Apple iPhone: Spawning an economy

Consumers are eagerly waiting to get their hands on Apple's upcoming iPhone. But a number of small accessory makers are already cashing in.

With buzz growing around the iPhone's anticipated launch in June, accessory makers are getting a jump on the market by unveiling cases, docking stations, speakers and other offshoot products weeks and even months in advance.

Since Apple announced the upcoming release of its iPod-cell phone hybrid in January, third-party manufacturers -- including many small business -- have been jockeying for position in the highly competitive accessories market.

ezGear, a Murray, Utah-based iPod-accessory maker, began offering three iPhone cases in early May, while several lines of ready-for-market cases were showcased at a consumer electronics show in Japan as early as April. Other products that are already available include a car cupholder craddle by Griffin Technology and a scratch-proof screen protector by Invisible Shield, among several dozen others.

Despite having introduced the iPhone in January, Apple hadn't received approval from the Federal Communications Commission for the device until May 17.

"In my experience in this market, I've never seen such a big anticipation for a product launch," says Andrew Green, the creative director of Digital Lifestyle Outfitters, or DLO, a Charleston, S.C.-based accessory maker. "I don't blame smaller manufacturers for trying to beat the rush," Green says.

DLO, which was bought by Philips in April and is partnering directly with Apple to produce iPhone accessories, had pictures of its own silicone cases leaked online two months ago, Green says. "The pressure out there from people to get photos of the iPhone and anything related to it is incredible," he says.

That pressure has been building up since the beginning of the year, when Steve Jobs declared at the Macworld Expo in San Francisco that Apple would launch the iPhone in June, giving accessory makers an unusually wide five-month window to design and market docking stations, carrying cases, speakers, and other products.

While Apple produces its own line of accessories, the company has largely ceded the market to third-party manufacturers.

According to New York-based ABI Research, the cell phone accessories market alone is expected to generate $32 billion in revenue this year, growing steadily to over $80 billion by 2012. About 77 percent of that revenue growth will come from after-market accessories, as opposed to in-box accessories, ABI says.

Meanwhile, iPod accessories have quickly grown into a separate $1 billion industry, nearly doubling in size every year. And while much of the growth in both markets is being driven by technology and an ongoing consumer trend for personalization, the biggest immediate boost will come from the iPhone, market watchers say. The iPod already commands more than an 80 percent share of the digital music player market.

"There's a lot of buzz over this," says Rod Schecter, a spokesman for Gomadic, a Herndon, Va.-based charger manufacturer that has already posted an iPhone page on its website. "We felt we needed to put an antennae out there to gauge demand."

While it's unusual for manufacturers to offer accessories before the actual product is available, it didn't make sense to wait in this case, Schecter says.

"Once in a while, there's a product that changes its specs, and we don't want our chargers to cause damage. But we've never had that problem with Apple," he says, adding that iPhone and iPod amps are widely expected to be the same. "If not, our engineers can sort it out very quickly."

In any case, Gomadic has yet to receive any advance orders for its iPhone chargers. That's not surprising, since "no one owns the product," Schecter says.

That doesn't surprise DLO's Green. "I don't know why any one would buy windshield wipers when they don't have the car yet," he says.

Apart from marketing, Green says, there is a very real danger of designing an accessory that's not compatible with the finished product. Apple hasn't released the iPhone's final specs, leaving most manufacturers to rely on industry leaks and other sources -- such as product details contained in last month's FCC ruling. Despite announcing the iPhone in January, Apple has been continually working to develop the actual working technology for it ever since, Green says.

"You have to get it right the first time or you lose valuable time," says Greens. "That's the biggest risk you take for jumping on the band wagon early."

For its part, DLO will officially unveil its products in conjunction with the iPhone launch, which could be as early as June 11, Green says. He believes consumers currently trolling accessory websites are really just looking for pictures and data on the iPhone itself.

Rob Honeycutt, the owner of Zuluworks, a San Francisco-based travel gear manufacturer, says there are other offsetting risks of launching to soon, even in an industry where competitors thrive on being first to market.

"If you're out there way too early, there's a good chance you'll lose a lot of attention as the anticipation grows," he says.

Honeycutt, like many small accessory makers, has promoted Zuluworks cotton canvas iPhone cases on tech blogs and other social networking sites in recent months, even offering a 20 percent "pre-launch" discount.

He decided to unveil the cases at the end of May, figuring Apple would launch in less than a month. "I'm hoping we're hitting it just right," he says. "If you launch too close, you can get lost in the smoke, especially for a little company like ours. For us, it helps to launch at a time when the air is clear."

In any case, Honeycutt says, smaller companies can't afford not to ride Apple's costly marketing hype for all it's worth.

"It's always better to pull the trigger too early," Honeycutt says, "instead of too late."

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