How Much Does Apple Make On The iPod Shuffle?

from the taking-it-apart dept

While there were a few fan websites that quickly disassembled the new iPod Shuffle soon after it came out, one research firm has done so in an attempt to figure out just how much Apple is making off of these devices. After examining the pieces, they found that the Shuffle components probably cost about $60, meaning Apple is getting lovely 40% margins. While this ignores things like marketing expenses, it’s not bad for hardware — and as the article notes, the priciest piece (the flash memory) is only going to get cheaper. Of course, this also means that there is likely to be much cheaper competition hitting the market soon, but (so far) Apple has been able to convince people that they’re worth the premium by having a superior interface, close integration with the iTunes store and a general premium for “style.”

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Comments on “How Much Does Apple Make On The iPod Shuffle?”

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Beck says:


I had a client who developed and sold small consumer electronic devices. They did the engineering and distribution, the devices were manufactured overseas and shipped here. The devices had a retail price around $100, so I was amazed to learn that it cost about $10 to build each one.

I asked how they could charge so much, and the answer from the company president was “It’s all in the perception of the consumer.”

ed says:

Re: Pricing

“It’s all in the perception of the consumer.”

As I tell my students, price and cost have very little to do with one another. Cost is money needed to build a product. Price is what people are willing to pay. Price exceeds cost? Great! You get to keep the difference. Cost exceeds price? Then it’s a bad product, and generally raising the price won’t help.

RJD says:

It's the Software

“they’re worth the premium by having a superior interface, close integration with the iTunes store and …”

The first two were enough for most users and the premium being paid is less and less. It really is less of a style issue than it used to be.

Two close acquaintenances (brother & friend) are hardcore windows (bordering on ‘we hate apple’) kinda guys and after being exposed to the itunes store and the Ipod both are now owners and believers.

Sometimes you have to Drive the Jaguar to understand why it is so much better than say … a corvette.

Mojo says:

Re: It's the Software

First of all, if it costs Apple $60 to make a Shuffle it’s not a 40% margin… you have to figure if the store sells it for $100 they are buying it for maybe $75 (apple stuff doesn’t have a high markup, which is why you never see it sold for much of a discount).

Secondly, as far as the second poster’s PC loving friends now being ‘believers,’ that’s scary. It’s one thing to say they bought an iPod and now like it, but to refer to them as ‘believers’ just supports the feeling that Apple fans are like a religious cult – they’ll accept anything Apple sells them with open arms and little criticism.

Honestly, the Shuffle is a joke. There is no revolutionary interface on it and the device is so simple it’s no better or worse than a myriad of flash players already out there.

Actually, of course it’s worse, there is no screen! They could have easily included one, since other players at the same price point offer one (and with more features, such as FM and voice recorder).

But Apple, in their quest to make more profit on every unit, left out any extra features, including the screen, and decided to try and market it as a selling point. The whole “life is random” thing is retarded, it’s just a way to justify them saving $5 extra on the manufacturing of each unit.

So other flash players cost maybe $50 to make and they sell for $100, while the Shuffle probably costs $30 and sells for the same price. Smart on Apple’s part, but it’s not revolutionary.

Anonymous Coward says:

Re: Re: It's the Software

I know this is old, but it’s also wrong. I work at a large electronics retailer and the discount I receive is cost (what my company pays for it) + 5%% for shipping and labor. Now after my discount I get around .30 off. Apple posted a 19% (around there) profit margin last year too. These joints are marked up pretty bad by apple. They just know people are dumb enough to buy them.

RJD says:

Re: iPod Shuffle's superior interface...

Itunes == Superior Interface.

Save 11 cents by going to walmart and download a song there and see if the 11 cents is worth it.

And since when did making a profit become an evil thing ?

Believer != cult. Simply that the reality lived up to the hype.

I’m not religious about the Mac. I took the long road to get there. DOS, Amiga, Win 3.1, Win95,Linux, …and after suffering enough decided the apple premium was worth it. Have seen nothing in the Windows world that made me want to switch back (yeah, those Dell great deals are inticing but seldom what they seem) and with Apple lowering it’s price points, it’s easier and easier to stay on this side of the fence.

Price and Mantra are no longer the issue when choosing your PC or Music player. It’s what works best for you (to include how much you’re willing to pay).

RJD says:

Re: Re: Re: iPod Shuffle's superior interface...

No, I’m saying I’ll pay for a operating system / software that works better than the ‘standard’ being provided. When the rest of the community provides something akin to itunes and the iPod where the operational inconvience is neglible and the price points are different enough, I’ll gladly switch … as will most People. That difference varies for all people. Beta Vs. VHS, LCD versus CRT, Ford Escort Vs. Honda Civic, etc. The perception of value lies with the purchaser and if a person ‘gets religion’ for a brand, then the more power to the brand for providing a ‘religious user experience’. Not many brands do which is why they compete on cost alone.

EmyAnn (user link) says:

I am very aware of the fact that Apple is making substantial profits on their media players. I was hesitant to even get involved in anything Apple. For one thing, I absolutely despise .Mac computers. I’ve tried Linux but I am already too familiar with Window’s DOS (I just change what it looks like with template provided by Style XP or Windows Blinds, but Blinds lags too much). Anyways that’s beside the point.

After I purchased a 60GB iPod, I immediately fell in love with it. A shuffle is a waste of money, it is just Apple’s cheaper version for those of us who don’t want to spend much. I am going well with my current iPod Video, however I’m on my third one!! LoL. The first one I purchased was a lemon, too it home and it wouldn’t turn on anymore. The second one.. well I took it back because a DlO case severly scratched the surface and screen of it. Now I have a white one that has been working fine ever since.

If you are considering getting an MP3 player, I’d suggest asking yourself what you want it for.

1) How much music do you have? If you don’t have much, consider getting a cheaper NON-Apple MP3 player, that would have a screen (unlike the shuffle) and probably enough space to hold your songs. If you need get the iPod Nano, but Shuffle should never be an option (unless your rich or a collector LoL I guess).

2) What do you want to use it for? iPod Video can keep video, pictures, and text files. So if you think you would constantly be using these features, but it.

3) How often will you be using it? If you are not going to be needed an MP3 player often, get a CD player LoL. It isn’t worth the expense if you won’t be using it much anyways.

4) Do you have a computer? (Well you should if you are reading this). But many of my friends purchase iPods without even having somewhere to upload songs onto it, so they beg me and others to go over to there homes to use their computers. Ugh! Annoying!!

And some tips. If you are going to buy a Video iPod (since you are even willing to pay that much, like me ^ ^) then hands down get the $50 3 Year Warranty plan. If you are going to pay $400+ for anything you should make sure it is insured. I mean look at my story, I am on my third iPod already and I’ve only had it about a month!! These things break, scratch, and malfuntion at the poke of a finger (unlike PSP, but memory sticks suck).

I am very happy with my current iPod, and for anyone who doesn’t already have too much of a grudge against Apple and is a music freak (like me) get one.

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