Apple Virtually Giving Away AppleTV


Gizmodo reports that in the wake of the recent Apple price drop on TV, Cupertino may be burning a little cash XBox-style just to keep the Little Cube That Hasn't Yet on the market.

Given the production costs for Apple TV, estimated by iSuppli in a teardown, Apple is clearly subsidizing the set-top box, whereas originally it went for profitability upon original release. After all, although it was drowned in the iPhone hysteria, it was still a major subject of Jobs' 2007 MWSF keynote.

The bottom line? Maybe a 10% profit on each 40GB box. The 160GB model likely tracks a little higher. but that's way off the 50% gross or 26-27% net margins Apple usually demands from its products.

But Apple TV is part of a longer-term product strategy, part of the digital lifestyle paradigm Jobs announced several years ago. Earlier attempts at moving Apple gear into your living room haven't necessarily been successful. iPod Hi-Fi, although generally well-reviewed, was considered a little pricey and the myriad third-party hi-fi equipment that was iPod ready meant it was only a minor seller - in a Bang & Olufsen kind of way.

Now that Apple TV's been unshackled from the PC and Mac, on top of the price cut, it may actually gain critical mass. But it's unlikely to be an iPod-like breakout hit.