Selling Razors, Selling Blades
Interesting observation at the Daring Fireball website:
Apple has flipped the old Gillette maxim — they’re making money selling the razors (iPods), not the blades. There’s definitely a huge potential upside — big, big bucks — if the ITMS [DTD: iTune Music Store] continues growing at the current rate for a few more years. And it’s hard to imagine that anything even remotely resembling any of the current iPods will still be a high-profit-margin product 10 years from now. But at the moment, Apple’s music revenue and profits are coming from multi-hundred-dollar iPods, not 99-cent songs.