on 7 September 2009Bizarre story on guardian.co.uk yesterday, headlined ‘iPhone makes worldwide loss’. Had me going for a minute, but the giveaway is in the breadcrumb – ‘Business > Telecommunications industry’ – and the byline of Richard Wray, the paper’s communications editor. Based on a Strand Consult report, this is all about how the iPhone may not be profitable for the networks – which, to anyone who’s been keeping up even slightly, is kind of ‘dog bites man’.
For Apple, which makes the gizmo and would thus be the company most likely to profit from it, the iPhone is as far from a loss-maker as could be imagined; indeed, much further than might be imagined. We’re all so accustomed to state-of-the-art hardware being subsidised by other services (most game consoles cost more to make than they sell for, etc) that it’s worth noting the consistent industry estimate that the iPhone’s components cost less than half its retail price. Given that Apple sold a million iPhone 3Gs, for example, in the first three days after launch, that’s some money-spinner.
Curiously, the story, which really does seem determined to talk down that pesky iPhone, notes: ‘Certainly in terms of actual sales, the iPhone is a small percentage of the global market. In the three months to end June, Apple sold 5.2m iPhones compared with 268m handsets sold worldwide.’ Well, that’s nearly two percent of the market, for one phone. Not one manufacturer, one phone. Both Motorola and Sony Ericsson, for example, have about a 6% market share of handsets. How many models do they sell? How infinitesimal would be the share of each one?
On top of the money Apple makes directly from hardware sales, it still gets a subsidy from the networks for the privilege of carrying the phone. No wonder they can’t make much profit. In fact, questioned by Wray, both O2 and Carphone Warehouse (respectively the exclusive network and stockist in the UK) justify their investment in the platform by waffling about ‘the iPhone effect’ and ‘impact’ and ‘raising the bar’, rather than the surely more shareholder-friendly ‘raking in hard cash’.
With renegotiation in the air, neither will be unhappy to see national press stories highlighting their raw deal. But to describe the iPhone as loss-making is a truly heroic feat of tunnel vision.
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