iPod still leads as 10th birthday nears

By Chris Nuttall/ Financial Times 11/03/11
The 10th anniversary of the first iPod going on sale will be marked next week, with Apple still dominating the MP3 player market. But the company leads a category in serious decline.

More than 300m iPods have been sold since they first appeared in stores on November 10 2001. The technology group had 78 per cent of the US market in August, according to the NPD research firm.

The iPod not only revolutionised digital music players, it also led directly to the creation of the iPhone and iPad and set Apple on a course to go beyond the personal computer and disrupt the media and telecoms industries.

Yet while Apple’s Mac, iPhone and iPad businesses are booming, sales of the iPod – the Shuffle, Nano, Classic and Touch models – fell 27 per cent year-on-year in its September quarter to 6.6m units. It was the 10th successive quarter of declining sales.

Apple still sold 42.5m iPods over the past year and other MP3 players are faring far worse. Microsoft announced last month that it had discontinued its Zune player after five years and was focusing its mobile music strategy on Windows Phone smartphones.

It is smartphones and tablets that have now largely subsumed the MP3 music player’s functions and melded it with new features such as gaming, video, web access and mobile apps.

“In one sense, the iPod is past its peak, but in another sense, it’s just evolved into the iPhone,” says Tim Bajarin, Apple watcher and consultant with Creative Strategies.

He maintains that Apple has been “shrinking by design” the iPod’s market share in order to promote the iPhone, although Apple says the later products were created because it had foreseen a decline for its iPod Classic, Nano and Shuffle models.

Apple’s iPod has turned the recording industry on its head and revolutionised the way consumers listen to music. This graphic explores the history and impact of Steve Jobs’ brainchild.
“This is one of the original reasons we developed the iPhone and the iPod Touch,” Peter Oppenheimer, chief financial officer, told analysts when first reporting declines in iPod sales in July 2009. “We expect our traditional MP3 players to decline over time as we cannibalise ourselves with the iPod Touch and the iPhone.”

The success of the iPod Touch, which is more of an iPhone without 3G chips than an iPod and is described by Apple as the world’s number one portable game player, has masked precipitous declines in sales of the other, purer music models. It accounts for more than half of reported iPod sales.

Mr Oppenheimer said the iPods still represented a great business that would last for many years. With iPods starting for as little as $49 for the Shuffle, they have also served as a first introduction for many people to Apple’s products, with around half of iPod sales still going to first-time buyers of iPods.

“The iPod is what started the ‘halo effect’ for other Apple products – people would come into the store for an iPod and they would see the Macs and later the iPhones,” says Mr Bajarin.

Tony Fadell, creator of the iPod, says it was originally aimed at bolstering Apple’s iTunes service – digital jukebox software for the Mac launched earlier in 2001 that could transfer songs to early MP3 players such as the Rio and Creative Labs brands.

“I got a call and they said there’s this great thing we’ve got called iTunes and we’ve tried all these MP3 players and they’re horrible, so maybe you can help us design one,” he says.

Steve Jobs chose one of three designs Mr Fadell presented around April 2001.

The scroll wheel became the central feature of the first iPod and Mr Fadell says the simplicity of its design forced his team to simplify all the actions associated with the device, moving more complex functions to iTunes and making it an easy device for consumers to use.

He still feels its influence and has distilled the essence of the iPod in his latest product just launched – the Nest smart thermostat, which consists of just a moving dial with a colour display at its centre.

The latest iPod Nano, like versions of Sony’s Walkman player, has had the fitness market in mind with its design – it is tiny, with a built-in pedometer and a clip to attach it to clothing.

“Sports activities are one clear application, where people need something small and light that straps to you,” says Roger Kay, analyst with Endpoint Technologies. “I think the market for that could go on forever.”

Mr Fadell also sees a future for the iPod as long as people love music.

“It may morph into a different end-product, but I think the iPod, in terms of playing all your music wherever you are, will never go away,” he says



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