statistical analyses to show this, so Orange and Apple will have to play tight at this game.

      BTW. I'm surprised so many of you in the US have plans around $60/month. I pay 14 euros/month for basic service, but it's plenty enough airtime.
      • by frdmfghtr (603968)

        BTW. I'm surprised so many of you in the US have plans around $60/month. I pay 14 euros/month for basic service, but it's plenty enough airtime.

        For many of us (such as myself), the $60/month (45 Euros by my math) covers both the voice and data plan.

        I pay $60 for the unlimited data, 450 anytime minutes, 5000 off-peak (nights and weekends) minutes, and 200 free text messages (I use maybe 5-10 per month). Any peak minutes that don't get used at the end of the month get added to the peak allocation the follo

      • Re: (Score:2, Funny)

        by KDR_11k (778916)
        It didn't strike me until the second to last sentence that Apple and Orange seem strangely fitting together.
      • by lotsofsand (950221) on Sunday October 28, 2007 @09:09PM (#21152665)
        You're clearly comparing Apples and Oranges here.
  • Hard to believe. (Score:3, Interesting)

    by LinuxInDallas (73952) on Sunday October 28, 2007 @04:08PM (#21150403)
    It's hard to believe AT&T is handing Apple $18/month for the iPhone when to get an iPhone added to an existing AT&T plan you only haved to spend an extra $20/month.
    • Re: (Score:2, Informative)

      by krakass (935403)
      You have to remember that AT&T is just redirecting the money they would normally pay towards discounting the phone to Apple. And when you consider that they usually don't discount phones by $432 ($18*24 months) they're actually probably making more money from iPhone users.
  • by Hao Wu (652581) on Sunday October 28, 2007 @04:12PM (#21150433) Homepage
    Cash will be accepted by the competition. I will not do business with pricks who treat me so suspiciously as not to accept pocket change.
  • useful information (Score:5, Insightful)

    by m2943 (1140797) on Sunday October 28, 2007 @04:15PM (#21150463)
    People say things like "it's Apple's right" and "good for them". Of course, it's Apple's right to do those deals.

    Nevertheless, where do you think this money is coming from? Do you think that AT&T is giving that to Apple because they are such good buddies?

    No, you are paying for it one way or another (e.g., by paying a premium for their sluggish EDGE service).
    • People say things like "it's Apple's right" and "good for them". Of course, it's Apple's right to do those deals.

      Nevertheless, where do you think this money is coming from? Do you think that AT&T is giving that to Apple because they are such good buddies?

      No, you are paying for it one way or another (e.g., by paying a premium for their sluggish EDGE service).

      But I pay the same price for ATT no matter which phone I use. So tell me again how I am paying more. Seems like I just learned I'm pay $18 per month less that the chumps with non iPhone who get the same service.

    • Re: (Score:3, Insightful)

      by ucblockhead (63650)
      Not me. I don't have an iPhone. I don't have one because I don't think it is worth the money. Other people do think it is worth the money and therefore have them. Where the money is going is irrelevant. What matters is if the price that is being charged is worth it to to the person buying the product. If it is, buy. If it isn't, don't.
  • Two? I don't even want one. Not even for free.

    Oh well, I guess I am not the average Apple fan...
  • Geez... (Score:3, Insightful)

    by LonghornXtreme (954562) on Sunday October 28, 2007 @07:07PM (#21151801)
    I can't get over how many people think Apple should not be entitled to freedom of contract. Apple can do about anything it damn well pleases. If you don't like it, don't buy a stinking iPhone. They don't 'owe' the consumer anything. It's their goal to make as much money as possible. If their tactics for making said money are so egregious, vote with your dollars and go elsewhere. But don't talk about changing the law just because you can't have an iPhone exactly how you want it.
  • by mrsteveman1 (1010381) on Sunday October 28, 2007 @07:40PM (#21152039)
    They make it sound like they have the right to go after people just because they haven't activated the phone. Apple may not be required to sell them unlocked yet, but consumers have the right to unlock them, plain and simple. This is borderline control freak territory on Apples part, and it looks even worse because they are taking massive kickbacks on an already expensive piece of hardware that was sold far above cost.

    Most phone makers get a kickback from the carrier because the consumer never paid the manufacturer directly, but this is not the case with Apple.
  • by gig (78408) on Sunday October 28, 2007 @08:35PM (#21152463)
    All the stuff that Apple does for every iPhone user POST-SALE costs AT&T at least that much to do for themselves. AT&T is like a silent partner just printing money. You pay them every month but otherwise you deal with Apple. Over at Verizon they are doing all the Apple stuff themselves, but doing it badly.

    The complaints about the iPhone never seem to come from iPhone users. The highest customer satisfaction in phones is iPhone at 82%, the next best is Blackberry at 51%, then ALL THE REST are below 50%. Everybody is paying a similar monthly carrier fee for their phone, but not everybody is getting the same value from it. So complaints about how much money Apple/AT&T are making while offering a single phone that has both the highest customer satisfaction and the most features really seem disingenuous to me. Complain about how much companies are making for selling phones that garner http://www.google.com/search?client=safari&rls=en&q=iphone+customer+satisfaction&ie=UTF-8&oe=UTF-8

  • by throatmonster (147275) on Sunday October 28, 2007 @09:38PM (#21152877)
    I still do almost all my purchasing with cash. I get it from ATMs, but then nobody really knows where I spend that money. That means my wife can't track where I've been, except the the nearest ATM.
  • Darn them (Score:4, Funny)

    by whitehatlurker (867714) on Sunday October 28, 2007 @11:04PM (#21153433) Journal
    It's tough to start conspiracy rumours when they state up front that they won't take cash because they're trying to track the people who purchase their phones. I prefer it when they try to hide what they're doing to reduce their customers' privacy. It's more challenging ...
  • by Monoliath (738369) on Monday October 29, 2007 @12:13AM (#21153835)
    ...so sorry.

    Fuck Apple

    This is more horrendous bullshit, from a hardware manufacturer trying to hold it's consumers / customers hostage...to the world's shittiest telco.

    There is NO device that has functionality SO GREAT...that would make me jump through hoops such as this nonsense.

    When are people going to wake up?
  • by bradbury (33372) <Robert...Bradbury@@@gmail...com> on Monday October 29, 2007 @12:46AM (#21154017) Homepage
    I do not think the Apple strategy will fly. It is easy enough to purchase prepaid credit cards and to use those to purchase iPhones. They may add a level of indirection but I doubt they will be able to prevent it.

    If technology is driving down the cost of hardware (circuit complexity increasing by 2x every 2 years -- classic Moore's Law according to Wikipedia). Meaning you can compress data at a lower cost, you can transmit more data at a lower cost. Then why should not communications costs be declining at that same rate? I could care less if I get video on demand. My voice comununications should be almost free. The challenge to AT&T, Verizon, Comcast, etc. is why our bills (adjusted for quantity of data delivered) should not be declining by at least 1/2 every 2 years.

    Apple can sell a fancy phone, whose advanced features I do not have to use. Lower the costs of my minimal connectivity. That is all I (as someone 51 y.o) needs to have I mean *really* what the hell does an iPhone provide that an easily available terminal cannot provide. And if you do not have an easily available terminal -- where the hell are you living? (And as a brief aside I have had dinner with Steve Jobs -- though I respect him as an individual I wasn't that impressed.) I would cite Google as being much more likely to change the playing field than Apple at the current time. It could strongly be argued that Apple has sold out to AT&T. Fortunately the hackers will defeat their efforts to completely manipulate their technology -- which customers have purchased. My hardware. My right to program it for my purposes. Claim otherwise. You will lose.
  • Bad post (Score:3, Interesting)

    by stewbacca (1033764) on Monday October 29, 2007 @07:36AM (#21155571)
    This story is two completely different stories, and as a result, we get a mess of a discussion thread. First of all, the no cash policy is due to the insane popularity of the phone, and the attempt to prevent the concert ticket phenomena of SCALPING. I could easily go to an Apple Store (well, three are in driving distance) and buy up 100 iPhones, in cash, then go around Austin and San Antonio and sell them for $100-$500 more, since there would be none left in the local area. Credit cards allow for tracking of transactions, cash doesn't. End of story. Next story...NEXT story....NEXT story (voiced by K.J., for all you Tenacious D fans out there).

    Story #2 (or non story I should say) is that Apple makes money from AT&T. Story #3, slashdot fools come out in droves to complain about a phone that they don't even own, because they feel they have some sort of 21st century pirate credo to stick to and would never buy anything that is supposedly "locked in". Because having tightly integrated, well produced hardware that works great is always a "bad thing" and the geek in them could obviously do/know better when it comes to Technology than an artsy little computer company from California.

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