Why iCloud Doesn’t Stream: Flash Memory Is Insanely Profitable For Apple

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Credit: aresauburn/flickr
Credit: aresauburn/flickr

Sync versus streaming. Essentially, that is the difference between how Apple, Amazon and Google view the cloud. However, a closer looks finds iCloud could pay off big for the Cupertino, Calif. company looking to cash-in on the falling price of flash memory.

Apple’s decision to sync rather than stream your music to your iPad or iPhone with iOS 5’s iCloud should pay off big as consumers opt for the heftiest flash drives to store their tunes. “That means big profits for Apple, because it sharply marks up the cost of the NAND flash memory-storage chips used on its mobile devices,” reports the Wall Street Journal Thursday.

Although a 32GB iPhone or iPad costs consumers $100 more than a 16GB version, Apple pays about $15, according to the article. That’s an 85 percent margin for Apple’s devices.

Additionally, flash memory is only getting cheaper. Research firm Gartner expects NAN flash memory to fall 30 percent this year, another 36 percent in 2012 and 39 percent in 2013. It’s not as pretty a picture for Amazon and Google, who opted for streaming.

While flash memory is getting cheaper and more abundant, the cost of streaming music could hit a sour note for consumers. Mobile carrier AT&T charges $25 per month for 2GB of data and $10 per additional GB. Verizon reportedly is ready to drop its unlimited data plan for a usage-based system akin to AT&T. And AT&T’s LTE plans look to be similarly expensive even when Apple releases the iPhone 4G.

Although home Wi-Fi might avoid some current expenses, costs there will probably rise as landline-based broadband providers “will likely eventually” unveil usage-based cost plans similar to their cellular cousins, according to the WSJ.

In short? It’s a bleak time to be a streaming only cloud company. Apple’s playing it smart and sticking with what they are good at with the iCloud: being profitable in hardware first.