Apple seeks royalties, consumer protection with "Made for iPod" campaign
Industry insiders say the world-wide MP3 accessory market is destine to become a half billion dollar business by the close of the 2005 calendar year. Apple, whose iPod digital music player dominates the MP3 player market, is looking to reap some of the benefits of this capitalization through an iPod marketing campaign it will roll-out sometime in the next two months.
The campaign, which Apple announced last January, introduced a "Made for iPod" certification (or badge) that iPod accessory manufactures can display to differentiate their Apple-authorized accessories from those that have not been approved by the iPod maker. In recent months, the iPod accessory market has been met with a proliferation of low-quality iPod accessories that, in some cases, have proven to be hazardous to Apple's iPod hardware, even when used as instructed.
But keeping consumers safe from these potentially dangerous add-ons may not be the only driving force behind Apple's motives. According to sources, the licensing agreements for which the program is base requires that accessory makers hand over a percentage of the revenues gained from products sporting the "Made for iPod" badge.
According to sources, Apple is rumored to be seeking an approximate 10% royalty kick-back on all products that will display the badge. For example, an authorized iPod accessory which retails for $50 would add $5 to Apple's bottom line, the proceeds of which will likely be used to offset the costs of its massive iPod advertising campaign.
Most of the larger iPod accessory makers AppleInsider spoke to supported the campaign, saying that any licensing fees that may be associated with the program would be worth the cost of the ensuing marketing benefit and industry stabilization. Still, a select few of the smaller manufacturers -- who don't sell at high volumes -- have vocally opposed the campaign, arguing that any imposed licensing fees would cut into their profit margins. At least one manufacture of iPod add-ons said it would cease development of iPod related products as a result of fees associated with the campaign, while several others continue to weigh their options.
Belkin, one of the leading suppliers of iPod accessories, declined to say whether or not Apple was seeking royalties with the campaign, but was confident in saying the campaign would not trigger a price increase on its products. The company said it expects to begin manufacturing products with the "Made for iPod" badge in April for delivery to retail stores by May. Its car charger product will likely be one of the first accessories to sport the badge on its packaging.
As recently as two weeks ago, Belkin surpassed the 2.5 million mark in accessories shipped for Apple's hard disk-based iPods, saying it expects to reach the 4 million mark by the end of the year. The company is also working on a slew of accessories for Apple's new flash-based iPod shuffle player, which will debut at lower price points and include cases, chargers, and other gadgets. The products will cost less than those associated with Apple's hard disk-based players because they will be 'electronically simpler,' said Brian Van-Harlingen, senior technology manager at Belkin. Griffin Technology, a company that markets a similar array of iPod add-ons, did not respond to repeated inquiries for comment.
According to insiders, iPod's share of the $500M MP3 accessory market is equal to, and likely greater than, Apple's share of the overall MP3 player market. Even if the company was only to receive a 5% share of all iPod related accessories sold, proceeds from the "Made for iPod" campaign would still add several million dollars to Apple's bottom line each year.
The campaign, which Apple announced last January, introduced a "Made for iPod" certification (or badge) that iPod accessory manufactures can display to differentiate their Apple-authorized accessories from those that have not been approved by the iPod maker. In recent months, the iPod accessory market has been met with a proliferation of low-quality iPod accessories that, in some cases, have proven to be hazardous to Apple's iPod hardware, even when used as instructed.
But keeping consumers safe from these potentially dangerous add-ons may not be the only driving force behind Apple's motives. According to sources, the licensing agreements for which the program is base requires that accessory makers hand over a percentage of the revenues gained from products sporting the "Made for iPod" badge.
According to sources, Apple is rumored to be seeking an approximate 10% royalty kick-back on all products that will display the badge. For example, an authorized iPod accessory which retails for $50 would add $5 to Apple's bottom line, the proceeds of which will likely be used to offset the costs of its massive iPod advertising campaign.
Most of the larger iPod accessory makers AppleInsider spoke to supported the campaign, saying that any licensing fees that may be associated with the program would be worth the cost of the ensuing marketing benefit and industry stabilization. Still, a select few of the smaller manufacturers -- who don't sell at high volumes -- have vocally opposed the campaign, arguing that any imposed licensing fees would cut into their profit margins. At least one manufacture of iPod add-ons said it would cease development of iPod related products as a result of fees associated with the campaign, while several others continue to weigh their options.
Belkin, one of the leading suppliers of iPod accessories, declined to say whether or not Apple was seeking royalties with the campaign, but was confident in saying the campaign would not trigger a price increase on its products. The company said it expects to begin manufacturing products with the "Made for iPod" badge in April for delivery to retail stores by May. Its car charger product will likely be one of the first accessories to sport the badge on its packaging.
As recently as two weeks ago, Belkin surpassed the 2.5 million mark in accessories shipped for Apple's hard disk-based iPods, saying it expects to reach the 4 million mark by the end of the year. The company is also working on a slew of accessories for Apple's new flash-based iPod shuffle player, which will debut at lower price points and include cases, chargers, and other gadgets. The products will cost less than those associated with Apple's hard disk-based players because they will be 'electronically simpler,' said Brian Van-Harlingen, senior technology manager at Belkin. Griffin Technology, a company that markets a similar array of iPod add-ons, did not respond to repeated inquiries for comment.
According to insiders, iPod's share of the $500M MP3 accessory market is equal to, and likely greater than, Apple's share of the overall MP3 player market. Even if the company was only to receive a 5% share of all iPod related accessories sold, proceeds from the "Made for iPod" campaign would still add several million dollars to Apple's bottom line each year.
Comments
As a small business owner, I can understand why those with slim margins already would be in jeopardy, especially on a low-priced accessory.
However, smaller vendors can organize as an independent group, authorized by someone like Ipodlounge, Ipod Garage or Ipoding.com, like small insurance producers do. Or they could just create their own orgnization.
"Independent Portable Players Accessories Association".
There's no need to jump out of a window over this.
Note to Apple: I'll be happy to accept a new iPod and test every accessory available for a small salary.
A more rational model would be a fee that would be related to the complexity of the accessory. An iPod skin would hardly cost anything for Apple to examine at verify that it does what is advertised so that would be a very low fee. An external speaker system would require a lot more advanced testing so it would have a commensurately higher fee.
After that, it should just have a nominal royalty per unit. Remember, FireWire costs 25 cents a port and still some PC makers found that to be a sufficient disincentive to including it (along with the fact they'd be paying it to Apple;-)).
But, who asked me?
Originally posted by deepkid
Very interesting. Made me think of the Intel Inside campaign, ...
yea, but the first thing that sprung to mind for me was the windows signed driver thing...Gosh, I hate that, it is a royal PITA when you are installing a ton of drivers.
Originally posted by fahlman
Note to Apple: I'll be happy to accept a new iPod and test every accessory available for a small salary.
stand in line: a very very long line!
Originally posted by macFanDave
10% of the retail price is WAY too much.
Thats nothing. I do work for people in the wholesale business, and it's these "cheap" items that have huge margins - huge. One company I know, who sells their product for $10 wholesale, buys it from China for $2, and it retails at $20. I don't think Apple would be taking 10% of retail, because, retailers can sell it at whatever they like - it would probably be 10% wholesale.
Besides, all the money Apple is putting into advertising for this thing, these companies are more than getting their moneys worth.
1% is more likely the royalty, plus a certification program that is based upon a revision system that companies will purchase in order to have their products certified with Apple.
At NeXT we used to charge $5,000 for NEXTSTEP Certified Inside as well as Openstep Certified. It was a one time fee after testing several systems and coordinating with vendors to target specific device driver options and motherboard specs, so on and so forth.
Since Apple doesn't offer OS X to third parties they would work a different relationship with say nVidia, ATI, Toshiba drives, etc.,.
This creates strict Quality Assurance Standards and when I was at Apple it was sorely lacking.
Originally posted by JimDreamworx
Uh, oh! Is there going to be a similar charge for "Made For OS X"?
Here is to hoping the I/O Team gets some more help and Apple makes the leap of writing not just for a few ATI and nVidia cards but there entire lines.
All the drivers for Openstep were in-house with the exception of certain external modem devices or specialty devices in various fields like medicine.
I would hope "Made for OS X" actually happens. Apple needs to be able to expand its markets in Engineering fields and being able to offer cards for CAD/CAM and help port say Pro/Engineer to OS X would be huge, but I'm sure something like that is down the line quite a bit.
* Some iPod products HAVE had real problems--even fire hazards. Others simply damage your iPod needlessly. Not many, but several of them have been noted at iPodLounge.com. So this has some use to the consumer.
* Nobody HAS to buy into the program. They can market lots of features other than this certification, if they want to attract interest.
* But if companies find VALUE in Apple's program--such as if Apple spend promotional dollars for it--then they can choose to join in, and both parties win when sales go up.
* Apple made this market, so if they want to find a way to make some more from it, that's business.
* Lower margins for accessory companies are a good trade-off, if sales actually increase.
* We don't know the % yet--and it may even vary.
I'll wait and see--but I wouldn't hesitate to buy a "non-certified" product. Reviews mean more to me, and to many others.
Originally posted by GamoGuy
but I find it simply greedy, on Apple's part.
Microsoft charges companies insane rates for server licenses and forces them into shitty renewal contracts, and you think Apple is being greedy?!?
It's about time they got with the fucking program!
I thought it was clever of them to put a proprietary connector onto the iPod, but this ... THIS is fucking brilliant!
Sounds like a good option to offer consumers... although the rumored 10% seems a bit much.
[EDIT]spelling
All this relates to is the connector that plugs into the iPod. All manufacturers that want to be approved must buy the connector from a certain manufacturer at inflated prices. Even if you design & test a connector that is better, Apple don't want to know & will not test for you ( even if you offer to pay )
It's a bit of a con & will keep prices for some accessories higher as companies will need to maintain their margins ( of course they will say that it won't make a difference )
Apple have some of their own accessories ( $29 socks anyone?) & this is their way of creaming off a little bit more of the market without having to invest in designing more accessories.
The accessories market & the strength of the iPod sales go hand in hand & without accessories the iPod would not be where it is ( one of the things that other MP3 makers seem to miss out is that because of the proliferation of accessories, you can do more things with an iPod )
The big accessories makers stand to benefit from this most as they have signed up & it will make their products seem more prestigious. iPodlounge have also bought into this programme & made it clear that they will highlight the Apple approved products ( the fact that other products may have been tested independently is irrelevent to them ) Strangely enough, as soon as they announced this policy, they had an exclusive on an iPod product from Apple & the policy benefits their largest advertisers. No other site has 'pimped' it's independence like this & the whole program is worthy of some more investigation to see if it's really about protecting the iPod user or just taking more $$s from gullible suckers.
I was reading them the other day and I was pleased to learn that they now have policies where they will refuse to review iPod accessories that just look alike (knock-offs and "harmful accessories") some of the very popular ones but that are made with cheaper materials.
http://www.ipodlounge.com/articles_m...d=6249_0_8_0_C