A new marketing model: what is the real product?

There was a time early in the introduction of the desktop computer when it was widely thought that the computer itself could be given away because it was merely a pretext to sell peripherals:  floppy drives, hard drives, monitors, printers and the like.  Many still feel this is the case with inkjet printers where the printer costs a third of the first investment in ink (Lexmark has sold printers through Cosco that cost $39 and the ink for the printer costs $110).

The prototype for this type of marketing goes way back to Gillette and Xerox.  When the first safety razor came out, it was a substitute for a straight razor.  A straight razor was expensive and a safety razor was relatively cheap.  But a straight razor lasted forever, although it required work (sharpening); the safety razor handle lasted forever but the razor insert was disposable and new ones had to be purchase (but they required no work).  So was the product the safety razor or the razor blades one had to buy forevermore to make it work?

Xerox had s imilar situation when it introduced the first copy machines.  Since they were new and expensive, it wasn't clear that they would prove that useful to many offices.  So Xerox provided the option in which a company paid a fixed fee per copy rather than purchasing the machine itself.  As everyone now knows, copy machines generate their own need and Xerox ended up being paid many times over what the machine would have been sold for originally, because they sold copies rather than a copy machine.

This discussion is coming up again with regard to the new iPod: is the iPod the product or are iTunes the product.  Using the Gillette analogy, is the iPod the loss-leader (the handle) and the real product is the iTunes (razors) bought from now on to make the iPod useful?  This site argues that the iPod actually is a product all by itself:

Apple makes very little money from selling songs, but it does make some profit. Apple makes a LOT of profit from selling iPods. So the song is the razor, not the iPod, and that's because the price sensitivity is currently about the content, not the player.

Apple's margins on the iPod Mini are about 30 percent from the retail channel and 60 percent through its own stores, so let's say that's an average of 35 percent or $75 on an iPod Mini. Apple makes about $0.20 on each song. So to make more money from the songs than from the iPods they'd have to sell 375+ songs per iPod. Apple has sold 250 million songs to date and has sold 10 million iPods. That is 25 songs per iPod, not 375+.