Thread

1. karmakurtisaani · 1790089191 · focus · HN ↗

   It's just ao insane that a company that's sitting on a massive pile of cash and has been wildly profitable for decades still needs to do this. I suppose the valuation requires more growth, and they're out of good ideas.

   1. bigyabai · 1790095013 · focus · HN ↗

      Look at any recent Apple revenue breakdown. If you pretend that the iPhone doesn't exist, Apple's most profitable market segment is services. Even the iPad and Mac can't dethrone it.

      According to leaked BOMs, the iPhone usually has ~40% profit margins. It's very likely that Apple Music, the App Store and iCloud all turn >90% margins, which is basically free revenue to shareholders.

      1. hylaride · 1790114520 · focus · HN ↗

         Apple Music’s margins are probably not that great. It does have to pay licensing fees, but everything else? Maybe…

         1. bigyabai · 1790119161 · focus · HN ↗

            I'd bet it's still well over 50% margins. At Apple's scale, royalties are pennies on each dollar you make.

            1. schnitzelstoat · 1790160285 · focus · HN ↗

               Aren't the royalties usually revenue share deals with the record labels like Spotify has?

               So that makes it really hard to make a lot of profit - as the royalty costs grow linearly with your revenue.

               1. hylaride · 1790172499 · focus · HN ↗

                  Yeah, royalty payments average ~60-70% for services where we can cleanly see the breakdown, and much higher for certain artists that can command it. Assuming the overhead for Apple and Spotify is 10% (big assumption), the margins are 20%, which is small for most SaaS. However, I assume both mostly use it as a loss (well, less-profit) leader as part of wider bundles.

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