Apple (NASDAQ:AAPL) sells a ton of its iPhone, iPad, and iPod Touch mobile devices and that has resulted in a very competitive market for protective cases. With a glass display and a glass back, dropping an iPhone 4 or iPhone 4S seldom ends well, so customers are willing to pay for a third-party protective case.

Because part of the Apple allure has always been its design aesthetic, there’s a reluctance to stuff these glass-and-stainless-steel gadgets into a cloth sack — cases are expected to be attractive and form-fitting, and to provide access to each button, port, lens, and screen.

How much money is there to be had in selling iOS accessories? The Fiscal Times projects that market will be worth between $5 billion and $6 billion by 2015. In fact the revenue being generated by iOS cases was significant enough to attract the attention of a really big shark — Apple itself — when the company introduced the Smart Cover along with the iPad 2 in 2011.

The virtues of big sales and a small lineup

There is a market for protective cases smartphones and tablets that run Google‘s (NASDAQ:GOOG) Android operating system too, but it doesn’t compare to the one that’s developed around Apple’s devices. Fragmentation is the primary reason. Although the term is typically used to describe the challenge facing app developers (with so many version of Android in circulation and manufacturers’ habit of putting customized user interfaces over top of the OS, the market is “fragmented” in terms of how many devices will be capable of running a given app), it also applies to form factor.

While Apple currently sells only three models of iPhone (the iPhone 3GS, iPhone 4, and iPhone 4S) and two iPad form factors, there are dozens of different companies producing Android handsets and tablets, each of which typically offers multiple models. Samsung (PINK:SSNLF) alone sells 136 different mobile phones in the U.S., along with five different tablet sizes. That is a fragmented market.

Making cases that are specific to any given Android device — even a top seller — means accepting the risk of having a very limited market. In the Android world, third-party cases are more likely to be less expensive generic versions that lack the tailored look of a customized case, but accommodate a wide range of devices.

The financial case for cases

Circling back to iOS protective cases, Apple sold 156 million iOS devices in 2011, bringing the total for the iOS platform to 316 million units. When the iPhone 4 was released, a Red Herring reporter noted that 80% of buyers of the iPhone 3GS bought a case along with their new phone. Only 20% of iPhone 4 buyers did, but Apple was offering free bumper cases along with the iPhone 4 as a solution to a reported antenna issue.

This also doesn’t take into account that fact that many iOS device owners buy multiple cases. Run several hundred million iOS devices through the calculator, multiply by protective cases that typically retail for anywhere from $20 to $60 and you can see how a multibillion market is possible.

Two major risks are faced by manufacturers of iOS cases. Because so many people buy a case at the time of device purchase, there’s a tremendous rush to be the first in stores when a new iOS device is released. This, in turn, can lead manufacturers to turn to the risky strategy of basing a new case on an early stage prototype iOS device that may or may not be legitimate.

The challenges

In 2011, Hard Candy Cases made headlines when it spent $50,000 on new case moulds prior to Apple’s fall iPhone event: the cases were based on a “prototype” iPhone 5, while Apple released the iPhone 4S. The case manufacturer lost 2,000 pre-orders and was stuck with moulds that were junk. It had lost the early adopter sales by having to start from scratch. As Hard Candy says on its website: “We rolled the dice. We took a gamble. No one’s more disappointed that us. It didn’t pay off…”

The other challenge is the short sales cycle. While selling an accessory like a computer mouse is relatively low risk because chances are it will remain compatible through multiple generations of computers, Apple refreshes its iOS devices rapidly enough that the sales-opportunity window is limited — often only a year before being replaced as a featured product.

Changing form factors and even minor changes in button placement often render a previous-generation case useless on new versions of iOS devices. While this works to the advantage of iOS case manufacturers in the sense that new devices mean another round of buying new cases, it also means that product development costs must be recuperated quickly, and educated guesses must be made to avoid being stuck with overstock of cases specific to a device no longer being sold.

Trying to stand out — and stay dry

Sometimes companies take the approach of trying to offer something unique in order to stand above the other protective case manufacturers. Colorado-based OtterBox is a good example. Although it originally produced waterproof gear boxes in 1998, the company has built a reputation for producing ruggedized protective cases for mobile devices, including waterproof versions. Apple cases make up a big part of the company’s product line. OtterBox landed at No. 70 on the 2011 Inc. 500 list with 2010 revenue of $168.9 million and a three-year growth rate of 3,179%.

Specialization also shows the risks inherent in iOS case designs. Several accessory makers, including TAT7, saw a new opportunity in the advanced camera included in the iPhone 4S: underwater photography. By protecting the iPhone with a relatively inexpensive, clear waterproof case, divers (and vacationers) could use their iPhone instead of lugging a costly, bulky underwater camera.

TAT7 took the extra leap of incorporating mechanical buttons on its case, mapped to Apple’s iOS camera icon and home button. This let users completely operate the iPhone 4S as a camera without ever having to remove it from the case, and the mechanical buttons made for much easier operation.

People thought it was a great idea at $84.95. Until Apple released an iOS update that changed how the iPhone’s camera app worked, disabling the TAT7’s clever mechanical buttons. After scrambling, the case maker came up with a workaround, but as CNET reports, this involves the user having to change the iPhone’s system settings (which will impact other functions) and renders one of the three buttons useless.

Given the challenges presented by working with Apple, it’s not surprising that many protective-case manufacturers don’t succeed. There are just so many things that can go wrong. But the lure of the massive and growing Apple accessory market is tough to ignore. OtterBox is a good example of how a third-party accessory manufacturer can diversify, build a reputation, leverage a distinguishing factor, and capture a good chunk of that multibillion-dollar iOS accessory market.