CrunchGear

Doesn’t look that iPod fail.
iPod is selled in many countries that dont have the iTunes Music Store working.
So both have a different paths at this time. I think the goal is make the iTunes Music Store service avaliable on the same countries that the iPod sales.

Uhm, first of all, that argument makes absolutely no sense. Why should the iPod fail because Apple hasn’t yet sold more than 20 songs per iPod? It simply doesn’t matter at all. The question here is: Did the iTMS fail?

Uhm, no. First of all, it’s the fifth-biggest music seller in America, right behind (and soon surpassing) Amazon. Second, Apple sells iPods all over the world, but only has music stores in a few of them. Third, the iTMS is growing, and it continues to grow. It takes a bit of time for people to change (and the iTMS, as well as the recording companies, will have to change, too - the price for music is still too high, and artists aren’t getting enough money).

Finally, no, the iTMS is not a loss-leader. It’s profitable. Yeah, Apple uses the iTMS to get people to buy iPods, and they’re not making a whole lot of money with it (and probably don’t intend to at this point in time). However, it *is* profitable.

Zune will take off? Well, let’s first see how the Xbox does this round. Right now, the Zune is nothing more than vaporware.

C’mon: no hating on Apple just makes for no fun. Besides, it is a target-rich environment, regardless of what the fanboys say.

Now, I would argue that the iTMS probably breaks even–recall the coverage when the industry was pushing Jobs/Apple to increase the per song price. Additionally, the unspoken rule here is that the contents of users’ iPods is not always legally acquired tunes. How many folks out there still have some of the tunes that they acquired via the old Napster?

The problem, in my opinion, with the iPod is the iTunes lock-in coupled with the incremental innovations. Look at the Shuffle: there are players that are more feature-rich than the Shuffle with a similar footprint–an FM tuner and a display being two missing features. That said, I think the iPod’s market-share will grow thanks to the burgeoning number of accessories for it–granted some of them really have little practical value. Add to that the connectivity that is becoming standard in cars, and it all but guarantees an iPod world.

I welcome the Zune to hopefully jar Apple and the iPod. Much like M$ needs Linux and Apple to push it to innovate in the OS space, Apple needs some competition to ensure that customers truly get the very best.

This is really amazing stuff. Flash memory will greatly improve both speed and performance on laptops and eventually on desktops as well. Fewer moving parts = fewer problems. Eventually, hard drives will be used almost soley as a backup medium. Thanks for the continuing coverage on this.

That’s an interesting calculation and I’m surprised no one did the math earlier. But I agree that the issue is really more targeted at iTunes than the iPod. My understanding is that Apple makes very minimal margin off song downloads and the majority of their profit is coming from the iPod hardware. I think that the number also shows how many people have illegal downloads or ripped tracks from their CD collections to add to their iPods. The one big problem for the iPod and other hard drive players is that at some point the hardware is going to far exceed the needs of the average user. At that point, the market becomes saturated and their is little incentive to upgrade which then impacts the profitability.

As to the Zune, I wouldn’t be so skeptic. I believe that Microsoft is going to make a tremendous marketing push, has some unique and attractive features, and that it will appeal to many people especially those not in the Apple cult. But I doubt that the Zune will make a dent in the iPod market for some time if ever. Only time will tell.

Ding, ding, ding….Let’s get it on!

@Jason

You didn’t think the iBreathalyzer was practical? LOL.

Great post and I agree entirely.

Oops. Previous comment was meant for the flash memory post.

I don’t think Apple has much to worry about. They have amazing market strength, and a lot of goodwill out there. The numbers alone don’t take that into account. I am not so sure the whole I-Pod / I-Tunes lines are loss-leaders, but I think they are priced reasonably and provide great service (generally).

I love the automatic assumption on the research orgs’ part that people who buy iPods get all their music from the iTMS, and that people who buy iTMS only put them on iPods. Neither is true.

I have an iPod. A lot of us pirate music because, even at iTMS prices, we still can’t afford to actually purchase and iPod’s worth of it. At the iTMS standard price of 99 cents per song, my current collection would have cost me more than $4,000. Trust me, I do NOT have that kind of money to spend on music, not even stretched out over the years.

I have spent a good chunk of change on TV shows at the iTMS, however, and I don’t watch any of them on an iPod or in iTunes.

Hi John and readers of the Crunch Gear blog

First, thanks for mentioning my blog in context of this discussion. I’d like to make it clear, that there are two threads of an argument. One is that iPods are being superceded by new MP3 playing musicphones. The other is that iTunes is underperforming.

In my fourth book, Communities Dominate Brands, we make iTunes (and iPod) as one of our excellent case studies of how to create new market space. So we don’t mean in any way to suggest iTunes is a failure.

But I am “guilty” for launching the analysis a year ago, that musicphones will overtake iPods as the prevalent mass-market music consumption device. That has already happened, today musicphones outsell iPods at a rate of over 6 to 1. For those of your readers who are based in America who may find this incredulous (against all possible conventional wisdom and all visible evidence?) recognize that iPods launched in 2001, but the first music service to sell directly to cellphones was launched in South Korea in 2003. Yet today worldwide more music is sold to phones than to iPods. Twice as many people consume music on phones (worldwide) than on iPods. And in advanced countries like in Sweden you can buy full track MP3 songs direct to your cellphone for as little as 8 cents per download. And leading manufacturers like Nokia, Samsung, LG, Motorola and SonyEricsson (Walkman branded) musicphones already outperform iPod shuffles and Nanos in storage ability etc.

The full story is at my blogsite at the link you’ve posted. But yes, we don’t suggest that iTunes is underperforming. We also by the way, don’t suggest iPods will disapper. We only make the point that much like a Ferrari or Rolls Royce - or indeed a Macintosh PC - the iPod has over the past 12 months become a high-end niche product. The mass market went to the cellphone makers. This year the industry will sell 250 million musicphones. Apple will be very lucky to sell 40 milllon iPods..

Tomi Ahonen :-)
four-time besttselling author
lecturing at Oxford University on digital convergence
founding member Wireless Watch, Engagement Alliance, Carnival of the Mobilists and Forum Oxford
website http://www.tomiahonen.com

The source of the “research” was Gartner…a shill company for Microsoft if there ever was one. Does anybody really take Gartner seriously?

>But I am “guilty” for launching the analysis
>a year ago, that musicphones will overtake
>iPods as the prevalent mass-market music
>consumption device. That has already
>happened, today musicphones outsell
>iPods at a rate of over 6 to 1.

The first sentence and the second sentence talk about different things. Music phones outsell iPods 6:1 because there are so many phones that can play music. Mine can. Most of my friends (btw, I live in Europe, not the USA) own phones which can play music. Most of my friends also never actually use that feature (except for ringtones, but in my opinion, that doesn’t count as “music consumption”) and own iPods in addition to the phones.

Music phones aren’t automatically “music consumption devices” if people don’t actually use these phones to consume music.

>Yet today worldwide more music is
>sold to phones than to iPods. Twice
>as many people consume music on
>phones (worldwide) than on iPods.

If you include ringtones, you’re probably right. But ringtones are a wholly different market from the actual music market.

The iPod is dead! Long live the iPod!

Serioulsy, that iPod case study sounds like pure marketing academia drivel. Yawn.

Hi LKM

Good observations. Certainly not all musicphones will be used for music consumption, but neither are all iPods - some are used for recordings, lectures, podcasts. Others are duplicates - someone buys a new nano and puts the necessary songs onto that and retires the older iPod etc.

The fascinating observation comes from demand. Apple slashed its iPod prices this spring, yet was overstocked and could not move supply. Sales dropped in both the first quarter (down from 14.1 Million to 8.5 Million) and again in the second quarter (down further to 8.1 Million). If that period had also witnessed a downturn in musicphone sales, you could argue that the market was in seasonal decline (or perhaps had peaked) but during the same period, all the major handset makers reported RECORD demand for specifically their musicphones. Bigger demand than for their similarly priced WiFi phones, high end cameraphones, 3G/TV phones etc. Motorola and SonyEricsson (walkman phones) report that their music phones are their biggest sellers. Nokia went futher saying their N-series and musicphones are selling so much beyond expectation they will double their musicphone sales this year. And last year Nokia alone sold as many musicphones as Apple had shipped iPods in its first four years combined. And so forth… The music phone makers all find a strong demand for particularly phones with this feature.

That means, that for most (but certainly not all) new phone buyers the over last 9 months, if they wanted the musicphone variant, they had to wait, or pay extra, or forego the discounts that similar other advanced phones by the same manufacturer would have had.

So currently, I would suggest this buying pattern - and very robust sales of musicphones, suggests most buyers are actually requesting that feature and will therefore mostly attempt to use it.

But equally, not all of the 6 to 1 superiority in sales goes to users who will actually consume music on phones. You are right. I think that even if I get half of them, Apple is in deep doodoo… From a market leader position of 5 to 1, to a minor bit-player at 1 out of every 4?

Separately, you mention ringing tones. Good point, but in fact ringing tones are a huge market - 12 times larger than iTunes worldwide - was over a 5 billion dollar business already last year (when iTunes was worth 400 million dollars). I was not talking about ringing tones. I was talking about real full-track MP3 downloads to musicphones. Even those already outnumber iTunes sales.

Tomi Ahonen :-)

>Certainly not all musicphones will be used
>for music consumption, but neither are all
>iPods - some are used for recordings,
>lectures, podcasts.

Yeah, but assuming that even 10% of all music phones are being used to listen to music is generous (see also Joel Spolsky’s new article about his experience with a music phone). On the other side, it’s unlikely that more than a few percent of all iPods are *not* being used as MP3 players.

>Others are duplicates - someone buys a
>new nano and puts the necessary songs
>onto that and retires the older iPod etc.

Even my G1 iPod is still in use. I gave it to a friend. Most people don’t just stop using iPods and stuff them in a drawer. Even old iPods are still quite valuable.

>I was talking about real full-track MP3
>downloads to musicphones.

…which will then be used as ringtones. And anyway, people *only* buy those songs because the iTMS songs don’t work on most phones. I mean, with most providers, these songs cost like three times as much as the songs on the iTMS.