Inside the iPod nano

[Detlev]

I always find it amusing when people take this moralist, indignant tone when talking about Apple products It's a bloody mp3 player--a lifestyle, luxury item. If you can't afford it, don't buy it. No one is forcing you. We're not talking about gasoline here.

Point #1
From Apple's point of view, they should charge as high a price as the market can tolerate. That's called business. Why in the world should Apple lower their margins to some arbitrary level??? To gain more marketshare? To boost their stock? Why?

Point #2
In any event, I think it's a fair price. The 1GB shuffle goes for $150. For $50 more, you get a color screen, the click wheel, the ability to display photos, AND a 1GB more. I'd say it's a steal when compared to any other flash player on the market.

Point #3
Apple does not make 50% profit on the Nanos. The 50% figure only includes manufacturing costs. The only meaningful way to digest these numbers is to compared them to the manufacturing costs and margins of other electronics and computer products. The final price doesn't really say much about whether Apple's making a killing or not.

Decent points made. It seems many folks around here have been brainwashed by WalMart and McDonald's. My first reaction reading this was, they are cutting it too close.

I would also take the fool article with a grain of salt. There is a lot of guess work going on there. That being said if the gross margin were around 27%, a fair guess, it would fit the present market landscape.

 

[generik]

Is 200-250 somewhat expensive for a mp3 player? Sure. Is 200-250 expensive for a FLASH based mp3 player? Not a chance. Actually, it's incredibly cheap!

Don't mean to correct you, but I believe you got your cheap and expensive mixed up.

It is bloody expensive.

 

[NicP]

Don't mean to correct you, but I believe you got your cheap and expensive mixed up.

It is bloody expensive.

i dont think so, why dont you check how much decent sized flash memory goes for on ebay or something 🙂

 

[shadowram]

iSuppli is so off the mark, it's really unprofessional. The 2 gig iPod nano does not use Samsung memory as stated by iSuppli

“iSuppli' s teardown revealed that the 2Gbyte nano employs two separate NAND flash parts, each with a 1Gbit by 8 configuration. Due to a substantial discount from Samsung, the two parts together are priced at only $54, iSuppli estimates.”

The 2 gig iPod Nano uses 2 ” Toshiba 1GB, model number TH58NVG3D4BTG00” memory. According to Ars Technica that demolished the 2 gig ipod nano.

Link : http://arstechnica.com/reviews/hardware/nano.ars/4

Only the 4 gig nano uses Samsung memory. I do not know the cost of the Samsung memory, but that is beside the point. If iSuppli wants to compare how much the nano costs to make..it’s needs to use the correct supplier to determine the actual cost. I did not hear about a price break from Toshiba.

Unless iSuppli was misquoted, they need to change the story

Shadowram

 

[Xapplimatic]

They've worked hard for this, and it's well earned.

I definitely don't begrudge Apple the profits they're eeking outa the 'Pods. After all, a lot of that money is reinvested in R&D for more great iPod revisions, Mac OS development, the move to Intel, and other great projects being cooked up by the real "dream team".. 😉

No, my Reality Distortion Field Goggles aren't even on yet!...

Hmm.. I wonder if anyone has ever done a cost per cubic inch (inverted) ratio to show how much smaller size contributes to higher price and how all the players line up in that scheme of measure?? I bet the iPod Nano would actually look cheap and the regular iPod expensive if compared in the inverse size to cost ratio chart... As it's known that the smaller things get, for similar storage or performance benefit, the more expensive they should be relatively speaking (like the difference in cost between a desktop hard drive and a laptop hard drive for example) because they are that much harder to get good yields on the smallest components. Certainly true for storage mediums, so if the iPod is also considered a storage medium, how does it stack against other players, other iPods, and even maybe flash drives and hard drives in that manner? I don't wanna burn 3 hours of midnight oil to figure it out, but anyone else, please step up.. 🙂

 

[alamar]

It is a large margin

Somethign to consider... say there is a 50% margin now, but that has to cover the marketing, distrobution (as mentioned) AND the development of the nano.

Once the development costs are 'paid off' and the nano become popular/known so they can basically turn off nano specific ads, the price could drop and they'd keep the same actual profit levels.

This is what I expect to happen after the holiday season. As a consumer, I think it is neat to see stuff like this though.

The article states that it's a large margin because it is, in fact, abnormanlly large. Still gonna get me on though. That thing is damn sexy, and pound for pound i find it to be priced properly when compared to its competitiors.

 

[alamar]

Jebus

(edited because I misread the article the first time and my numbers were off)

I don't think the nano is overpriced. Cost for parts and assembly: 2GB = $98 and 4GB = $152. So far, that leaves $97-$101 profit. But you still have to account for costs associated with:

1. hardware design and testing
2. developing and updating software and firmware
3. advertising
4. distribution to retail stores (like Best Buy)
5. lower wholesale prices for retail stores
6. cheaper educational pricing ($20 less)
7. overhead of selling through Apple stores
8. free shipping for website sales
9. free engraving for website sales
10. support and warranty
11. packaging
12. headphones, USB cable, and dock adapter (or were these counted in the initial cost estimate?)

IMHO, $229 (educational) for a 4GB flash player is an exceptional deal, never mind also getting one that's 0.27" thin, weighs only 1.5 ounces, and features a color screen, excellent sound quality, click wheel interface, iTunes integration, photos, games, PIM, etc.

Yeah, you can get hdd-based players cheaper, but they're bigger and heavier and suffer from hdd-induced sluggishness, skipping, vibration, noise, and fragility.

OK this thread is starting to get to me. The reason the article says it is a high margin, and that apple is prone to higher than normal margins, is that these things are ture. Every company that outputs a tangible product deals with everything you mentioned in you bulleted list (sparing the last one which is ipod specific.

Its a high margin, that is good for apple, and not so good for consumers. But when you go to best buy and look at the players, the nano still looks like a steal so it is not super for consumers really.

I just wish the thing came with a power adapter. I don't want to buy a usb 2 card to charge it. I'm not one of hose people who would buy an ipod and then be in a big rush to slam 4 gigs of data onto the thing while the house was burning down around me, and don't need usb 2. 😀

 

[alamar]

???

Think about software for a second.

Quark Xpress is what, like $800, and you get a small box with a CD in it...maybe $1 cost ? ok, ok say $5...that is one hell of a mark up..

But, look at the cost to get you what is on that CD...
Same for the Nano, maybe more

your silly. You might as well compare basketball and blood donations.

 

[oskar]

Think about software for a second.

Quark Xpress is what, like $800, and you get a small box with a CD in it...maybe $1 cost ? ok, ok say $5...that is one hell of a mark up..

But, look at the cost to get you what is on that CD...
Same for the Nano, maybe more

Very well put. Also, I think the prices are very reasonable for the nano. I already own an iPod and am seriously considering getting one. You can be sure the prices will drop, but don't wait too long. I don't see price drops at least in six months.
How long did the iPod Photo price drop take?

 

[SPUY767]

Now, ask yourself, "with all the dung that other market players are sending to market, what are they making on their players?"

 

[sushi]

Now Apple has enough leverage to make great profit and sell a flash based player that can't be beat by others on any level (including price)- but people still complain about prices.

I think that you hit the nail on the head with this comment.

A week ago I compared the Nano to some other MP3 players.

At the retail stores here in Japan, you can get about 1/4 to 1/8 the memory for the same price.

I mean for $200 bucks, I would rather have a 2GB Nano than a 256MB or 512MB flash based player from another manufacturer.

So to me, the iPod Nano is priced fine regardless of what it costs Apple to produce. It is definitely competitive with the other flash based players available here in Japan.

Sushi

 

[shamino]

Keep in mind that it's a zero-sum game. The more Apple negotiated to purchase, not only did they lower the puchase price, but they *raised* the price for everyone else at the same time.

Says who? Do you seriously believe that (for example) the price I'd have to pay Intel for a P4 chip would be lower if Dell wasn't buying them by the millions?

Do you think chip makers are unable to increase production to cover increased sales? Don't you think they'll build new facilites if their existing plants are being pushed beyond capacity?

 

[shamino]

I just wish the thing came with a power adapter. I don't want to buy a usb 2 card to charge it.

It should charge with your USB 1.1 ports just fine. USB 2 doesn't specify higher voltage than 1.1, you know. Just make sure you attach it directly to the computer or to a powered hub. (The hub built-in to your keyboard is not powered.)

You can also get an iPod FireWire cable. The nano won't be able to transfer data over this, but I've read that it will charge the battery.

I'm not one of hose people who would buy an ipod and then be in a big rush to slam 4 gigs of data onto the thing while the house was burning down around me, and don't need usb 2. 😀

You don't own all that much music, do you?

BTW, do you know what USB 2.0 cards cost? I paid $25 for mine at a local Radio Shack. That's less than the standalone charger that Apple sells ($30) and less than a spare iPod cable (also $30).

 

[dejo]

Do you think chip makers are unable to increase production to cover increased sales? Don't you think they'll build new facilites if their existing plants are being pushed beyond capacity?

Yeah, but the trick comes in ensuring that the revenue from increased chip sales covers (at least) the cost of building new plants. It's not like they can just start construction as soon as demand exceeds capacity by, say, 1 chip. There is an interesting middle-ground where they cannot justify a new plant but also cannot meet demand. I'd hate to be the chip maker in that situation.

 

[riversky]

Scratched Screen!!!

Has anyone else who bought one found a ton of scratches on the screen after really minimal use and no abuse? Mine has four scratches and all I did was put it in pockets, and laptop case alone....The screen protection material SUCKS.... 😡

 

[fabsgwu]

Time to lower the cost of the nano in the next revision, Apple. I think $300 CDN for a MP3 player is a tad excessive. Bring it down to $150, and expect to sell 100 million units a year.

Um, where are they going to find 100 million Canadians 😉

 

[~Shard~]

Um, where are they going to find 100 million Canadians 😉

Give us time, we're a third of the way there! 😱 😱 😉

 

[sjk]

Has anyone else who bought one found a ton of scratches on the screen after really minimal use and no abuse? Mine has four scratches and all I did was put it in pockets, and laptop case alone....The screen protection material SUCKS.... 😡

invisibleSHIELD might help it from getting worse. Looks like it covers the entire device, even the click-wheel.

 

[iMeowbot]

Has anyone else who bought one found a ton of scratches on the screen after really minimal use and no abuse? Mine has four scratches and all I did was put it in pockets, and laptop case alone....The screen protection material SUCKS.... 😡

The silly part is that Apple reps act surprised that Lexan scratches so easily. It's lovely for impact, but it doesn't stay pretty.

 

[alamar]

It should charge with your USB 1.1 ports just fine. USB 2 doesn't specify higher voltage than 1.1, you know. Just make sure you attach it directly to the computer or to a powered hub. (The hub built-in to your keyboard is not powered.)

Good to know. Then why did they keep the firewire charging at all? For people who already own a firewire power adapter?

You can also get an iPod FireWire cable. The nano won't be able to transfer data over this, but I've read that it will charge the battery.
You don't own all that much music, do you?

I have about 80 gigs but only about 10 gigs of that are songs i would want in my pocket, lots are just cute novelty and such.

I just can't see the need to swap files out that fast, the music files on the device will well outlast the battery....and you can fill 4 gigs inside the time it will take to refresh the battery, even on usb 1.

BTW, do you know what USB 2.0 cards cost? I paid $25 for mine at a local Radio Shack. That's less than the standalone charger that Apple sells ($30) and less than a spare iPod cable (also $30).

I'd rather a 250 dollar device only cost 250 dollars is all. looks like it does. I have more use for the mobile charger than i do the usb 2 card. I use my computer purely to listen to music and for writing. USB 2, if i bought it, would basically be an accessory for the ipod. I understand that it needs a fairly new computer to use the thing, but me personally, i don't have or need usb 2.0 🙂 I lead kind of a monk like exsistance.

 

[Deslock]

OK this thread is starting to get to me. The reason the article says it is a high margin, and that apple is prone to higher than normal margins, is that these things are ture. Every company that outputs a tangible product deals with everything you mentioned in you bulleted list (sparing the last one which is ipod specific.

Its a high margin, that is good for apple, and not so good for consumers. But when you go to best buy and look at the players, the nano still looks like a steal so it is not super for consumers really.

I just wish the thing came with a power adapter. I don't want to buy a usb 2 card to charge it. I'm not one of hose people who would buy an ipod and then be in a big rush to slam 4 gigs of data onto the thing while the house was burning down around me, and don't need usb 2. 😀

I'm confused by your post. Are you saying it's true that the nano has a high margin because the article gives that impression? But post 69 in this thread linked to articles that indicated the exact opposite. Then you wrote that the high margin is good for Apple, but bad for consumers while also being a steal for them. Are you saying it's a steal because it's well priced compared to other flash players? Then why is that bad for consumers?

BTW, this article got slashdotted.

 

[m4r71n1]

not according to apple

Apple really is not out to make a big turn around on any of their "pods."
Their real profit comes from the contract you sign when you buy one.
What's that I hear? You did not sign a contract? ... Oh yes you did! How many millions of people have downloaded itunes after buying a pod? And how many millions of songs sell after the sales of new pods?
They could give them away and still make a big profit... but who's that dumb?

When you download itunes you arent charged anything, you have to buy songs for Apple to make any money. Several months ago in an announcement, I think for investors, somebody asked about the profit of itunes, theyre breaking even. Although they own a large market share of the online sale of music, the cost for them to buy the rights is ridiculous. In the future maybe when every one trusts buying things off the internet and people feel that P2P services are truly bad then maybe itunes will help apple a lot.

cheers, ini

*Note I just purchased an imac 20" yesterday... i accidentally put down the wrong postal code of my last residence.. what should i do?

 

[5300cs]

I was going to buy a nano, but the guy right in front of me got the last one 🙄 So I went back and looked at the prices. ¥27,800 for 4gig Nano, or ¥32,800 for a 20gig regular iPod.

That made up my mind.

 

[sjk]

*Note I just purchased an imac 20" yesterday... i accidentally put down the wrong postal code of my last residence.. what should i do?

Your options seem to be:

• Contact the person/place you bought it from to give them the correct postal code

or:

• Do nothing, wait and see what happens

Were you thinking of something else? 🙂

 

[itsa]

Your logic is really backwards here.

The "logic" is... Apple is not living for the here and now. They are looking forward. itunes without ipods would be dead, and the otherway around. Apple knows it takes a more than just a good product to make a profit. If you want the big bucks in the real world you MUST create a Monopoly! itunes may be "just breaking even" at this point... it's not about now... Wake up and smell the Monopoly!