> (By the way, the article in question put AirPods revenue at $12 billion in 2019. The actual number will end up being more like half that - closer to $7.5 billion.)
Which means it still exceeds each of them separately.
Just to put that in context for everyone here. If his analysis is correct, AirPods are still bigger than Spotify, which is fascinating to think about.
Spotify also have a huge number of free accounts that rely on ads which probably means less profits for Spotify. Everyone still needs to actually spend money to get the device but you don't really need to spend money to listen to music. Also, while Airpods is a "one off" purchase, a lot of people don't like having subscriptions (like me for example).
I have spent hundreds of dollars the last years on headphones (not Airpods tho) but I hesitate for a long time before starting a subscription service. Not because I cannot afford to, I just do not like subscription services.
Spotify, Youtube Music etc provide a free service. With adblocker, music.youtube.com is totally free without any ads so I have a really hard time to justify the cost of another paid service like Spotify.
Edit: if you downvote this, please comment on why? What is incorrect about my statements?
When I was in my teens, I spent waaay more money on CD's than I ever did on my Discman and headphones.
The fact that it's now the norm to spend more money on your audio hardware than on what you listen to is just an interesting reversal.
Back in the day you had to buy each album individually for $10-$15 (or more) each, same with movies. Nowadays I can go on Netflix and watch what would've been hundreds or thousands of dollars worth of DVDs for 13 bucks a month.
Since also many (like me) pirated their way in their teens I never purchased many cds. I got an mp3 early from japan with 512mb of disk space. This was huge, all my classmates had like 128mb or less.
It was clear for me anyway that I would never pay a lot for the music because there was simply no reason to. I haven't really experienced the time where it was a norm to spend a lot of money on cds.
I am 29 and this kind of experience you have seems to become more and more uncommon as time passes ;)
Airpods might have captured more of the market this year for headphones than Spotify captures for its market. Finally the people who use Spotify might use multiple services etc.
So even if you spend more money on your audio hardware than what you listen to I don't think we know if people actually spend more on their hardware than on what they listen to.
Of course, that was nearly 3 years ago so it's almost certain margins have improved on what is essentially the same product, but I suspect Apple's margins on these are not as high as for the iPhone or iPad.
Spotify's big problem is they sell a product which is 99% commodity. Anyone with enough money can create a music streaming service and all resellers pay very similar rates for the same content. Apple Music, Amazon's music, and Google's music all sell the same essential thing. Spotify's only chance for turning their product into a premium (thus profit generating) service is building a significantly better playlist and music recommendation service.
Oh hell no. That was started by DaringFireball John Gruber. When we talk about margins it is important to note most would refer or implies this as Gross Profit Margin. Which is without the R&D and Marketing Cost, since these are fixed cost, i.e They are the same irrespective of how many unit were sold.
All the Audio Gear ( Or Accessories ) sold on the market has some of the highest Gross Profits Margin. Much higher than iPhone or Mac because they were never meant to be sold in huge quantities. Beats, and Apple AirPod were the only two Audio gear that manage to sell in volume.
I would be surprised if the BOM cost of AirPods is higher than $20. ( You could get a replica of AirPod without W1 Chip from Shenzhen for less than $10, $8 in thousands of unit, so I am already add lots of headroom in my BOM estimate. ) The major cost is developing W1 Chip and Speaker R&D. Which needs to amortised over unit volume. And AirPods did that spectacularly well.
Second. No Manufacture like to undercut in price ( Even the Chinese brands are getting away from it ). It is much better to follow Apple's price and offer higher margin for retailers, better incentive to 3rd party resellers and sales to push volume. And we all know it somehow didn't work quite as planned. Xiaomi launched their 3rd revision Airdot for $40. Using Qualcomm Chip.
Third, All the competitor your mentioned combined would not even come close to Apple's Airpod Shipment. Most of the major competitors, just sell a fairly low quantities.
In 2 years the battery life fall to 1 hour? This is just crazy unsustainable!
I'm just surprised I've never run them through the wash.
Please take into consideration that making something replaceable means (in general) adding more stuff to the product. I doubt at this scale that is it possible to maintain the small size and to also have replaceable battery with the current hardware capabilities.
Is "this" referring to "Apple Airpods" or "free market capitalism"?