Yes, $350 Screen Replacements are a Money Loser

So says Apple about its iPhone repairs, where it claims that it loses money on each repair that it makes.

So the unaffiliated repair shop down the street can fix it for $100.00, but apple can't at 3½ times the price.

I want their accountant.

Actually, I don't want their accountant, I want whatever their accountant is smoking:

It can be tough in the repair industry, and no one knows that better than struggling corporation Apple.

Cupertino has long been criticized for trying to control what its customers can do with their products, and especially so for charging what critics have said in an unjustifiable mark-up on repairing everything from iPhones to MacBooks.

But it’s just not true, the iGiant revealed this week to US Congress: in fact, despite charging between double and triple what other repair shops charge for fixing problems, Apple (2018 profit: $60bn) actually loses money on its repair business.

Asked by the House Judiciary subcommittee to “identify the total revenue that Apple derived from repair services,” the Cupertino idiot-tax operation revealed [PDF] that: “For each year since 2009, the costs of providing repair services has exceeded the revenue generated by repairs.”

That’s right, it may charge you $329 for a screen replacement that costs $100 everywhere else. Or $80 for a battery than costs $30 across the street. Or even $475 to replace a single key at an Apple store. But poor old Apple is making a loss every time.

Which is, of course, nonsense, though it’s interesting to explore how Apple can make the claim with a straight face. And the answer is creative accounting.

………

In short, Apple has, for years, carefully restricted the number of repair shops that can service its products in order to maintain artificially high prices – prices that it often sets for its authorized outlets. And it has gone to some lengths to discourage any repairs to its products outside of those authorized outlets or its own stores.

But people have grown fed up with the situation – hence the congressional review. That has resulted in a slow and carefully controlled expansion of independent repair shops approved by Apple. But even now someone at such an outlet has to go through an official Apple repair course before they’re allowed to touch its products. And Apple has put plenty of controls on both the course and any subsequent evaluation and approval of people that want to repair its products independently.

Apple defends this blatant market control in a dozen different ways in its responses, painting a picture of super-complex machinery that requires specialist and highly trained technicians. It’s nonsense but for some reason it’s effective, especially when people spend small fortunes on beloved electronics.

………

Even accounting for Apple’s BS however, how does it justify the claim that it is actually losing money on its repair business, despite charging multiples of what every other repair business does?

Easy: it counts its own ridiculous repair costs as what customers would have paid had they not taken out its over-price warranty. So if a customer pay $199 for AppleCare+ for their iPhone XS Max and brings it in to replace the screen, paying just $29 instead of the $329 out-of-warranty costs, Apple reckons it has just lost $101 – because that’s what the customer would have paid if they didn’t have a warranty.

Of course that completely ignores the fact that it costs Apple nowhere near $329 to replace the screen of a iPhone XS Max. We have no idea how much it does cost and Apple isn’t going to tell us either but that is how you get away with ripping people off while claiming poverty at the same time.

The cult of Apple is a manifestation of PT Barnum's observation about the natural rate of increase of suckers,