What about the cost of that investment in rolling out 4G networking? That must be a huge expense, right? It is, and the $2 billion Verizon has spent on 4G LTE development to date sounds impressive--until you consider the $115 billion in revenues the company earned in 2012 ($63 billion in the wireless group). Most of the rest of the money ends up going to the marketing department and, well, Apple (see above).
The carriers would tell you that they have earned every penny of that fat profit margin because they, and they alone, built the giant national networks that allow them to provide the service. What they don't often talk about are all the government tax breaks and incentives they've received to build the networks in the first place. In fact, it's no secret that AT&T and Verizon benefited handsomely from the 2008 stimulus package to help them build new networks in the wake of the financial collapse.
Microsoft Office Professional 2013
Average cost: $400 (Windows 8 Professional Upgrade)
Average cost to produce: $136
Say what you want about Microsoft's recent fortunes (or lack thereof): The company's flagship software, Microsoft Office, is still a cash cow. (And don't look now, but the company's stock is near a five-year high.) Before Microsoft's reorganization, the division that made Office was by far the most successful of the company's five units, pulling in $24 billion of the company's $74 billion in revenue last year.
The cost of creating the software that made that money? Just $8.2 billion, thus creating a 66 percent profit margin, according to Microsoft financial statements. Considering that the current versions of Office borrow so much from earlier iterations (a dynamic that's true for most software), it's understandable that Microsoft would earn a lot of money on each unit sold. Consumers, however, may be less understanding about footing so much of the bill.
Meanwhile, Microsoft doesn't even have the "it's expensive to press discs, stuff boxes, and ship software" argument any more. Most of its software is now delivered online, packaging-free.
Microsoft won't comment on the pricing of packaged software. But IDC analyst Melissa Webster did share this in an email: "Microsoft is the only company making these products; about 97 percent of organizations widely use the Office desktop suite (huge adoption) according to our survey research; and "fidelity" (the assurance that you can exchange files with someone else and see no glitches, no formatting loss, and so on) continues to be a big deal. It has proven difficult for the clones to put a big dent in Microsoft's renewal rate."
Average cost: $1.20 a gigabyte per year (Carbonite Pro Business Premier)
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