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Steve Jobs, iTunes and Cheaper iPod?

MacRumors

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Original poster
Apr 12, 2001
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Newsweek posts a short interview with Steve Jobs about the new iTunes Music Store for Windows.

The interview touches on Apple vs. Microsoft, as well as the frequent topic of a cheaper iPod:


Q: Some think you wouldn’t want to sell a $100 iPod because the profit margin would be so low.

Jobs: What are you talking about? We’d love to have a $100 iPod! We just don’t know how to do it right now. We’re constantly trying to make cheaper iPods. We’re working on the next step.
 

arnette

macrumors 6502
Nov 22, 2002
295
64
Manhattan Beach
cheap iPods

The only thing that's holding me back from buying the 20GB iPod is the price. If it were 100 bucks lower, I would buy it tomorrow.

Yeah, the iPod is a music only device. And that's cool... I can dig it. But for ****es' sake, make it a little less!! I'm typing this on my iBook and I really want to take my music with me (I'm a fan and customer of the iTunes Music Store). iPod is the best intigration device I know of but a lower price would seal the deal.

Here's hoping!
 
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ColoJohnBoy

macrumors 65816
Mar 10, 2003
1,129
0
Denver, Colorado
That would be awesome! I hope whatever this next step is, they take it soon. Perhaps a 20 GB iPod for $100, a 40 GB for $200, and a 60 GB for $300. Only time will tell, but if they can figure out how to drop their prices, Apple's market share of MP3 players wil skyrocket.
 
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alphaone

macrumors 6502
Aug 12, 2003
300
0
Or maybe at the next ipod product update they could do it like this: 10GB: $149, 20-30GB: $249, 40-60GB: $349. Or something like that. Maybe they could add a forth model or something to fill it in.

If the 10GB ipod's price was that low I'd pick it up in a heart beat. I want one right now, but $269 for the 10Giger (which is all I need) is way too much for me :(.
 
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LoopHoles

macrumors member
Jul 19, 2003
42
0
okay, wanting twice the GBs for a third of the price is a bit too much. i got my no-dock 20GB ipod for $300. it IS very expensive. won't surprise me if apple decides to cut the 10 or 15 GB model to $200 right before the pepsi promotion kicks off. $200 is regarded as a magic price point for consumer devices. that combination will be like a fire vortex. it'll just sweep the market from its feet. however, keep in mind that the profit margin on the ipod is very important to apple. they're not making money on the iTMS yet.

$100? maybe in two years. it depends on volume. is toshiba going to make a cheap enough hard drive?
 
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eddyg

macrumors 6502
Sep 5, 2003
331
0
Christchurch, New Zealand
Originally posted by alphaone
Or maybe at the next ipod product update they could do it like this: 10GB: $149, 20-30GB: $249, 40-60GB: $349. Or something like that. Maybe they could add a forth model or something to fill it in.

That would work if the major cost associated with the different size iPods were the cost to Apple of the hard disk. However I reckon that that is not the case, and that there is a fixed high cost associated with the rest of the iPod that they need to bring down before you will see cheaper iPods.

At the moment the lower capacity iPods probably have a lower margin than the higher capacity ones, which all up gives an OK margin over all. Which means that there is a fine balancing act between models, price and demand for them to get their desired margin for the entire range.

So, unless components get cheaper, their assembly costs go down, they redesign using cheaper components, or they redesign with less functionality I don't see a huge change in bottem end pricing as a possibility.

Cheers, Edward.
 
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tristan

macrumors 6502a
Jul 19, 2003
765
0
high-rise in beautiful bethesda
I think it was a dumb question by the interviewer. The miniature hard drive alone costs around $100, so you're really not going to see a $100 ipod anytime soon.

Anyway, Apple considers itself a premium brand, and generally prices its products a little higher than the competition. It's like asking Louis Vitton if they'll come up with a $20 handbag. Even if they could do it, it wouldn't have the quality that you'd expect.

I think Apple's prices get out of hand sometimes. I almost bought an airport last week - almost - then I found a 4 port wireless hub/router for $30 after rebate. Sure, the airport's better, but if something will do the job for $30, it's hard to justify spending $200. (Especially in a recession.)
 
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weev

macrumors regular
Jan 21, 2003
180
0
Sydney, Australia
"Celestial Jukebox"

Not heard of that one before. Anyone got more info on this future technology?

NEWSWEEK: Your business model is based on people owning their music. But in 10 or 20 years, isn’t there the possibility for high-speed wireless transmission—the “celestial jukebox” where no one owns music but has access to everything?
STEVE JOBS: God, I wish there was. But the bandwidth revolution is happening so slowly. I don’t see it happening that fast. I hope it does, and we’ll be there.
 
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Rod Rod

macrumors 68020
Sep 21, 2003
2,175
2
Las Vegas, NV
iPod possibility

Another iPod possibility is moving away from HD storage and into flash memory type storage (similar to SD/MMC/xD, but not necessarily removeable from the device, maybe an SD/MMC RAID of sorts).

Only, of course, if the latter storage method becomes price competitive, cheaper and as dense or denser than hard drives.

The major advantages could be durability and longevity because of no moving parts to break down.

Given the popularity of the iPod, maybe Apple could realize economies of scale quickly on the chip-based storage.
 
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rainman::|:|

macrumors 603
Feb 2, 2002
5,438
2
iowa
Re: iPod possibility

Originally posted by Rod Rod
Another iPod possibility is moving away from HD storage and into flash memory type storage (similar to SD/MMC/xD, but not necessarily removeable from the device, maybe an SD/MMC RAID of sorts).

Only, of course, if the latter storage method becomes price competitive, cheaper and as dense or denser than hard drives.

The major advantages could be durability and longevity because of no moving parts to break down.

Given the popularity of the iPod, maybe Apple could realize economies of scale quickly on the chip-based storage.

That's my hope as well, size stops being a factor then too-- they can fit gigs upon gigs into tiny little cards. unfortunately it will still be a year or two before this becomes even feasable... tho we can all see that HD is going to move solid-state soon, and no doubt Apple will be the first one out there incorporating it into their machines...

pnw
 
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snahabed

macrumors regular
Sep 14, 2002
165
0
New York, NY
Maybe I am way off, but outside of R&D costs, I would guess that the major cost of the iPod is the hard drive.

What else IS there? The processor, 1 bit screen, plastic casing? $100 seems too low, but I just don't buy that they couldn't do a $199 5-10GB and still maintain a decent margin. How expensive can a 10GB hard drive be now? It ain't cutting edge anymore!

I think Apple has a good pricing structure, it's just that an entry level model is missing. Price points of 199, 299, 399, 499 would be ideal, in my opinion (Maybe offer some iTunes downloads on the higher models, or discounts on accessories, to motivate people to go higher).
 
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Digipimp

macrumors regular
Jun 17, 2003
190
0
Texas
I think it's obvious the cost factor is the hard drive, the three models each share identical components with the exception of the hard drive size so it's not something else that's inflating the price between them. However it could be components that hold the price on the lower end of the models at a higher price.

Right now an entry model is $299 for 10 gigs which is a bit high considering what you get for it in the form of functionality. The design is great and top of the line, but to be competitive in the music and mp3 player biz in the future or to take the market totally to convince people who don't have mp3 players that they need them they will need to get cheaper on the lower end while retaining the high quality top end.

Already CompUSA was just selling refurb 15 gig 3rd gens for $199 so you know they can make it happen. Time to ante up on a 10 gig model that sells for $149 that maintains current functionality when the new ipods come out with new functions at higher price points.
 
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localman

macrumors newbie
Feb 21, 2003
20
13
Okay -- Steve is in la-la land

Still, $300 to $500 is an obstacle to a lot of people.
No, of course I don’t think it’s too costly. Fifty million homes have DVD players that cost that kind of money. For music lovers, I don’t think it’s a hurdle at all. There are sneakers that cost more than an iPod.

First off, DVD players can be had for $39 now. I just bought one for that price and it works great. They cost a lot less than $300 when they hit 50 million units.

Second, I know a load of music lovers who could never afford a $300 music device. These billionaires need to get their numbers straight.

Third, I work for a shoe distributor and I've never seen a pair of $300 sneakers. Some may exist, but that's not what most people are buying. Is that the type of market share he wants?

Some think you wouldn’t want to sell a $100 iPod because the profit margin would be so low.
What are you talking about? We’d love to have a $100 iPod! We just don’t know how to do it right now. We’re constantly trying to make cheaper iPods.

How about this: bring back the original 5GB version. I (and most of the world) wouldn't care if it's the new form factor. Toyota makes the Echo and the Avalon. Why can't Apple?

-- Sorry, I love my Apple gear and software, but you gotta admit that those geniuses can sure be stupid
 
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MikeL

macrumors 6502
Jan 22, 2003
297
1
Bloomington, MN
The iPod is not that expensive. If you're a kid or a student it might be a hurdle, but for what it is it's not unreasonable at all. It's targeted at people with large music collections. I've got thousands of dollars worth of music--a few hundred bucks to be able to keep it all with me and use any of it anytime I want? That's a no-brainer! If you can't afford an iPod, you likely can't afford the music to make best use of it. A flash-based player is probably the right thing for you, and they're only $50-$150. Add just a bit more dough, and you've got an iPod that gives you considerably more capability in a very superior package.

If you shop around, you can get an iPod for under $200. Apple sells refurbs every couple of months, and had one for something like $170 not long ago. CompUSA.com just had 30gb iPods for something around $250 this Friday. If you want something badly enough, you save and sacrifice to get it. Putting $10 aside a week will get you an iPod in a realatively short time.

As for Levy's Celestial Jukebox, he's just referring to the idea of on-demand music being delivered wirelessly whenever and whereever giving you access to anything anytime you like. Cell phone providers would love to do that, but the technology just isn't there yet.

None of that is the interesting part of the article, however. Jobs is making it pretty clear that the days of the meek, appologetic Apple are gone and that the company is ready to go to war again. I think it's damn cool to see Apple targeting a mainstream market with the intent to dominate it, rather than just settle for a small slice of the pie.
 
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Arcady

macrumors 6502
May 24, 2002
402
24
Lexington, KY
I sure hope they don't come out with a $100 iPod too soon, because I just paid $400 for a 30gb iPod today, and it hasn't even shipped yet! (I still think it was a nice deal - same price as the current 20gb :D )
 
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MikeL

macrumors 6502
Jan 22, 2003
297
1
Bloomington, MN
Re: Okay -- Steve is in la-la land

Originally posted by localman
How about this: bring back the original 5GB version. I (and most of the world) wouldn't care if it's the new form factor. Toyota makes the Echo and the Avalon. Why can't Apple?[/B]

Because Toshiba doesn't make the 5GB drive anymore. Apple isn't the only company in the supply chain with a margin to protect, you know.

There's nothing new or surprising about this kind of situation. Suppliers are always revamping and restructuring their products in order to maintain their margins. Just because time and technology march on does not necessarily mean that a 5GB 1.1" drive is cheaper to produce. At some point it is nearly as expensive to make as the larger capacity models, and so the supplier simply stops making them. Demand dries up.

To put this in context, it'd likely cost Apple about the same to make a 5GB iPod (assuming, of course, that Toshiba would start production of the 5GB drive again) as it does to make a 10GB iPod. The idea is not to sell at a loss or to allow margins to erode.
 
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nightporter

macrumors newbie
Sep 9, 2003
9
0
Australia
If you look at all the companies that have their fingers in the iPod pie you'll understand why the price is so high.

-----------------------------

One item that's invisible but indispensable is the iPod's operating system, which, I've been informed, is not of Apple design. PortalPlayer, a company that specializes in developing OSes for cellular phones, PDAs, and other streaming and wireless applications, designed the iPod's human interface. The iPod is so easy to use that it's obvious Apple chose the right company for the job.

Parts choices are said to have been made with an emphasis on sound quality, availability, and "time to market" considerations. Parts vetted include PortalPlayer's own MP3 decoder and controller chip, a Wolfson Microelectronics D/A converter, a Sharp flash-memory chip, Texas Instruments' IEEE1394a interface controller, and a Linear Technologies power-management and battery-charging system. The essential innard is the hard disk drive (HDD), which is amazingly tiny—a 1.8" Toshiba design built to fit Toshiba's PCMCIA cards.

The iPod's PCB is a marvel of parts density—so much so that I was almost completely at sea when confronted with it. The largest item, by far, is the Sony-Fukashima lithium-ion battery, molded to fit over the HDD. The back of the circuit board is dominated by the LCD display and the controls, which are attached directly to the board. The board's landscape is dominated by three large chips, presumably the buffer, CPU, and FireWire controller (the only item I'm sure of, since it's next to the 32-pin input). The rest of the board is jammed with surface-mount components.

Article
 
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GregA

macrumors 65816
Mar 14, 2003
1,248
15
Sydney Australia
Originally posted by nightporter
If you look at all the companies that have their fingers in the iPod pie you'll understand why the price is so high.

-----------------------------
<snip> The iPod's PCB is a marvel of parts density—so much so that I was almost completely at sea when confronted with it. The largest item, by far, is the Sony-Fukashima lithium-ion battery, molded to fit over the HDD. The back of the circuit board is dominated by the LCD display and the controls, which are attached directly to the board. The board's landscape is dominated by three large chips, presumably the buffer, CPU, and FireWire controller (the only item I'm sure of, since it's next to the 32-pin input). The rest of the board is jammed with surface-mount components.

Article
How much cheaper could Apple sell a car-radio sized iPod... I could go for one of them. A physically larger hard disk and no battery would make it cheaper. Make it removable so it can be placed next to your Mac for syncing occasionally (and preferably have a radio built in).
 
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revenuee

macrumors 68020
Sep 13, 2003
2,251
1
Re: Re: Okay -- Steve is in la-la land

Originally posted by MikeL
Because Toshiba doesn't make the 5GB drive anymore. Apple isn't the only company in the supply chain with a margin to protect, you know.

There's nothing new or surprising about this kind of situation. Suppliers are always revamping and restructuring their products in order to maintain their margins. Just because time and technology march on does not necessarily mean that a 5GB 1.1" drive is cheaper to produce. At some point it is nearly as expensive to make as the larger capacity models, and so the supplier simply stops making them. Demand dries up.

To put this in context, it'd likely cost Apple about the same to make a 5GB iPod (assuming, of course, that Toshiba would start production of the 5GB drive again) as it does to make a 10GB iPod. The idea is not to sell at a loss or to allow margins to erode.

to bad, i'de snag a new 5 gig in a minute - looks like it's back to ebay for me :)
 
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jhershauer

macrumors member
Feb 3, 2003
61
0
Gilbert, AZ
Re: Flash-based iPod

I'd like to see Apple come out with a sub-$150 flash-based "iPod junior" that they sell in addition to the current HD-based models. In addition to having it work seemlessly with iTunes as the current iPods do, a really cool feature would be to allow HD iPod owners to hook up their iPod junior to their iPod via the dock connector, and download the current on-the-go playlist to the flash-based player.

They might not have as big of a margin on the smaller, flash-based players, and may lose some sales of the more expensive iPods. However, they could make up for it somewhat by selling both devices to people like me, who would still want their whole collection to be portable, but want a small flash-based device for working out.
 
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revenuee

macrumors 68020
Sep 13, 2003
2,251
1
Re: Re: Flash-based iPod

Originally posted by jhershauer
I'd like to see Apple come out with a sub-$150 flash-based "iPod junior" that they sell in addition to the current HD-based models. In addition to having it work seemlessly with iTunes as the current iPods do, a really cool feature would be to allow HD iPod owners to hook up their iPod junior to their iPod via the dock connector, and download the current on-the-go playlist to the flash-based player.

They might not have as big of a margin on the smaller, flash-based players, and may lose some sales of the more expensive iPods. However, they could make up for it somewhat by selling both devices to people like me, who would still want their whole collection to be portable, but want a small flash-based device for working out.

Dude your definatly a thinker

nice 512 MB design would be sweet... oh well... we shall dare to dream
 
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SiliconAddict

macrumors 603
Jun 19, 2003
5,889
0
Chicago, IL
Re: Re: Re: Flash-based iPod

Originally posted by revenuee
Dude your definatly a thinker

nice 512 MB design would be sweet... oh well... we shall dare to dream

Nope. The solid state audio players out there are a dime a dozen. They have saturated the market. What makes the iPod unique is the ability to couple high capacity drives to a very slim and beautiful form factor. Honestly Apple doesn't need to compete against these other low end devices.

All they need to do is come out with a device that is in the $200 or less range. I don't know what the heck people on these boards are smoking but Toshiba sure as heck DOES still offer 5GB drives. They are PCMCIA based and actually consume less power then their laptop counterpart. Heck For a time I had one of these drives coupled with my iPaq pocket PC and PCMCIA sleeve. (In that case it was a 2Gb drive.) Looking at Toshiba’s site it appears that the 5GB retail price is $199. I’ll bet if Apple purchased these in quantity they could get a massive discount on them. While I highly doubt we will ever see a $100 iPod a $200 5Gb iPod would fit in perfectly. Try this on for size:

5GB $199 Small - For those who just want to carry a lot of music in their pocket on the go.

20GB $399 Medium - For those who have a large collection but don’t want to go bankrupt.

40GB $499 Large - For those who want everything on their iPod and don’t mind paying a premium.

*shrugs* I personally think this does a good job of covering all of apples bases.
 
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cb911

macrumors 601
Mar 12, 2002
4,123
3
BrisVegas, Australia
having a cheaper model iPod would be awesome. the only reason i've got one is because i got the $300 rebate with iPod + PowerBook deal (although i'm still waiting on the cheque...:eek::rolleyes: ).

i really hope they can do that without sacrificing the quality of the iPod, but i doubt that would ever happen.
 
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