On iPod pricing, competition and the value of a full package

I've noticed a couple reports from analyst firm Gartner Research that claim A le's pricing on the new iPods betrays an increased interest in profit margi at the expe e of market share. These reports focus on the iPod nano's pricing of $199/4GB and $249/8GB as being a bit high, given their estimated materials cost of $90 and $130, re ectively. Admittedly, similar players from competitors such as Creative do beat out A le in pricing; the ZEN V 4GB player is only $159.99 - but what rulebook dictates that a higher price on one particular member of a product family (by and far the most popular member) definitively mea the company doe 't care about market share?

These reports don't seem to mention anything about the nano's big brother (unle Mac and Playlist used some eaky cut and pasting techniques), where A le is competing quite well: they dro ed their 30GB iPod price to match that of Creative's 30GB ZEN Vision:M ($249), and the 60GB ZEN Vision:M (if you can find it on their site), is reportedly $399 - a full $50 more expe ive for 20GB of le storage.

Gartner's claim that competitors like Creative and Microsoft's new Zune could start chomping at the iPod's market share, based solely on the profit margi of one member of the family, also doe 't seem to take into account the value of the full package that A le's iPod offers, such as seamle , 'it just works' integration with a leading digital media store (maybe Gatner simply forgot that the existence of A le's margin-thin digital store lea fairly heavily on the popularity of the iPod).

While there are plenty of co umers out there to whom a $40 difference between an iPod nano and a ZEN V can (understandably) make or break a purchase, the are still other important factors co umers can evaluate for a DAP purchase. Unfortunately, some of these elements aren't capable of being factored into an analyst's equatio , but A le is clearly still banking on their weight with a co umer's dollar.