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Topic: Apple

Latest iPad may boost Apple's app, music revenue

Summary: Worries about Apple's profit margins on the new iPad may be misplaced. Cost increases in iPad manufacturing could be offset by increased media and storage purchases.

Larry Dignan

By for Between the Lines |

Worries about Apple's profit margins on the new iPad may be misplaced. Cost increases in iPad manufacturing---due to a retina display, faster chip and overall higher bill of materials---could be offset by increased media and storage purchases.

Latest iPad may boost Apple's app, music revenueLast week, Apple unveiled the latest iPad, which has a high resolution display, faster processor and improved camera, starting for $499. The iPad 2 now goes for $399 to start.

The improved specs of the iPad led many analysts to estimates that profit margins would fall somewhat for Apple. However, Apple kept the storage on the iPad 3. In other words, high def videos are likely to squeeze the 16GB on the starter iPad 3 pretty quickly.

Should that storage be maxed for many---how could it not?---iCloud is going to look like a viable option to offload some content. In addition iTunes Match, which goes for $24.99 a year, may also look useful.

Gabelli analyst Hendi Susanto said in a research note that the high-resolution capability of the iPad is going to drive more media consumption. That reality will drive the average revenue per user for Apple via higher iTunes and App Store sales as well as iCloud subscriptions.

"High resolution retina display means larger file sizes for camera, apps, games, digital publication, videos and other media yet the iPad 3 carries similar storage capacity with iPad 2," said Susanto. "This may create more needs of iCloud storage offerings. Retina display will make more compelling cases for more applications, more media publication, and consequently higher media consumption—more ARPU for Apple."

Add it up and Apple's next-gen iPad may drive a series of revenue streams.

See also:

Topics: Apple, CXO, Hardware, iPad, Mobility, Storage

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  • It is all about content

    The iPad is all about the platform of ios and iCloud. The money is in the content, and potentially the storage moving forward. Music and apps make work well in this model. But I am not sold on the retina display adding much value in terms of selling more content and storage.
    My feeling is that people want to own thier music and apps. Movies and TV shows not as much. Yes there are some classic movies and tv shows people purchase, and lots of kids programs which people buy. As far as main stream movies and tv shows, my experience is that people buy those from the bargain bins. The price of movies and tv shows is too high from iTunes for mass consumption. I could see a subscription model working much better. Between Netflix and Hulu one can cover a lot. The display is not what is stopping people from using iTunes for video, the price of content is.
    jhuddle
    Reply Vote

    • Re: It is all about content

      Perhaps, jhuddle, but don't forget that every new iPad sold moves a previously owned iPad into the hands of someone who previously didn't have one. It's the trickle down effect. More new iPads sold = more iPad users = more apps and music sold, etc. This is the genius behind iOS and the annual product refresh.
      RedLion72
      Reply Vote

      • Music and apps yes video not so much

        100% agreed on music and apps, more devices in more hands equals more content sold. But that has nothing, or little to do with the screen reslotion. I don't see the addition of HD resolution driving sales of video content from iTunes. That is just my take. The price of the content being the sole reason. Going to HD on the iPad does not change that.
        jhuddle
        Reply Vote

    • Gimme that MLB.tv

      Yep. I just had occasion to choose between buying a Roku or an Apple TV. I could see a future of endless nickel-and-diming with iTunes, so I bought the Roku.
      Robert Hahn
      Reply Vote

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  • Increased App Prices another source of revenue.

    When Apple first introduce iPhone and the App Store, they undercut the entire software market by introducing apps at ridiculously low prices, like $.99. People used to drop $25-45 for a computer game, but with the advent of the App Store, the value of a game dropped to 99 cents.

    However, now that Apple has garnered a strong position in the market, I've noticed that Apps are creeping up in price, especially as resolution has increased. Angry Birds for the iPhone sold for 99 cents, while on the iPad, those extra pixels would cost you $2.99. I spent $4.99 for Garage band, and if I want to get the iWorks suite, I'll spend $9.99 per app, or around $30 for the set of three.

    With the new even higher resolution iPad, will we see even higher prices for Apps?
    gomigomijunk
    Reply Vote

  • Except iTunes isn't much of a revenue generator.

    Yes, it's profitable, but it's the closest thing to a loss-leader Apple has. And lets not kid ourselves, it will take a [b]lot[/b] of iTunes Match subscriptions to pay for that datacenter.
    matthew_maurice
    Reply Vote
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