How much do you think the Sport band costs Apple to produce?

[youradhere4222]

The Sport band is obviously great and looks nice, but I thought it would be fun to discuss how comically high Apple's profit margins are on this band.

The watch retails for $50. My guess is Apple can make the band and packaging for less than $10. What say you?

 

[EdisEdward]

It doesn't matter. The "costs" you are referring about is called "cost of goods sold" and results in higher gross profit. However, it may exclude other costs associated in the development of the bands (r&d) and other indirect costs (operating overhead such as indirect labor and indirect materials) as well as operating expenses related to selling the sport bands, which are presented in the financial statements below gross profit so it doesn't get included in the calculation of gross margins, which is what most non-financial people look at. You have to look at a firm's EBITDA or EBIT margins

 

[bushido]

20 cent

 

[youradhere4222]

It doesn't matter. The "costs" you are referring about is called "cost of goods sold" and results in higher gross profit. However, it may exclude other costs associated in the development of the bands (r&d) and other indirect costs (operating overhead such as indirect labor and indirect materials) as well as operating expenses related to selling the sport bands, which are presented in the financial statements below gross profit so it doesn't get included in the calculation of gross margins, which is what most non-financial people look at. You have to look at a firm's EBITDA or EBIT margins

I realize there are R&D costs but those exist for every smartwatch and band produced. More importantly, they're largely fixed and recouped many times over early within the product lifecycle. In Apple's case, I would guess that their allocated R&D expense amounts to less than a dollar for each band given the number sold thus far. The same can be said for the other expenditures you mentioned.

I suppose I am trying to make a point that Apple is probably making, at minimum, twice the amount of profit on each band as other smartwatch manufacturers. But I am genuinely curious what peoples' guesses are as to the actual production cost of each sports band, overhead included.

 

[exxxviii]

$5, max.

A Livestrong band sells for about $10, and the materials look similar. The cost to manufacture an AW sport band is probably less than that.

 

[ZBoater]

$1

 

[AZhappyjack]

I realize there are R&D costs but those exist for every smartwatch and band produced. More importantly, they're largely fixed and recouped many times over early within the product lifecycle. In Apple's case, I would guess that their allocated R&D expense amounts to less than a dollar for each band given the number sold thus far. The same can be said for the other expenditures you mentioned.

I suppose I am trying to make a point that Apple is probably making, at minimum, twice the amount of profit on each band as other smartwatch manufacturers. But I am genuinely curious what peoples' guesses are as to the actual production cost of each sports band, overhead included.

They don't make anything on the ones you don't buy. If your concern is Apple's obscene profit margins, then don't participate. I'd put this in the "golden rule" category - those with the gold get to make the rules... or in this case, those with the goods get to set the price. Whether you or I, as individuals, choose not to participate, I doubt Apple much cares.

However, I would direct you to the aftermarket. What is the build quality of those products vs "genuine Apple"? And what is the cost of each? Apple sells the sports bands at $50/pop because they can, not necessarily because that's what it costs to design, maunfacture, market and distribute.

 

[youradhere4222]

They don't make anything on the ones you don't buy. If you concern is Apple's obscene profit margins, then don't participate. I'd put this in the "golden rule" category - those with the gold get to make the rules... or in this case, those with the goods get to set the price. Whether you or I, as individuals, choose not to participate, I doubt Apple much cares.

I disagree completely. There is room for people who like Apple's products but wish they'd adopt profit margins more consistent with the rest of the industry. Hopefully I can inspire some other Apple fans to ask why Apple sells smartwatch bands for two or three times as much as other manufacturers who sell what is essentially the same product. Not everyone is a stockholder, most of us are just consumers.

 

[JayLenochiniMac]

More like under $2. It's nothing more than rubber.

 

[Rogifan]

I disagree completely. There is room for people who like Apple's products but wish they'd adopt profit margins more consistent with the rest of the industry. Hopefully I can inspire some other Apple fans to ask why Apple sells smartwatch bands for two or three times as much as other manufacturers who sell what is essentially the same product. Not everyone is a stockholder, most of us are just consumers.

Why does Apple charge $50 for the sport band? Because they can. If their prices bother you the only thing you can do is not buy their products.

 

[fischersd]

More like under $2. It's nothing more than rubber.

Heh. Funny, I was going to say $3 because of the stainless steel pin.

 

[andrewstirling]

It probably costs them about the same as the ikepod straps cost to make. They look identical and the same designer designed them both. They're currently selling for around £300

 

[JayLenochiniMac]

It probably costs them about the same as the ikepod straps cost to make. They look identical and the same designer designed them both. They're currently selling for around £300

Not really. Apple's is mass produced in the millions so cheaper per unit.

 

[andrewstirling]

Still reckon their profit margin per strap is a whole lot lower!

 

[Newtons Apple]

$1

Yep I am betting on a buck with packaging.

Welcome to the world of Apple.

 

[OneMike]

My bet would be under one dollar. Maybe $0.78.

 

[srshaw]

$5, max.

A Livestrong band sells for about $10, and the materials look similar. The cost to manufacture an AW sport band is probably less than that.

Can you actually still buy livestrong bands? I bought a couple back in the day but it wasn't more than a couple of GBPs. Sadly I wouldn't be seen dead in one of those things now or anything else associated with Lance Armstrong.

 

[exxxviii]

Can you actually still buy livestrong bands? I bought a couple back in the day but it wasn't more than a couple of GBPs. Sadly I wouldn't be seen dead in one of those things now or anything else associated with Lance Armstrong.

Yep, you can still get them. I see them all the time. Like you, I am surprised. But, they managed to survive Lance.

http://store.livestrong.org/wristbands.html

 

[NovemberWhiskey]

Actual raw materials: under a dollar. Probably more like 10-50 cents.

Labor: maybe another 10-50 cents per piece.

But royalties, advertising, r and D maybe up to 10 dollars per piece.

Rememebr these look a lot like Marc Newsons watch stuff. I would not be surprised if he gets a small percentage of all watch sales.

 

[JayLenochiniMac]

Actual raw materials: under a dollar. Probably more like 10-50 cents.

Labor: maybe another 10-50 cents per piece.

But royalties, advertising, r and D maybe up to 10 dollars per piece.

Rememebr these look a lot like Marc Newsons watch stuff. I would not be surprised if he gets a small percentage of all watch sales.

Apple hired him as a consultant on a part time basis. It doesn't necessarily mean Newson gets a royalty for each sale that uses his designs as you'd expect when a company approaches an outsider.

 

[Jefe's MacAir]

Pure materials and manufacturing? Less than a $1 based on Apples HUGE scale of production.

Proprietary fastening system, design, marketing, etc. It's likely they're losing money at $50/band currently. That will flip flop very soon and actual profits will be made. For many, many years.

Question is; How much will Apple charge others to use their fastening system for off brand bands?

 

[exxxviii]

Proprietary fastening system, design, marketing, etc. It's likely they're losing money at $50/band currently. That will flip flop very soon and actual profits will be made. For many, many years.

Question is; How much will Apple charge others to use their fastening system for off brand bands?

They copied the band.

 

[Rogifan]

Apple hired him as a consultant on a part time basis. It doesn't necessarily mean Newson gets a royalty for each sale that uses his designs as you'd expect when a company approaches an outsider.

Newson just said in an interview he's spending about 60% of his time on Apple. My guess is he's more than a consultant.

 

[Rogifan]

They copied the band.

How can Marc Newson copy himself?

 

[JayLenochiniMac]

Newson just said in an interview he's spending about 60% of his time on Apple. My guess is he's more than a consultant.

Regardless, he doesn't even have an official job title at Apple.