Piper Jaffray: AT&T paying Apple $18 per iPhone, per month
The exact details of AT&T's revenue-sharing agreement with Apple have not been disclosed, but one analyst thinks that over the two-year life of a user contract, the amount exceeds the actual price of the iPhone.
Silicon Alley Insider spotted a research note from Piper Jaffray's Gene Munster estimating that Apple is receiving $18 per month for each iPhone subscriber, under the revenue-sharing agreement between the two companies. Apple has confirmed that such an agreement exists, but has not shared the details about exactly how much cash it's getting from the revenue AT&T makes on iPhone customers using the carrier's data network. In July, Munster estimated Apple was receiving just $3 per iPhone subscriber and $11 per iPhone customers new to AT&T, but he's rethought the numbers after Apple's latest earnings release.
Munster takes the 1.4 million iPhones that Apple has sold since the device made its debut, and subtracts the 250,000 iPhones that Apple said it believes were bought to unlock from AT&T's network, to calculate that there were 1.15 million revenue-generating iPhones in play during Apple's fourth quarter. He then uses the $118 million that Apple recorded in iPhone-related revenue during the quarter to estimate out how much service revenue Apple took in from its share of AT&T's data charges by subtracting his estimate of hardware revenue generated by the sale of each iPhone, based on the average selling price.
iPhone users on AT&T's data network could be giving Apple as much as $18 a month under their revenue-sharing agreement.
(Credit: CNET Networks)It's a little tricky because the iPhones that were sold in June and July have obviously been generating revenue for longer than the ones sold in September, but he arrives at a figure of $18 per iPhone subscriber in monthly payments to Apple during the fourth quarter.
That would mean that over the life of a two-year contract, AT&T will pay Apple $432 per iPhone subscriber. Silicon Alley Insider adds the $400 in revenue per iPhone and uses iSuppli's cost estimates to calculate a $565 profit per iPhone over a two-year period. I'm a little wary of those iSuppli numbers myself (they don't really account for things like research and development costs), but the exact number isn't really the point: Apple has a huge incentive to make sure iPhones stay on AT&T's network, even if Munster's numbers aren't perfect.
I sent Munster an e-mail with a few questions, including whether it's fair to assume that the $18 a month figure will remain constant over the two-year contract, but I haven't heard back yet. A reader of Tuesday's iPhone blog made a fair point that Apple still gets revenue from the sale of an unlocked iPhone. But it's leaving quite a bit of money on the table if that phone doesn't run on AT&T's network.
an iPhone user is subscribed to (i.e., ATT pays Apple less for a user
at the bottom $59.99 plan than they do for a user at the higher
$129.99 plans).
Then Apple turns around and cuts AT&T's throat, or basically turns a blind eye and allows its customers to, which is the same thing.
Who in their right mind would now sign as a business partner a backstabbing ***** like Apple? At least most other companies (like MS) try to honor their commitments.
So they are not leaving any money on the table, when an unlocked iPhone is sold. Those phones were only sold because they were unlocked.
It didn't take an iPhone out of the hands of a would be AT&T subscriber...apple makes all the phone they need to make, so that they don't run out.
Personally, I'm not going to buy an iPhone, because I don't want to give Apple that darn $18 a month, that was supposed to go to me, to subsidize the cost of the phone.
Obviously it will be a long time before Apple worries about me, considering how well they are doing so far....maybe they'll get to the cost conscious people someday....but for now, I'll take a pass on apple's cell phone business.
Talk about leaving money on the table...every customer not made an Apple customer, that would have been an Apple customer (and maybe even a Mac buyer later)...thats money left on the table.
Apple can make money on the iPhone, via iTunes, via games downloads, via first party software....
and the iPhone universe is smaller, (probably less than 1/3rd) the size it would have been without the AT&T contract.
The unlock phones, helps ...but not much. Most people don't want a 'hack' solution....so Apple has left a lot of money on the table, hoping the AT&T will be more profitable over all.
But the unlock phenomena....is clearly going to strongly anti-AT&T people, and is helping recover some of the money, that otherwise, would have been left on the table.
iPhones sold in France through Orange would have to comply with
consumer's rights laws of France by suppling in addition to the
"locked" Orange version an "unlocked" version which would allow
cell phone subscribers to use the cell phone provider of their
choice. This "Naked iPhone" comes at a price though as it's
expected to cost over $1,200.
Comparing the contract cost payback to the original cost for the phone is kind of irrelevant.
Maybe next someone will tell us about the shocking practice of carriers actually giving away FREE phones just to get you under contract!
*GASP*
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by AlexGerwer
June 10, 2008 1:41 PM PDT
- I thought that you might enjoy reading the attached email exchange to put some context as to how the new iPhone release is being handled with respect to consumers:
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Reply to this comment
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See all 27 Comments >>Greg,
Frankly, I don't see any manifestations of being sorry in anything you have written or offered to do. Although there were not explicit misrepresentations of technical specifications of the iPhone, superior performance and capabilities were implied, though they were lacking. I think if you ever walked into an AT&T store you would discover that the staff who works at these establishments are not particularly rigorous in their portrayal of products and services. Again, perhaps your comments serve to comfort your conscience, but they do nothing to solve my wife's problem.
Sincerely,
Alex Gerwer
- Hide quoted text -
On Tue, Jun 10, 2008 at 10:26 AM, Greg Joswiak <joz@apple.com> wrote:
Again, I'm sorry your disappointed. I've already provided my recommendations to you. I don't think it will be news to anyone that the first iPhone wasn't 3G and didn't have GPS -- nor was it ever communicated that it had these features.
Greg
On Jun 10, 2008, at 9:31 AM, Alex Gerwer wrote:
> Greg,
>
> Frankly, I have read my emails and I have reviewed your responses to them, including this one. My approach reflects the fact that neither you or anyone else who we have tried to deal with at either AT&T or Apple seem to care enough to truly correct the problem and, perhaps even more offensive, when a fix presents itself, it is viewed as a revenue opportunity. Add to this that the iPhone is (or was) a premium-priced product, and the offensiveness of your business practices are only amplified. Frankly, I think a lot of people who are customers and potential customers who find my approach warranted based upon the treatment we have received.
>
> Although the explanations you have provided are interesting, they do not serve as justifications for putting my wife in a position to pay again to get the capabilities and performance that are embodied in many less expensive phones.
>
> I am sorry that your insight fails to allow you to visualize another solution for us. Something tells me that no matter how polite, kind, and gentle I would have been in my previous communications we would have found ourselves in the same spot. Seems to me that we will be investing some time and money in making the facts of our situation public immediately, something which is within our legal rights.
>
> Now, there is one courtesy which I have extended to you....informing you of our next course of action.
>
> Sincerely,
> Alex Gerwer
>
>
>
> On Tue, Jun 10, 2008 at 9:06 AM, Greg Joswiak <joz@apple.com> wrote:
>
> Alex,
>
> If you read your emails, you shouldn't wonder why that would make anyone defensive. You really should try a different approach when seeking assistance from someone -- especially someone of whom you've only had casual contact.
>
> 1) To your first issue, the original iPhone is a 2G phone, your Blackjack is a 3G phone, like the iPhone 3G that announced yesterday. 3G is faster than 2G. The original iPhone has Wi-Fi, which is faster than 3G. But if she's not on a Wi-Fi network, her speed will be gated by the speed of 2G networks. Our software update coming out next month will improve the speed of downloads on 2G, but it still won't be near the speed of 3G.
>
> 2) The original iPhone uses two methods to report location -- cell towers and wi-fi networks. The wi-fi location can be unbelievably accurate. But, if it cannot find a wi-fi network (you don't have to be associated with it) that is in the Skyhook database, it will revert to the cell tower info with is a much larger and less precise location. Again, the iPhone 3G has GPS, the original iPhone does not. There is no way to change this with a software update.
>
> It appears that both of these issues for your wife are solved with the new iPhone. Fortunately, AT&T has decided to allow people to purchase a new iPhone at $199 and not pay a penalty to break their original contract. Short of that, I don't see another solution for you.
>
> Best,
> Greg
>
>
>
> On Jun 10, 2008, at 8:39 AM, Alex Gerwer wrote:
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>> Greg,
>>
>> Thanks for the note. Indeed I am frustrated, as much by your defensive response to the situation I brought to your attention as with the situation itself. Honestly, my frustration represents just a fraction of my wife's, so following your suggestion may not be the best idea under the circumstances.
>>
>> Here are the two seminal problems which my wife has been facing:
>>
>> 1) Being able to download files in a reasonable amount of time. She has various documents/presentations that she needs to call up for her work while traveling. We are both on AT&T. We have tested this. When I pull up the same file on my Blackjack II, it takes somewhere between 3 - 4 times less time than it does downloading the same file from the same site using the iPhone.
>>
>> 2) Being able to use the iPhone for navigation. When the Blackjack II is used for navigation, the application references the precise location where when is located at a particular time, making navigation easy. The iPhone gives a location which is more approximate, resulting in confusing directions, especially for people who are not good at being location oriented.
>>
>> My wife purchased the iPhone to be fashionable (after all, she is a leader in that business), but also to get her work done. She could be a great spokesperson for the iPhone if her legitimate needs could be met. Now, it seems, you have a vehicle with which to do this as a price which is less than the original phone that she purchased. It seems to me that fortunately, you have an outstanding opportunity to easily solve her problem with the iPhone. I am hopeful that you will come through for her. We both greatly appreciate your provide whatever means you have at your disposal so that this situation can be put behind us.
>>
>> Sincerely,
>> Alex Gerwer
>>
>> On Mon, Jun 9, 2008 at 10:22 PM, Greg Joswiak <joz@apple.com> wrote:
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>> Alex,
>>
>> I know you're frustrated, but your curt approach exhibited in these emails neither explains the problem well nor does it help me best empathize with your situation. Perhaps it would be better for your wife to describe the situation to me?
>>
>> Best,
>> Greg
>>
>>
>> On Jun 9, 2008, at 10:15 PM, Alex Gerwer wrote:
>>
>>> Greg,
>>>
>>> Thanks for the note. As I often tell my five year old daughter, sorry is not worth anything if the underlying problem is not addressed. In fact, as I indicated in my previous email to you, we have visited the Genius Bar at the Apple Store in South Coast Plaza and the folks are, indeed, geniuses in coming up with all kinds of reasons why they could not doing anything to improve the issues of poor performance in internet access as well as pathetic performance in localization in the mapping functions. By the way, they are also very good at finger pointing at the AT&T store where the phone was purchased.
>>>
>>> I think you miss my point. The iPhone was purchased as a premium-priced product, but did not deliver premium priced performance in such essential functions as accessing the internet and location services. That is the root of the frustration. The problems should be fixed in the phone that my wife has. The price is not the issue beyond the fact that given the improved phone is less expensive, it should be a non-issue to replace the expensive phone with the new phone that has the stated problems corrected. No refund has been requested...just the kind of service that should have been delivered with the original phone. The updates you mention do not solve the problem as the solution involves hardware changes. Correcting problems is not a rarity when it comes to what reputable companies in the industry do, such as Novell. You have chosen the Microsoft it seems, however, where corrections can be labeled as enhancements and deemed to be sources of revenue.
>>>
>>> It terms of the customer satisfaction statistics to which you allude, that depends on whose data you use. I know that all too well as my wife's step brother is Dean Andrews at Nokia...who is all too familiar with the N95 and Series 60 phones. So I guess you will look at the data you wish to look at. Unfortunately, when it comes to my wife and her satisfaction, it is her experience that counts, not some data selected from a self-serving source.
>>>
>>> My wife and I have not asked for perfection. What we have requestes is a genuine interest in getting a phone that was purchased for a premium price to perform at least as well as other premium priced phones. It seems like your answer is to point your finger at the Genius Bar. Well, given that choice, we will go away, but we will make sure that the experience we have had is widely articulated before the launch of the new iPhones. Oh, one other thing, thanks for reminding us to get the appropriate market data to back our position!
>>>
>>> Sincerely,
>>> Alex Gerwer
>>>
>>>
>>>
>>>
>>>
>>> On Mon, Jun 9, 2008 at 7:25 PM, Greg Joswiak <joz@apple.com> wrote:
>>>
>>> Alex,
>>>
>>> I'm sorry for the problems your wife has had. It sounds like you've talked to the folks at the Genius bar at the Apple Store?? If you haven't, they're your best bet.
>>>
>>> While I realize you're frustrated, your tone seems to indicate that we should be apologetic for continuing to improve the iPhone (for which we provided several free updates to all iPhone users) and for making it less expensive. I cannot, however, feel bad for either. The free updates we've provided have not only served to fix problems for our customers, they've also been the source of over 100 new features as well. This, as you know, is a rarity in the industry.
>>>
>>> We try to build products and services that will delight our customers and we seem to be doing pretty well at it. In fact our customer satisfaction for the iPhone is significantly higher than the N95 you've recommended to your wife (or the blackjack you're currently using). No one's perfect and I apologize to your wife for the inconvenience she has had and I hope that the folks at the genius bar can help her. Despite your very blunt demands of me, I think they're the best folks to help in this situation.
>>>
>>> Best,
>>> Greg
>>>
>>>
>>>
>>>
>>> On Jun 9, 2008, at 4:57 PM, Alex Gerwer wrote:
>>>
>>> Greg,
>>>
>>> I am writing to you on behalf of my wife, Carrie Ellis, a leading designer in the fashion industry (Paige Premium Denim and Hudson) who, after a great deal of deliberation, purchased an iPhone about two months ago from AT&T. Since that time, she has had many problems with both the inconsistent ability to download the files that she needs in a reasonable period of time to the phone as well as the inability to use the map routing features, given the lack of what I believe you call GPS on the device. (By the way, none of the cigarette lighter adapters she has tried, whether purchased from AT&T or Apple, seem to work in either or our two automobiles.) Despite many years of being an AT&T customer and despite her complaints to both the Apple Store in South Coast Plaza as well as to AT&T, no real solution was offered. Now, I come to find out, that you have a new phone which solves these seminal problems and it costs $100 less! Frankly, I warned my wife not to purchase the phone after the way you handled the first price drop on the product. Now, it seems, you have corrected substantive problems with the product, only to release the fixes in a lower price product! I am hoping that as my wife is considering a Nokia N95, you and your team consider finding a way to make my wife whole. She is not happy and I dare not say "I told you so...."
>>>
>>> Sincerely,
>>> Alex Gerwer
>>>
>>> ....a proud user of the Samsung Blackjack!
>>>
>>>
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>>>
>>>
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