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IPOD "monopoly":Apple had an orgy with your money

http://blogs.pcworld.com/staffblog/archives/000114.html

One reason why Microsoft must be stopped. Windows in not worth more than 30$ (personal opinion). Microsoft is raking in billions more than it should.
In IPod's case Apple's monopoly was solely because of the modest IQ of Apple's customers.

A couple of Disclaimers/Pointers:

1)To all Apple apologists: Yes, We know iPod is great, cool, fantastic etc. etc.  But it does not hide the fact most of you cannot think.
2)This is strictly not a "monopoly" in the economic sense of the term. Thanks to someone in JOS who pointed out the usage.

Karthik
Tuesday, July 20, 2004

" Apple has rolled out updated versions of its 20 GB and 40 GB IPods, and announced the first-ever price cuts (the new units cost $299 and $399 respectively). That's a $100 drop versus same-sized previous versions, which tells me Apple was making a fortune on those suckers!"

Suckers. Ha Ha Ha

Karthik
Tuesday, July 20, 2004

These dorky trolls get lamer and lamer each day.

Clutch Cargo
Tuesday, July 20, 2004

I agree its trollish. But can you explain why paying $100 more than you should is cool?

Karthik
Tuesday, July 20, 2004

Aesthetics matter.  Jobs is one of the people in the technology industry that understands this.  That's why iPods demand a premium.

christopher baus (www.baus.net)
Tuesday, July 20, 2004

*or* Apple has optimized the electronics and is passing the economies of scale on to its consumers.

Plus, iPod helped fund iTunes (Jobs has openly admitted this). Perhaps the initial investment in iTunes is paid off and, again, the savings are being passed on.

Finally, something is worth what the market is willing to pay for it. This is like the "how much is my recruiter making" questions - it's irrelevant. The question is
a) How much did you pay
b) Do you feel you got your money's worth

"How much did the vendor make" is a fool's errand.

Philo

Philo
Tuesday, July 20, 2004

amen Philo.

boogs
Tuesday, July 20, 2004

fyi

http://ipodbatteryfaq.com/

trollop
Tuesday, July 20, 2004

Couldn't agree more with Philo.

I think you are doing good business if you can get market to pay premium for your product. May be iPod is sexy, cool, functional, elegant... whatever it is.... ultimately Apple made it desirable [I am sure there is lots of behind the scene work by Marketing guys..] and I think they deserve what they are charging for iPod. [doesn't matter what I think... if Market thinks that iPod is worth that extra money and that is what matters...]

JD
http://jdk.phpkid.org

JD
Tuesday, July 20, 2004

I would have thought that geeks more than anyone else would have realised that anyone on the bleeding edge is paying a premium.

Look how pc components move along the price line.

AMD FX-53 anyone?

Tapiwa
Tuesday, July 20, 2004

The point isn't whether Apple was wrong in charging a premium price; it's whether iPod users are idiots for paying it and thinking their cool.

Still got my money
Tuesday, July 20, 2004

Their cool what?

Steve Jobs
Tuesday, July 20, 2004

I cant think of a single electronic consumer device that didnt get significanly cheaper as time went by. Any early adopter type of person knows this.

Eric Debois
Tuesday, July 20, 2004

Nagle & Holden's book on pricing covers the argument of, "People shouldn't pay much more than the cost of production!"
http://www.amazon.com/exec/obidos/tg/detail/-/013026248X/ref=lpr_g_1/104-7007890-6253508?v=glance&s=books

Tayssir John Gabbour
Tuesday, July 20, 2004

What's the profit margin on a Rolls Royce?  I don't know, and I don't want to know, but it's more than 100 dollars.  Is no one allowed to charge a premium for a job well done?

A Picasso painting recently sold for just over US $100 million.  Do items not hold some additional value to certain owners, who find their aesthetic pleasing?

Apple made a computer product so good, it could earn a nice profit, without strong-arm tactics in order to "convince" people it was worth buying.  That's something to applaud in today's economy, that aesthetically pleasing products, products that do interesting things, sell well.

sir_flexalot
Tuesday, July 20, 2004

The $100 drop in price also comes with the exclusion of the dock and case that came along with the 20GB model - not sure about the 40GB model.  So, taking that into consideration, the price drop is really around $20, certainly within the realm of normalcy.

Greg Hurlman
Tuesday, July 20, 2004

By the way, this isn't Apple's first price drop.  Here's how iPod-economics work (in fact almost all of apple's multi-tiered product lines work this way as well).

1) 5G - 499
2) 5G - 399, 10G - 499
3) 5G - 299, 10G - 399, 15G - 499
4) 10G - 299, 15G - 399, 20G- 499
5) 15G - 299, 20G- 399, 40G - 499
6) 20G - 299, 40G - 499

So Apple picked price points it felt consumers would be happy with, and created a product to fit that price point.  Now have Apple's margins changed over time, sure, that's the way manufacturing of a high-tech product (or really any product) tends to work - margins increase with volume (demand) and time (experience).

As new hard drive technologies became available Apple introduced new players.  But at the same time, those drives forced down the price of the previous drives, so Apple moved everything down a price point and introduced the new product at the highest price point.

The only difference this time is that Apple didn't introduct a new player.  Toshiba is now making a 60G hard drive which would fit the iPod, but Apple has said publicly that they aren't looking at a 60G iPod any time soon.  And Steve Jobs has said that he'd like to see iPod prices drop (specifically regarding a 250 USD iPod mini).  So Apple isn't quite trying to gouge it's customers, but rather make a decent profit that allows them to continue to innovate.  That doesn't sound too unreasonable to me.

Lou
Tuesday, July 20, 2004


I bought one of the first "WinPod" iPods. One of the BEST purchases I have ever made, but then I have a bit of a music fetish. Before the iPod I owned several Sony miniDisc players.

I like having all of my music with me, all the time. When I bought the iPod, there really weren't any other options. Even now, when there is choice, there's not really THAT much to differentiate the competition. When you add in iTunes it's almost no contest. The only negative for me is that the music store hasn't been rolled out to Canada yet.

Of course, this is just my opinion. You could always simply dismiss me as a stooge of that evil capitalist kingpin, Stephen Jobs. That may be easier for you to face.

anon
Tuesday, July 20, 2004

You sir, are a stooge of that evil capitalist kingpin, Stephen Jobs.

That *was* easier, thx.

billg
Tuesday, July 20, 2004

Philo is absolutely right.  Market value is the only relevant issue.

"How much did the vendor make on my purchase" is a question most often asked by poor-attitude types who begrudge others any measure of success while simultaneously feeling as though the world owes them something.

Get over it.

www.ChristopherHawkins.com
Tuesday, July 20, 2004

One more chiming in here to alert posters that cost of production is a nearly irrelevant factor to price in ALL things.  Cost only comes into play indirectly when that cost allows others can produce a substitute at a lower price.  This is just basic freakin' economics.

Specifically in the case of the iPod, the hard drive cost almost *dictates* the iPod price, so don't expect dramatically cheaper alternatives from other vendors.  Try to buy the Toshiba drive of the white iPods, or the Hitachi drive of the iPod Minis, and you'll find out where the dollars go.  Buy the Hitachi drive in retail Hitachi packaging for digital camera use, and you'll pay twice the price of the iPod Mini wrapped around it.

bob
Tuesday, July 20, 2004

Well, to be fair there are lots of cases where people often don't accept high market prices. Such as with gasoline and certain kinds of medicine. And brands like Nike which charge high prices to poor people who want to emulate some guy; while I couldn't care less about that, pricing sometimes does intersect with societal problems.

In the computer world, people in poor countries rebel against paying a large part of their salary for software.

On topic, music is also a flashpoint, with music cds that have one decent song costing more than a DVD movie.

Tayssir John Gabbour
Tuesday, July 20, 2004

Is this realy a price drop if the new 20 gig IPods don't include
the Dock, remote and carrying case?

Or is it just me?

anon-88
Tuesday, July 20, 2004

Speaking of iTunes, I don't know why it gets so much more press than Rhapsody [http://www.listen.com].  I am totally addicted to Rhapsody, even if the interface isn't as nice as iTunes because I can listen to their entire catalog on demand for one low price ($10/month). 

Maybe they have a lot of customers who don't use the service, just like a gym or a season's pass to Heavenly Ski Resort, but I am not one of them, and hence I am getting an insanely good bargin. 

Unfortunately now that Real [http://www.real.com] bought them the service has gotten a bit flackier.  The new software hangs on occasion.  I just hope Real doesn't totally screw this up like all their other products. 

christopher (baus.net)
Tuesday, July 20, 2004

anon-88,
As Lou said, it's the standard shift in drive capacity they've done every step of the way with the iPods.  The $299 version has never included the accessories you mention.  So in that regard, it's not exactly a price drop, but a capacity bump at the lower two price points and an elimination of the top price point.

Six of one, a half-dozen the other.

Two things about that missing high price point:
1. Toshiba doesn't ship a bigger drive than the 40GB yet in that form factor.
2. A 60GB+ iPod probably has a much smaller potential market for a pure music player.  How many people own more than 1400 CDs?

bob
Tuesday, July 20, 2004

It's not the iPod alone that makes it a great device... it's the huge number of accessories available for it.

chris
Tuesday, July 20, 2004

Ar you saying that Nike charges more for their shoes than they cost to make? Next thing you'll tell me is that the products made at WalMart cost less to manufacture than they are charging. If you can substantiate these bold claims, then it would prove that customers are being ripped off, like the original poster said. But I think that only Apple is gouging their customers. All other companies merely charge the price of manufacturing. Because of this, the Justice Department should break Apple up and have the government administer their assets. This would provide value to the people.

Tony Maxwell
Tuesday, July 20, 2004

"most people don't own 1400 CDs"

Who said anything about purchasing CDs? Their filled with MP3s downloaded off Kazaa and their ilk.

MilesArcher
Tuesday, July 20, 2004

1400 CDs?  Nonsense; in WAV format 60GB is only 94 hours of music.  And why wouldn't you record in WAV if you have a 60GB player?

Kyralessa
Tuesday, July 20, 2004

Early adopters always pay more.  I paid NZ$1300 for my NAD T550 DVD player in 2001.  It's a fantastic DVD player, but I could replace it now with a high-end DVD player from the same company for maybe NZ$500 (and with a lousy one for NZ$100). 

If I wanted a high-quality DVD player in 2001, it was going to cost > NZ$1000.  Perhaps you'd like to cal me an idiot.  Fine, whatever makes you feel better about yourself.  Personally, though, I'd rather have enjoyed watching the movies I watched then, than wait a few years for the price to plummet.

Someone will always advocate waiting for the price to drop.  You can wait forever.  If you want a particular piece of functionality, sooner or later you have to take the plunge.

Apple had an orgy with Apple's money.  iPod buyers have been enjoying having their iPods.  Everyone seems to be happy (except those people with the battery problems...)

Oh, and I could easily fill a 20 GB iPod purely with 192kbps MP3 rips from the 300+ CDs I own.  If I went to WAVs even a 60GB iPod would be inadequate.  Trolly jerks who insist that everyone with an iPod is a pirate are welcone to collect thier 30 pieces of silver for the RIAA, but could you stop polluting this discussion?

Rodger Donaldson
Wednesday, July 21, 2004

Tony, so people don't get a mistaken idea of what I said, I couldn't care less about Nike charging high prices. As I mentioned.

The other examples I mentioned though are problems.

Tayssir John Gabbour
Wednesday, July 21, 2004

"The point isn't whether Apple was wrong in charging a premium price; it's whether iPod users are idiots for paying it and thinking their cool."

Sheesh. If you want idiots, look at SUV buyers.

SUVs have the fattest profit margins in the auto industry. The profit margin on an Escalade could probably buy a several dozen top-line iPods.

Paying $15,000 extra for a car, now THAT is stupid.

Jon H
Wednesday, July 21, 2004

Jon H - refer to Philo's comment.

As everyone has said, Philo is right on.  The vendors charge what the people will pay.

But that doesn't mean we can't laugh at them.  I'm laughing hysterically at all those who bought overpriced iPods.  They're laughing back at my SUV.

Difference is I don't really care.

Ironchef Sakai
Thursday, July 22, 2004

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