Vehicle iPod Integration and the “Made for iPod” Racket

By Deane Barker on January 13, 2006

Cars are the most expensive iPod accessories: On the one hand, I was going to complain that all of this vehicle integration is for the iPod only, which means that users of other players are getting unfairly left out…but I suppose Apple users have been complaining about that same thing in the software market forever, haven’t they? Perhaps this is just their turn in the sun?

Apple estimates that 40 percent of cars sold in the U.S. this year will offer iPod integration.

Some iPod-ready autos put iPod-like playback controls right on the steering wheel or instrument panel, with the built-in stereo displaying the name of the current track.

Still, we’re starting to see my theory play out: Apple is becoming evil, just like Microsoft.

Apple exerts tight control over accessories for its music player through its “Made for iPod” licensing program. Dashboard integration with the iPod requires the ability to plug into the iPod’s special dock connector — and that, in turn, requires a license from Apple.

“Made for iPod” may be quite lucrative for Apple, with accessory makers reportedly paying 10 percent of the wholesale price of their wares for a license. Some observers have dubbed the license charge an “iPod tax.”

Actually, this is not evil, it’s just good business. But then how many things has Microsoft done that we can go back and redefine as “good business”?

The fact is, when a big business and a big ego (Gates or Jobs — doesn’t matter) owns a market, it will be exploited for profit. I just hope people are as quick to call Apple on it as they have been with Microsoft.

Gadgetopia

Comments

  1. I tend to agree with you on the whole big ego , big business thing, but let’s not forget that without the development of the iPod by Apple companies like Belkin and Griffin would barely exist today. Apple created it’s own little economy. I don’t think mp3 players in general would be as big a business had Apple not introduced the iPod. The iPod has done nothing but drive better inovation on the part of the ‘Plays for Sure’ group and they still can’t put a dent in iPod sales.

    The iPod accessory world is now a multibillion-dollar industry, said Richard Doherty of the Envisioneering Group. He estimates $1 billion worth of accessories were sold during the recent holiday quarter alone, on everything from iPod protectors to speakers to car accessories.

    And that’s only the last quarter. Here’s a good read on how people are making a great deal of money by making accessories for a little device that people doomed to failure when it was introduced. Link

  2. companies like Belkin and Griffin would barely exist today.

    Belkin has been making cables for yesrs and years. They we’re doing fine before the iPod and would have done fine without it.

    I don’t think mp3 players in general would be as big a business had Apple not introduced the iPod.

    I utterly reject this. The market was there, Apple has just become the dominant player because they offer the best product. If they hadn’t, the market would be just as big, people would just be using crappier merchandise.

    Apple did not define this market. They just made the best stuff to fill it. If they hadn’t, someone else would have.

  3. One thing to point out is that the “iPod tax” is purely voluntary; those who pay it reap the benefits of being able to slap the “Made for iPod” sticker on it and have their product listed on Apple’s pages, which maybe gains them additional sales. There is nothing stopping a manufacturer from developing and marketing an unlicensed product. It’d be a bit more difficult to do, but definitely possible.

    I guess I don’t see the iPod licensing deal as a “racket” at all. Does it really differ much from something like the aftermarket auto parts industry? There are lots of replacement radiator hoses out there that will fit your run-o-the-mill Chevy pickup, but only a select few that will carry the GM brand on them. Those manufacturers pay a bit more to get the specs from GM, have their product checked out by GM, and are able to market their product through GM channels. Hoses made by others that don’t jump through those hoops will probably work fine, but those manufacturers have to work a little harder to get their product in your truck.

  4. Perhaps I mispoke regarding Belkin, but numerous other companies owe their existence and success directly to the iPod.

    Apple may not have defined the market, but they certainly refined it. There is no way that Creative, Rio, iRiver or Archos would have sold 14 million mp3 players last quarter. Half the reason they’re still in the game is because of the extraordinary competition the ipod provides. Part of the reason the ipod is so successful is because it’s cool and sexy. (Whether you bought one for that reason or not.) Even with the ipod as an example of what sells only Creative has come close to the cool factor. If the market were left without the ipod Creative’s offerings wouldn’t be as good and the world would not be snapping up Rios and iRivers at 14 million a quarter..

  5. I have no doubt that the “Made for iPod” thing is on the up and up, and it’s good business to boot.

    I think there’s more than a marketing benefit, though. I read somewhere that they’re buying insurance that the interface won’t change or something. I don’t know how it works, but a lot of manufacturers are buying this so that they can be sure they’ll have reverse compatibility on future versions of the iPod.

    But what I’m really curious about is the perception. You and Rob and quick to jump in and defend Apple, and it sounds like your reasoning is sound. But would you have defended Microsoft under similar circumstances? Would your perception of the situation have been the same if Microsoft made the iPod? Would anyone’s?

  6. But would you have defended Microsoft under similar circumstances? Would your perception of the situation have been the same if Microsoft made the iPod? Would anyone’s?

    That’s kind of a silly question, because there isn’t a chance that MS could have come up with something like the iPod.

    I’ll admit to my pro-Apple bias, but I don’t really think that comes into play here. The iPod is a separate and distinct product from everything that I admire about Apple products. I can’t even say that I’ve ever used an iPod, much less owned one. My perception of the iPod is based purely on what others have said about it and what I know of it’s manufacturer.

  7. That’s kind of a silly question, because there isn’t a chance that MS could have come up with something like the iPod.

    Always good to worm a cheap slam in there, isn’t it?

  8. I realize that Apple very well could use its hegemony in the DAP market in a way that one could call evil. But the reason I call Microsoft ‘evil’ is because they have used their market dominance to push a product that many – if not most – consider to be inferior. Apple’s products are near universally identified with quality and ease of use – completely the opposite of Microsoft. The counter argument to this is “if a product is good for the customer, then people don’t care whether it’s good for the market” (sort of like a tax cut that can hurt the greater populace in the long run) and so by this definition, yes Apple could be evil. I think that these are the same people who began to hate their favorite band as soon as they hear them on the radio. I say “good for them, they finally have an audience that they can bring their good music to.” And so I say good for Apple; after years of making excellent products, they’ve finally acheived enormous success in their field; without playing hardball with the under dogs, a la Microsoft.

    P.S.: Don’t we pay a “Windows tax” on every new computer we buy whether we plan to use XP or not?

  9. Not a cheap slam; just a truism. The closest “innovation” that MS has come up with is the XBox, and that was more of a me-too development than an innovation. And they only reason they got into the game console business — and can stay in business with the XBox — is because of the money to be made in software/game sales.

    Don’t get me wrong; I don’t fault MS for what they do with the XBox. But why is it that Apple gets scrutinized for something like the iPod licensing program, which only serves help iPod sales and 3rd party manufacturers?

    I guess that begs the question Deane; would you have criticized Microsoft under similar circumstances? Would your perception of the situation have been the same if Microsoft made the iPod?

  10. they have used their market dominance to push a product that many – if not most – consider to be inferior. Apple’s products are near universally identified with quality and ease of use – completely the opposite of Microsoft.

    That’s a wickedly slippery slopw to start down, my friend. So we evaluate business practices by the quality of the product? A good product means you can be evil? Or you’re only evil if your product sucks?

    And you bring up something interesting about the rock band analogy. I’ve always believed that if Apple had 95% market share, Macs would be so much less cool and it would be hip to switch to something else.

    Apple has reinfiorced this with things like “Think different.” If they had 95% market share, then what would “different” be? I don’t know, but I bet a lot of people would be looking for it.

    It’s cool to be different. Always has been.

  11. You’re right, it is a slippery slope. But if Microsoft could kill Apple by making a better iPod, a superior OS, and playing nice with their competitors, then by all means, “let the best man win.” In the long run, it’s counter-productive for us consumers to reward Microsoft for making lousy stuff and trying to kill off companies that make better stuff. But Apple hasn’t done that – yet. I think your point is that we must remain vigilant, and I would certainly agree. I do not personally think that they are as far down the evil road as many Apple-skeptics are saying, but they are quickly getting to a point where it will be easy for them to load the dice.

    P.S: The band I was thinking of is Modest Mouse. I still like them.

  12. In the long run, it’s counter-productive for us consumers to reward Microsoft for making lousy stuff and trying to kill off companies that make better stuff.

    This is an unsupportable argument in practice because it all comes down to personal preference in determining “better.”

    I hate OS X. I like looking at it, and I’ve flirted with getting in on occasion, but 10 seconds after I sit down to use it, I want to toss it out the window. Things like The Dock strike me as poorly done in the extreme.

    I realize that I’m in the minority now, but who decides what company gets to be evil and what doesn’t? Based on your argument, that depends on who makes the “better” product. And that, my friend, is not clear cut.

  13. Jobs has a tiny fraction of the market, but tries to (and does) force sweeping change (sometimes)- “Floppies are dead”, “You will use CDs”, “You will use Firewire”, “The CRT is dead”, etc. But these attempts at forming standards are based on a commitment to excellence. Sure, it’s not always excellent, but the commitment is there, and you gotta appreciate that, because right intent never hurts.

  14. Alot has been said on this article but I haven’t had net access so yes, I’m late to the party.

    I call everyone out so it doesn’t matter who does what.

    1. Apple forces podcastors to “update” their rss to fit into their format. This comes almost a year after the standard had already been set, used and agreed upon.

    2. Sorry but iPods are not the best product out there. They are the best marketed. For example, Irivers, Creatives and Sandisks (which I own) have had built in mics and FM receivers in them practically from the beginning. ipods have not. To prove my point, my Sandisk 1gig was $40 less then a shuffle. Shuffle has no screen, no mic and no FM.

    3. While downloading the lastest video codec from Apple I was forced to install iTunes. Why would I need iTunes to watch a movie trailer??

    4. People load linux on ipod and find out its being limited.

    5.http://www.sitepoint.com/blogs/2006/01/17/apple-photocasting-mac-only-uses-invalid-rss/

    1. And my personal marketing story favorite. Before Intel switch. Jobs – Macs are superior to PC because of PPC. Switch announced – People run X on x86 and find its faster. Now – What’s an intel chip doing in a mac….blah blah blah.

    Sorry but Apple can and does act like MS already when given a chance. Any company that controls the market share does. Do I hate Jobs and co? Not really. I build all my own systems and sitck with Linux/BSD so I really don’t care per say. Plus if I were to list all the things MS has done your DB would fill up. ;-)

  15. I haven’t joined the iPod yet, for reasons of cost prohibitiveness and practicality in my country, which taxes on import products.

    But I gotta admit I have no problems with the device — they are cool and offer the best localization interface (displaying Chinese characters in a fine resolution) than other low-end MP3 players made and sold in Taiwan.

    Instead, I bought a new car head-unit that plays MP3 files (AND WMA!) burnt on a CD-R. And this Pioneer head unit is priced very economically (even cheaper than the 2GB Nano). If I even wanna consider a head unit that offers the iPod connection kit, I’d pay three times more for an ALPINE deck, plus the control module. Not to mention the initial cost of the iPod itself! I can almost buy a good Centrino laptop with that sum of money…

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