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Apple spends a bundle on iPod ads

Hundreds of millions of dollars spent on creating a buzz for the music player is reflected in threefold increase in sales.

Ina Fried Former Staff writer, CNET News
During her years at CNET News, Ina Fried changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley.
Ina Fried
2 min read
How much do all those iPod commercials cost?

It's a bundle. Apple Computer spent $287 million on advertising in its last fiscal year, up nearly 40 percent from the $206 million it spent a year earlier. And the company spent $193 million in the year before that, according to its annual report, filed Thursday with the Securities and Exchange Commission.

U2 singer Bono was featured in
Apple's iPod ads last year.

The ad spending, though significant, is far less than the billions of dollars spent each year by the very largest advertisers--companies such as consumer products giant Procter & Gamble and automakers such as General Motors and Ford.

And, though its spending is a lot for a tech company, Apple has also seen a significant spike in its sales, particularly the heavily marketed iPod music player. The company sold $4.5 billion worth of the players in its fiscal year, a more than threefold increase over the prior year.

"They're getting great bang for the buck," said Piper Jaffray analyst Gene Munster. "To be who they are, it's important to have cool ads out there."

However, Munster said Apple also can depend on word of mouth to sell its products. "The reason they get such great leverage from their ad campaigns is that they have products that people want to talk about."

In addition to boosting its ad budget, Apple is investing more in research and upping its capital spending. The company said it plans to spend $390 million in capital spending this year, up 50 percent from the $260 million spent last year, much of which went to Apple's retail store effort. Research and development costs for last year were $534 million, up 9 percent from the prior year.

"Apple is clearly focused on continuing its innovation," said Sam Bhavnani, an analyst at San Diego-based market research firm Current Analysis.

Apple's regulatory filing also contains an update on various legal matters, including its ongoing dispute with Apple Corps, the Beatles' record label, as well as a host of other pending lawsuits. The Apple v. Apple case is slated for trial in a British court during the last week of March.

Meanwhile, Apple disclosed that it has settled a dispute with Tiger Direct, which sued the company in April for its use of the "Tiger" name to describe Mac OS X 10.4. "The parties have reached a settlement," Apple said in the filing. "Settlement of this matter did not have a material effect on the company's financial position or results of operation."

An Apple representative was not immediately available to comment further.