Profiting from broken iPods

July 27, 2006|By MCCLATCHY-TRIBUNE

MIAMI -- Since the iPod debuted in 2001, Gregg Radell has used five of the music and video players. He lost one, another broke, a third ran out of storage space, and he decided to replace the fourth. Each time, he bought a newer model.

Sensing a market in refurbishing rather than replacing the devices, the Miami businessman started PodSwap.com about 18 months ago. The company allows customers to credit the value of used iPods - even if they're broken - toward new or repaired ones. Customers also can trade in their iPod for its cash value. Podswap.com has handled 5,000 iPods, Radell said.

Radell said the demand is so high that he limits his advertising on Google. "We can get 1,500 inquiries over the weekend," he said.

In the booming online iPod repair business, PodSwap.com is a small player.

At least 12 firms operate in the market. One, iPodMods.com, fixes about 24,000 iPods a year. Another, iPodResQ.com, repairs 250 a day - albeit on its "biggest days," according to its owner - in a 15,000-square-foot warehouse in Olathe, Kan.

Brandon Jones, owner of BrokeniPods.com in Orem, Utah, is only 21, yet a year and a half after starting his business, he fixes 200 to 400 iPods a month. Only now is he drawing up a business plan. He said the average price of a repair is $100.

Firms that previously fixed other computer parts also have entered the industry, and iPod repairs now make up the majority of their business.

Analysts and repair shop managers said the industry is growing because iPods are easy to break and tough to repair. It helps that iPod's maker, Apple Computer, is reluctant to repair broken players, they say.

Radell said "the single weakest link" is the iPod's hard drive. "When they're being carried around and being tossed up and down, they go through such a variety of environments that I think the hard drive has a tendency to fail," he said.

The newest iPod, the Nano, avoids that criticism because it sports flash-based memory - similar to that of a cell phone - rather than a hard drive. But it is prone to breakage, Radell said. Then there's the battery, which is difficult for a user to replace without help.

"It's the Corvette and not the tank," said Aaron Vronko, business manager at iPodMods.com in Kalamazoo, Mich., which has grown from two to 12 employees in slightly more than two years. "It looks sleek and works well and doesn't hold up to a lot of damage."

On Internet bulletin boards, there are a slew of complaints about the iPod. The support discussion boards on Apple's Web site, www.apple.com, also are filled with complaints.

Natalie Kerris, an Apple spokeswoman, said the popularity of the iPod speaks for itself.

"With more than 50 million iPods sold worldwide, the vast majority of our customers are extremely happy with their iPods," she said, adding that an iPod is designed to last four years.

Several groups have sued Apple, alleging the device is defective. Last August, Apple settled a class action lawsuit in which plaintiffs claimed Apple had misrepresented the durability of iPod batteries.

Another class action lawsuit is pending in Los Angeles, charging that the screen of the new iPod Nano breaks or scratches with regular use.

But several analysts said the problems have more to do with the popularity of the iPod and the tendency of users to abuse them than with Apple's manufacturing policies.

Fifteen percent of iPods will fail within a year, estimated Rob Enderle, principal analyst at the Enderle Group in San Jose, Calif. He said that's roughly comparable with other small electronic devices, such as cell phones. Nevertheless, he said, cell phones are much easier and cheaper to repair.

Apple's Kerris said iPods have a failure rate of less than 5 percent, which she said is "fairly low" compared with other consumer electronics.

"As with any complex consumer electronic product, they can be broken," she said. "For example, they can be dropped or mishandled."

What bodes especially well for third-party repairers is Apple's warranty policy, Enderle said. All new iPods come with a one-year warranty, but the warranty does not cover damage caused by the user.

Harvey Rosenfield, president of the Foundation for Taxpayer & Consumer Rights in Santa Monica, Calif., which is suing Apple over the Nano, said Apple charges a $29.95 "shipping and handling fee" on all warranty repairs performed six months after the date of purchase. After the warranty expires, Apple will replace an iPod for $249; a Nano, $189.

If the problem is the battery, the price is lower.

"Apple's view is they want the customer to buy a new one on a regular basis," Enderle said.

But Kerris said Apple has been consistently recognized for its customer service, and iPod owners can get in-person help at the company's stores.

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