Quote:
Originally Posted by Pinecone
Overhead is normally 100 - 125% of what you pay an employee.
That covers, the employer part of the FICA and Medicare (in the US) the cost of other benefits, the cost of the employees supervisor, and his supervisor. And the people in HR, and payroll. And things like space, lights, computers, power, telephone (service and equipment), etc, etc.
Then add profit.
And then there is the idea of not the cost, but what are people willing to pay for this feature.
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Good point, there is additional overhead, but even accounting for that affects the whole product, not a single feature. A lot of that cost
doesn't go away if I cut out a feature from the product. So even if I double my exaggerated man year cost to account for the overhead of development of that feature, we are still in the realm of 3-4$ for it, including 30% gross margins. Those are the sort of margins Apple gets to enjoy on their stuff. With the possible exception of Sony, I doubt any in the eReader industry are enjoying those sorts of margins on the device itself. I doubt any of the OEMs could get away with margins in the multi-hundred percent range (20$ vs cost of 4$, as an example). My whole point was that 20$ is extremely exaggerated, and plucked out of the air without at least being grounded in reality. The concept of "what the customer will pay" for a feature these days is more about finding out if it is viable to get the per-unit cost low enough that the returns either through higher volume and/or prices is beneficial.
Already the margins on the device are becoming razor thin, with the notion that it's an engine to generate book sales with their store. The fact that WiFi enables that even more makes it more likely for an OEM to accept smaller margins, not demand bigger ones. Especially in the face of competitors who are selling the razor near or at cost because they know they can sell you the blades too.