TMO Exclusive - Average iPod Owner Shelling Out $150 on Accessories, Study Finds (UPDATE)

by , 2:00 PM EST, March 4th, 2005

The average U.S. iPod owner is spending about $150 on cases, cables, adapters and other accessories and there is little evidence that trend will subside any time soon, a consumer survey has found.

A survey by the market research firm Envisioneering Group found that American consumers who own an iPod are spending on average half of the value of their digital media device on accessories. The survey averaged the price of an iPod at $300 and was taken before the release of the iPod shuffle in January.

"This is an amazing uptick in iPod accessory sales and it doesn't appear to be slowing down," Richard Doherty, research director at the Envisioneering Group, told The Mac Observer. "The iPod is a different phenomenon among electronic products. Music is a reflection of our soul and the iPod is becoming an emotional extension of people."

"We're very glad to see those numbers," said Brian Van-Harlingen, senior technology manager at Belkin Corp., one of the larger iPod accessory makers, based in Compton, Calif. "That's are a real affirmation of the market."

Jason Litchford, marketing director at Griffin Technology, believes the number might be "a little high", but doesn't argue with the fact that iPod accessory sales are higher than ever.

"Our iPod products are selling well," Mr. Litchford said. "Sales are good and customers are responding to our products and prices."

Mr. Van-Harlingen said the survey numbers are a "little higher" than his own company's estimates, but do reflect the demand for iPod add-ons. He said Belkin surpassed two million in iPod accessories shipped near the end of 2004 and is expecting to nearly double that number in 2005.

Mr. Doherty said that an earlier consumer survey taken in the first half of 2004 showed iPod owners were buying less than $30 worth of accessories for their players, or less than 10%. "As more people bought iPods and more accessories hit the market, consumers shelled out more to make their players more stylish and easier to use," he commented.

Mr. Van-Harlingen believes what is driving most of iPod accessory sales are customers buying speakers from makers such as Bose, Altec-Lansing, Creative, JBL and Audio-Technica for anywhere from $150 up to $300-plus.

For its survey results, Envisioneering Group, of Seaford, N.Y. interviewed thousands of consumers leaving major electronic retailers like Best Buy, Wal-Mart, Circuit City and Sears in cities between Boston and Washington as well as between San Francisco and San Diego.

The 'iPod economy'

Mr. Doherty believes the iPod is becoming its own "economy" with 10 million units sold.

"That works out to about a $3 billion economy," he said. "So we believe accessories are capturing about $1 billion of that."

Mr. Doherty said the "iPod economy" is a fairly unusual situation and is only comparable to a similar consumer trend his company found between 2000 and 2002.

"We saw this same thing with Palm-based PDAs," Mr. Doherty told TMO. "People were buying PDAs averaging about $350 each and spending about $175 on all kinds of accessories. That trend continued for some time."

Mr. Doherty believes iPod accessory sales will creep above $150 per device in the U.S. sometime in 2005, and stay steady for at least a year.

"I don't think you'll see the average hit 200% of each average iPod sold of $300, but it will creep up a little," he said. "Demand will stay strong, for sure."

So what makes the iPod and its owners such a successful combination?

"It's an interesting market," Mr. Van-Harlingen said. "An iPod owner is almost 'pre-qualified' as somebody who's willing to pay a bit of a premium for usability, style and fashion. They certainly aren't shy at spending money."

Mr. Doherty agrees.

"They aren't shy in spending on something that to them really isn't that expensive," he said.

"Once you're over the $300 hump in pricing of a premium player, it's pretty easy to go ahead and buy top-shelf peripherals for an iPod," Mr. Litchford said. "What's another $50 bucks?"

Mr. Doherty also believes a major reason for the success of iPod accessories has been Apple's use of the multi-use connector that allows users to adapt their iPod to everything from speakers, to FM transmitters and power chargers.

"The ability to use one type of cable with a multi-functional connector has made it easy for manufacturers to make a family of devices and expand their product range," Mr. Doherty said. "This has offered consumers choice and led to another prime benefit of the iPod over its competitors."

Mr. Doherty believes that if any competitor can challenge the dominance of the iPod, Sony might have a chance, but only if its convinces accessory makers to adapt their current iPod offerings to their soon-to-be-released and improved media players.

Accessories: The deciding factor in buying an iPod?

"Accessories are a major selling point to a music player," Mr. Doherty said. "Sony has to realize this and convince companies like Griffin (Technology) and Belkin to make their products for their players. The numbers prove this is essential for successful sales."

Mr. Van-Harlingen agrees that anyone who wants to challenge Apple and the iPod is going to have to partner with accessory makers to have a good success rate.

"The public perception is that the market leader has a variety of options for consumers to buy," he commented. "When you walk into a retail store and there's six feet of iPod accessories, consumers are going to gravitate toward the iPod."

Of benefit to Apple in trying to sell iPod's is the willingness among retailers to sell accessories because of their enormous profit margin -- anywhere from 30% to as high as 150%.

"Retailers don't make a lot of money on MP3 players," Mr. Van-Harlingen said. "What encourages a retailer to sell one MP3 player over another may actually be how many things they can attach to that sale."