October 18, 2005 4:00 AM PDT

Apple steps up iPod 'tax' push

Apple Computer is stepping up its push to get iPod accessory makers to pay for the right to connect to the popular music player.

For some months, the company has been seeking royalties from accessory makers that want to display a "Made for iPod" logo on their products. The program, which one analyst has likened to an "iPod tax," applies to devices that connect electrically to the player and not to cosmetic things like cases.

Now Apple has made the program a requirement for manufacturers who want their gadgets to plug into the "dock connector" at the bottom of the music player, Senior Vice President Phil Schiller confirmed to CNET News.com last week.

News.context

What's new:
Apple is telling iPod accessory providers they must pay it royalties if they intend to make devices that connect electrically to the music player.

Bottom line:
The move could generate millions of additional dollars for Apple, but it also may cause grumbling among those companies that have to play along.

More stories on the iPod

"Yes, the electrical connection has specifications around that and licensing around that, and the way you get that assistance and information and licensing is through the 'Made for iPod' program," Schiller said in an interview. He did not say when Apple made the program mandatory.

It's not clear what means Apple might employ if companies don't go along, as Apple declined to comment on that. Though many manufacturers have signed up for the program so far, some have complained in private that it's too high a price. But for Apple, the move is a chance to profit further from the empire it has built on the iPod, given that the market for such add-ons is estimated in the hundreds of millions of dollars per year.

According to a source familiar with the program, Apple is getting a royalty on the order of 10 percent of a device's wholesale price. Schiller declined to discuss the financial details, but that percentage is similar to what Apple has been seeking in recent months, according to sources familiar with the program.

"They're just expanding the 'iPod tax'," said Gene Munster, a financial analyst at Piper Jaffray. "Ultimately Apple is tired of watching these people profit off their success."

Munster said the move is unlikely to dramatically boost sales for the Cupertino, Calif.-based company, but said "from an earnings perspective, given it is pure profit, it could inch the needle."

Though accessory makers are loath to criticize Apple publicly, there have been grumblings over the price the company is charging. An Australian online report quoted unnamed executives from speaker makers Altec Lansing and Bose grousing over the double-digit cut.

An Altec Lansing representative in the United States said the company has been unable to verify who, if anyone, at Altec made those remarks and said it is glad to be part of the program.

"We have a great relationship with Apple, and we fully support the 'Made for iPod' program," said Pamela Roccabruna, the senior marketing manager at the Milford, Pa.-based speaker maker.

Bose representatives did not return calls seeking comment.

Future models
Though some device manufacturers may quibble with the royalty Apple has set, there will be some peace of mind for them in knowing that the accessories they make today will work with the iPod of tomorrow.

As part of the current "Made for iPod" program, Apple will ensure that devices will physically accommodate future models of the player, Schiller said. Accessory makers can build a standard well for an iPod

CONTINUED:
Page 1 | 2

24 comments

Join the conversation!
Add your comment
Sounds like a monopolist at work extorting money
It should be noted that the end-user who buys the accessory is always going to pay the whole of the iPod tax.
Posted by aabcdefghij987654321 (1721 comments )
Reply Link Flag
Sounds like a monopolist at work extorting money
It should be noted that the end-user who buys the accessory is always going to pay the whole of the iPod tax.
Posted by aabcdefghij987654321 (1721 comments )
Reply Link Flag
Isnt this how they lost he PC market?
Isn't going all proprietary like this the exact way they lost the PC market? Apple, dont go down this road. Dont discourage people from supporting your product.
Posted by (402 comments )
Reply Link Flag
No
Apple never cornered the PC market. They just
changed the shape of the market in a way that
Microsoft copied.

PC's were already prevalent and 'IBM
compatibles' were fairly standardised across
the board - Apple II's ran MS-DOS for instance.
But that was the problem, the interface was
DOS, so Apple bought the rights (and
employed the staff) from the Xerox GUI
development and created MacOS. They
needed an entirely new way to interface with
this GUI and hence the mouse became
standard issue. Unfortunately the PC-market
was (and still is) a weird divergent place
where there is no true standard hardware
configuration and Apple could see that it
would make more sense (and make their
software faster, more efficient and more
stable) if they could base it on it's own
architecture. Plus the original chipset was
entirely different (the 68K series) from the
x86... at the time it was a cutting edge chip
(see how far advanced the Amiga was around
that time based on the same chip - colour,
multiple screen resolutions on the same
screen, 4 channels of audio and you'll know
what I mean). Apple may well have been in it's
rightful place as market leader (actually it
already DOES lead, it's just not dominant) if it
hadn't been for that thieving git Bill 'I can't write
a decent line of code to save my life' Gates. ;)
Posted by M-RES (28 comments )
Link Flag
Isnt this how they lost he PC market?
Isn't going all proprietary like this the exact way they lost the PC market? Apple, dont go down this road. Dont discourage people from supporting your product.
Posted by (402 comments )
Reply Link Flag
No
Apple never cornered the PC market. They just
changed the shape of the market in a way that
Microsoft copied.

PC's were already prevalent and 'IBM
compatibles' were fairly standardised across
the board - Apple II's ran MS-DOS for instance.
But that was the problem, the interface was
DOS, so Apple bought the rights (and
employed the staff) from the Xerox GUI
development and created MacOS. They
needed an entirely new way to interface with
this GUI and hence the mouse became
standard issue. Unfortunately the PC-market
was (and still is) a weird divergent place
where there is no true standard hardware
configuration and Apple could see that it
would make more sense (and make their
software faster, more efficient and more
stable) if they could base it on it's own
architecture. Plus the original chipset was
entirely different (the 68K series) from the
x86... at the time it was a cutting edge chip
(see how far advanced the Amiga was around
that time based on the same chip - colour,
multiple screen resolutions on the same
screen, 4 channels of audio and you'll know
what I mean). Apple may well have been in it's
rightful place as market leader (actually it
already DOES lead, it's just not dominant) if it
hadn't been for that thieving git Bill 'I can't write
a decent line of code to save my life' Gates. ;)
Posted by M-RES (28 comments )
Link Flag
Aux Input Line
Will do the trick and then you don't have to pay Apple a dime and users can use the line for other units like sat radio.
Posted by faust (41 comments )
Reply Link Flag
Aux Input Line
Will do the trick and then you don't have to pay Apple a dime and users can use the line for other units like sat radio.
Posted by faust (41 comments )
Reply Link Flag
So-called tax is Standard Practice
A. If author, and/or readers, have any kind of a business
background, they would find this unusual to even write a story
about. This is standard practice.

B. If the authoer has little, or no, business education, there is this
thing called journalism, which requires a tad bit of research, to
determine if this is a news worthy story.
Posted by Thomas, David (1947 comments )
Reply Link Flag
So-called tax is Standard Practice
A. If author, and/or readers, have any kind of a business
background, they would find this unusual to even write a story
about. This is standard practice.

B. If the authoer has little, or no, business education, there is this
thing called journalism, which requires a tad bit of research, to
determine if this is a news worthy story.
Posted by Thomas, David (1947 comments )
Reply Link Flag
Cnet, the title is disengenious
>he company has been seeking royalties from
>accessory makers that want to display a "Made
>for iPod" logo on their products.

So let me get this straight. I create a product and a trademark for it. I take it to market, it sells well. Then others build accessories for my product, and use my trademark on their collateral.

A. It is my trademark they are profiting from.
B. They don't need to use the trademark.
C. If they do use my TM, they pay me a royalty.

What makes this an "iPod tax?" Answer, nothing. It is standard business practice.
Posted by R. U. Sirius (745 comments )
Reply Link Flag
Cnet, the title is disengenious
>he company has been seeking royalties from
>accessory makers that want to display a "Made
>for iPod" logo on their products.

So let me get this straight. I create a product and a trademark for it. I take it to market, it sells well. Then others build accessories for my product, and use my trademark on their collateral.

A. It is my trademark they are profiting from.
B. They don't need to use the trademark.
C. If they do use my TM, they pay me a royalty.

What makes this an "iPod tax?" Answer, nothing. It is standard business practice.
Posted by R. U. Sirius (745 comments )
Reply Link Flag
Well look at it this way
There is vast benefit from open interfaces for all kinds of devices. Have you ever lost your TV remote? Didn't you like being able to run up to the store and buy a universal remote that worked on your TV? And what did it say on the back of the remote box: works on Samsung, Sony, Toshiba, etc TVs and VCRs. It actually IS necessary to list the devices (even though they're trademarks) that the remote works with in order for a purchaser to have any idea if it works with their device.

Apple has every right to ask companies to pay them 10% of the money. The companies have every right to ignore them and work out the interface for the iPod socket on their own. Reverse engineering for interoperability is perfectly ok legally, especially for consumer electronics and things like remote controls. Look at off brand ink cartridges that list which models they work with, universal remotes for tvs and garage doors, etc.
Posted by wbrianwhite (12 comments )
Reply Link Flag
Think about it a bit more...
TV makers don't object to 3rd-parties selling universal remotes which operate with their products because TV makers want to sell their *TV's* primarily, and just aren't that interested in selling remotes as stand-alone products in the first place.

If Apple *really* wanted the iPod peripherals market to itself it could simply choose to make the peripherals itself, right? It could choose to hoard its trademark for itself exclusively, right?

What Apple wants, however, is for other companies to invest their own time and money in developing 3rd-party hardware support for the iPod so that Apple doesn't have to invest in them, but then Apple spoils it all by demanding a cut of their profits. For Apple, the phrase "you scratch my back and I'll scratch yours" has no meaning; at Apple it's "You scratch my back or else get the hell out."

It's just plain old short-sighted greed we're seeing here on the part of Apple--a company that doesn't know what phrases like "long term" and "market building" mean. If Apple understood the dynamics of things it would be a far larger company than it is, by at least an order of magnitude, imo.
Posted by Walt Connery (89 comments )
Link Flag
Well look at it this way
There is vast benefit from open interfaces for all kinds of devices. Have you ever lost your TV remote? Didn't you like being able to run up to the store and buy a universal remote that worked on your TV? And what did it say on the back of the remote box: works on Samsung, Sony, Toshiba, etc TVs and VCRs. It actually IS necessary to list the devices (even though they're trademarks) that the remote works with in order for a purchaser to have any idea if it works with their device.

Apple has every right to ask companies to pay them 10% of the money. The companies have every right to ignore them and work out the interface for the iPod socket on their own. Reverse engineering for interoperability is perfectly ok legally, especially for consumer electronics and things like remote controls. Look at off brand ink cartridges that list which models they work with, universal remotes for tvs and garage doors, etc.
Posted by wbrianwhite (12 comments )
Reply Link Flag
Think about it a bit more...
TV makers don't object to 3rd-parties selling universal remotes which operate with their products because TV makers want to sell their *TV's* primarily, and just aren't that interested in selling remotes as stand-alone products in the first place.

If Apple *really* wanted the iPod peripherals market to itself it could simply choose to make the peripherals itself, right? It could choose to hoard its trademark for itself exclusively, right?

What Apple wants, however, is for other companies to invest their own time and money in developing 3rd-party hardware support for the iPod so that Apple doesn't have to invest in them, but then Apple spoils it all by demanding a cut of their profits. For Apple, the phrase "you scratch my back and I'll scratch yours" has no meaning; at Apple it's "You scratch my back or else get the hell out."

It's just plain old short-sighted greed we're seeing here on the part of Apple--a company that doesn't know what phrases like "long term" and "market building" mean. If Apple understood the dynamics of things it would be a far larger company than it is, by at least an order of magnitude, imo.
Posted by Walt Connery (89 comments )
Link Flag
These Apple fanatics....
I can understand the fanfare from these guys every time Apple
comes out with a "NEW AND IMROVED" product. But this
fanaticism is going too far...

If microsoft wants a piece of cake from the XBox accessory
makers, they are monopolistic vaporware (Read soft/hardware)
makers trying rip-off 90% of fools. But, when Apple Computers
surviving on the success of $200+ music player is trying to
squeez more money out of consumer, that is a standard
buisiness practice.

God... why are these folks on CNET fora if they think this article
is not newsworthy. Guys, like it are not, whether it is about
Microsoft or Apple- new is news. If you think these articles are
not news, don't waste your time posting comments. Go, to
Appleinsider.com or thincksecret.com (are wherever the hell
apple fan boys read news) and post all you want.
Posted by indrakanti (90 comments )
Reply Link Flag
I quite agree
Strangely enough, although I've been an Apple
fanatic since I started using Macs back in '85, I
find myself agreeing with you wholeheartedly
on this issue.

I understand that Apple owns patents on it's
dock design and thus anybody replicating a
connector should possibly pay a royalty, but it
seems these days that BIG business is all
about squeezing smaller players and
consumers dry through use of patents, IP
rights and outright market dominance.

Whether this be Apple or the evil empire of
Darth Gates these business practices are
plain wrong and perhaps if more Mac-lovers
and general Apple fans made this clear to
Apple then it might stroke home harder...

Occassionally Apple try to sweeten the blow -
in this case promising to honour deals they're
striking with accessory companies by keeping
the dock connector (or an adapter) standard
for the forseeable future, yet this doesn't
change the fact that squeezing their support
market is not on.

Apple would argue that the accessory market
only exists because of the iPod, and whilst
this is true on one level, it is also true to say
that the iPod market has been expanded and
pushed to it's lofty heights by the
ever-increasing range of add-ons which make
it a much more versatile and modular device
than many of it's rivals. Apple shouldn't forget
this.
Posted by M-RES (28 comments )
Link Flag
These Apple fanatics....
I can understand the fanfare from these guys every time Apple
comes out with a "NEW AND IMROVED" product. But this
fanaticism is going too far...

If microsoft wants a piece of cake from the XBox accessory
makers, they are monopolistic vaporware (Read soft/hardware)
makers trying rip-off 90% of fools. But, when Apple Computers
surviving on the success of $200+ music player is trying to
squeez more money out of consumer, that is a standard
buisiness practice.

God... why are these folks on CNET fora if they think this article
is not newsworthy. Guys, like it are not, whether it is about
Microsoft or Apple- new is news. If you think these articles are
not news, don't waste your time posting comments. Go, to
Appleinsider.com or thincksecret.com (are wherever the hell
apple fan boys read news) and post all you want.
Posted by indrakanti (90 comments )
Reply Link Flag
I quite agree
Strangely enough, although I've been an Apple
fanatic since I started using Macs back in '85, I
find myself agreeing with you wholeheartedly
on this issue.

I understand that Apple owns patents on it's
dock design and thus anybody replicating a
connector should possibly pay a royalty, but it
seems these days that BIG business is all
about squeezing smaller players and
consumers dry through use of patents, IP
rights and outright market dominance.

Whether this be Apple or the evil empire of
Darth Gates these business practices are
plain wrong and perhaps if more Mac-lovers
and general Apple fans made this clear to
Apple then it might stroke home harder...

Occassionally Apple try to sweeten the blow -
in this case promising to honour deals they're
striking with accessory companies by keeping
the dock connector (or an adapter) standard
for the forseeable future, yet this doesn't
change the fact that squeezing their support
market is not on.

Apple would argue that the accessory market
only exists because of the iPod, and whilst
this is true on one level, it is also true to say
that the iPod market has been expanded and
pushed to it's lofty heights by the
ever-increasing range of add-ons which make
it a much more versatile and modular device
than many of it's rivals. Apple shouldn't forget
this.
Posted by M-RES (28 comments )
Link Flag
Look at it backwards, though...
This is where I think Apple has traditionally dropped the ball...and it's no different with the iPod.

Just how much more attractive will the iPod be to propspective purchasers if it is surrounded by a host of reasonably priced and superbly functional 3rd-party devices? Is it beyond the pale to suggest that an abundance of 3rd-party hardware support may indeed actually help Apple sell more iPods in the first place? Gee, who'd a thunk it?

There are so many examples of how this monolithic thinking within Apple has cursed the company that I scarcely know where to begin...how about with Firewire, for starters? Apple all but ensured Firewire would never become the standard it could have been when it decided to charge manufacturers a licensing fee to use it--and when Apple finally reversed itself it was far too late and royalty-free standards like USB from Intel had already usurped it and saturated the market. I always found it supremely ironic that Apple picked USB for the iMac, no doubt because it didn't have to pay Intel for the privilege...;)

This is Apple's congenital defect, seems to me. The company is constitutionally unable to see other manufacturers within its markets as anything but leeches and parasites who are always seeking gain at Apple's expense. Such companies are never viewed as "partners" in a growing market. Apple expressed the same sentiments when it massacred the fledging Mac clone companies long before they might've helped grow the Mac market. This kind of tunnel vision and "me first" thinking is precisely why Microsoft has never had to worry about Apple as a competitor.
Posted by Walt Connery (89 comments )
Reply Link Flag
Look at it backwards, though...
This is where I think Apple has traditionally dropped the ball...and it's no different with the iPod.

Just how much more attractive will the iPod be to propspective purchasers if it is surrounded by a host of reasonably priced and superbly functional 3rd-party devices? Is it beyond the pale to suggest that an abundance of 3rd-party hardware support may indeed actually help Apple sell more iPods in the first place? Gee, who'd a thunk it?

There are so many examples of how this monolithic thinking within Apple has cursed the company that I scarcely know where to begin...how about with Firewire, for starters? Apple all but ensured Firewire would never become the standard it could have been when it decided to charge manufacturers a licensing fee to use it--and when Apple finally reversed itself it was far too late and royalty-free standards like USB from Intel had already usurped it and saturated the market. I always found it supremely ironic that Apple picked USB for the iMac, no doubt because it didn't have to pay Intel for the privilege...;)

This is Apple's congenital defect, seems to me. The company is constitutionally unable to see other manufacturers within its markets as anything but leeches and parasites who are always seeking gain at Apple's expense. Such companies are never viewed as "partners" in a growing market. Apple expressed the same sentiments when it massacred the fledging Mac clone companies long before they might've helped grow the Mac market. This kind of tunnel vision and "me first" thinking is precisely why Microsoft has never had to worry about Apple as a competitor.
Posted by Walt Connery (89 comments )
Reply Link Flag
 

Join the conversation

Add your comment

The posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.

What's Hot

Discussions

Shared

RSS Feeds

Add headlines from CNET News to your homepage or feedreader.