According to analysts, retailers only see margins of around 11 per cent when they sell an iPod, far less than the cut offered by other manufacturers of similar products.
This is why the rising tide of iPod accessories is crucial, suggests BusinessWeek.
Retailers are, in effect, forgiving Apple the low margins because iPods are a great way to drive traffic into stores, and because they can "load up on profits from iPod accessories," claims reporter Peter Burrows.
Analysts say margins for iPod peripheral products often exceed 50 per cent and are sometimes as high as 80 per cent. This hasn’t escaped the notice of Apple CEO Steve Jobs, who recently joked: "Sometimes we wonder if the guys making the cases made more money than we did."
This is one reason why iPod products are big business. Altec Lansing's Bob Garthwaite told BusinessWeek: "iPod accessories are the fastest-growing business for us". He added that pre-Christmas orders from retailers for the company's three iPod-compatible products are "through the roof. It's going to be an iPod holiday season".
BMW has also done surprisingly well out of its custom-built iPod connector. The connector lets BMW drivers control their iPods via buttons on their radio or steering wheel. According to BMW's James McDowell the carmaker has sold about 12,000 of the connectors so far. "That's far more than expected, and there is a long waiting list for BMW owners who want to have it installed."
It is fair to say that, thanks to the iPod, the industry has changed its opinion of Apple. Barry Jaruzelski of technology consulting firm Booz Allen Hamilton told Reuters: "It's becoming much more a digital consumer electronics company. They have proved better than anybody that they know how to make the optimal trade-off between ease of use, complexity and features."
Following the recent iPod announcements – iPod Photo, U2 iPod, iTunes Europe – Apple shares are riding high, closing last night (28 October) at $52.19 – a four-year high.
The share price has been steadily returning to levels of 2000 since the beginning of the year. The lowest trade in the last 52 weeks was $19.25, towards the end of last year.
The company now sells more iPods than it does its signature Macintosh desktop and notebook computers.