How many Watch units have been sold in the first 15 months or so? Only Apple knows, but the company says Watch outsold iPhone in its first year, so we have a rough guesstimate. Over a similar period of time from launch Apple probably sold about 15-million Watches. How big is that business for Apple?
Accessory To Crime
Watch criticisms have been almost criminal in their intent to dismiss the device as a failure, especially when compared to iPhone sales. What sells more than iPhone? Such comparisons are fruitless. Additionally, Watch, in its current incarnation, is a fashionable, utilitarian accessory for the iPhone. To get Watch to work you must have an iPhone. That makes Watch an accessory, so it could not and should not be compared to iPhone or iPad or Mac as a standalone product category.
Estimates for Watch sales in calendar 2015, up to the first 15 months or so after launch are all over the map. Industry watchers have estimates that range from 7-million to 12 million for calendar 2015, to as much as 15-million since launch.
Let’s go with the 15-million Watch units sold since the device launched in spring 2015. Again, only Apple knows, and analysts estimates range higher and lower. This is a good number to start and Apple’s upgrade to watchOS 3.0 later this year– with massive performance and usability improvements– are likely to propel sales in the holiday shopping period at the end of 2016, even without new Watch hardware.
Sales unit guesstimates are one number of importance, but there are other variables, including the average selling price, and accessories which will include Watch bands, Watch chargers, and more, all of which combine to make up Apple’s Watch business.
First, let me start with the average selling price (ASP). The entry-level Watch Sport model starts at $299 for the 38mm and $349 for the 42mm, and it’s safe to say those are the biggest sellers, but the price tag for stainless steel models with more expensive watch bands will skew the ASP dramatically higher.
Second, many customers opt to buy different Watch bands from Apple after the initial purchase. That adds to the overall Watch business.
Let’s assume that the ASP for Watch– all models– is a somewhat conservative $500. With 15-million Watch units sold, that makes Watch a nearly $8-billion business. While that number does not equate favorably to iPhone, Mac, or iPad, it is substantial, and it’s growing.
Add Watch accessories– extra Watch bands, Watch charger, etc.– to the ASP at a conservative $100 per Watch– purchased through Apple, of course– and the first 15 months of Watch growth means revenue of nearly $10-billion. Again, that number pales compared to iPhone, but what product has sales that are comparable to Apple’s flagship product?
Whether Watch is a successful product or not depends upon the measuring stick. By most measures, a growing $10-billion business bodes well for the future. Compared to iPhone’s annual revenue and profits, Watch is a failure. But such a conclusion is based on a false comparison and poor analysis.
Is there another smartphone company beyond Apple and Samsung that have established a $10-billion business in just over a year?