iPhone, iPod touch "cannibalizing" traditional iPod market

Posted:
in iPod + iTunes + AppleTV edited January 2014
Sales of traditional MP3 players like the iPod nano, iPod shuffle and iPod classic continue to decline, as the enemies of these Apple products -- the iPhone and iPod touch -- come from within the same company.



Peter Oppenheimer, Apple's chief financial officer, said the company had expected that consumers would lose interest in traditional MP3 players over time, and that was one of the reasons the iPhone platform was created.



"We expect our traditional MP3 players to decline over time," Oppenheimer said during Tuesday's earnings report conference call, "as we cannibalize ourselves with the iPod touch and the iPhone."



Later, Chief Operating Officer Tim Cook also used the word "cannibalization" to define the iPhone chipping away at traditional iPod sales.



Realizing that iPod sales would slow, Apple has lowered channel inventory of its lineup by about 400,000 units. Cook said this was partially due to the shrinking market for traditional MP3 players.



Together, the iPhone and iPod touch have sold 45 million units. Year over year, sales of the iPod touch increased 130 percent in the third quarter of the 2009 fiscal year.



"Customers continue to embrace this outstanding platform experience, which has been increasingly enhanced by the tremendous offering for the App Store," Oppenheimer said.



While Apple has portrayed a future of diminishing returns for traditional iPods, the market is hardly dying. In the third quarter, Apple sold 10.2 million iPods -- more than the total number of sold iPhones and Macs combined.



Apple also controls 70 percent of the MP3 player market, and announced Tuesday that 50 percent of customers who buy an iPod are new to the brand.



"We have a great business that we believe will last for many, many years," Oppenheimer said of traditional iPods, "and which we will continue to manage well and offer the world?s most innovative products."
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Comments

  • Reply 1 of 40
    ajpriceajprice Posts: 320member
    I don't think the iPod classic has that long before it goes to the big Apple Store in the sky. The next iPod touch will probably be 64GB, and the cycle will probably continue in the future with 128GB etc. The current iPod classic is 120GB, iPod games have been completely outclassed by the iPhone App Store, and that hard drive is (comparatively) heavy to carry around. I don't think you can even get a hard drive based Walkman or Creative player now.
  • Reply 2 of 40
    galleygalley Posts: 971member
    I'm surprised the classic has lasted this long.
  • Reply 3 of 40
    teckstudteckstud Posts: 6,476member
    So the new Shuffle sales are declining? Why am I not surprised.

    I extremely doubt that an iPhone or iPod Touch would contribute to poor Shuffle sales. It's simply the new Shuffle itself- totally different markets and one bad design.
  • Reply 4 of 40
    Quote:
    Originally Posted by Galley View Post


    I'm surprised the classic has lasted this long.



    Hey, my 160GB classic is almost full - when will the new classic come out???
  • Reply 5 of 40
    gqbgqb Posts: 1,934member
    OK, all together now (so the 'analysts' can hear us)...



    THE iPHONE AND TOUCH ARE iPODS!!!!



    Sorry for shouting.
  • Reply 6 of 40
    javacowboyjavacowboy Posts: 864member
    I find it interesting that Apple is generally regarded as a company that sells products to high-end markets (ex Macs are generally regarded as a "premium" product vs. regular PCs) yet it sells to the low (shuffle), medium (classic, nano) and high (touch) ends of the music player business.



    The iPhone is a device aimed squarely at the high end of the mobile phone market. It definitely does not cater to the low end, and is arguably just now beginning to cater to the medium end (iPhone 3G 8Gb model).



    If Apple expects to do business in all levels of the MP3 player market, then it will most certainly start losing share when low-end phones begin to offer higher storage (4 Gb and up) and reasonably user friendly music player capabilities. The fact that no low-end phone manufacturer offers such a feature doesn't make a whole lot of sense, since adding reasonably user friendly music playback and decent storage shouldn't be that complicated. The only thing I can think of is that none of the service providers have added these features to their checklist of features required from phones.



    Still, it's only a matter of time before they do. So what does Apple plan to do if it loses the low end of the music player business. Do they care?
  • Reply 7 of 40
    javacowboyjavacowboy Posts: 864member
    Quote:
    Originally Posted by johnmcboston View Post


    Hey, my 160GB classic is almost full - when will the new classic come out???



    Just out of curiosity, what do you have on there? Tons of video and lossless music?
  • Reply 8 of 40
    nasseraenasserae Posts: 3,167member
    iPod Touch is the future. The Classic will go away once the Touch gets the 128GB flash drive. We will end up with the Shuffle, a different Nano, and the iPod Touch. It wouldn't surprise me if Apple dropped the next iPod Touch price to $199.
  • Reply 9 of 40
    Quote:
    Originally Posted by JavaCowboy View Post


    Just out of curiosity, what do you have on there? Tons of video and lossless music?



    A few hundred CDs. music videos. some long podcasts. I'm not at home, so I can't give the breakdown - will post later if interested...
  • Reply 10 of 40
    macvictamacvicta Posts: 346member
    Does the shuffle re-design have anything to do with the decline in iPod sales?
  • Reply 11 of 40
    Quote:
    Originally Posted by NasserAE View Post


    iPod Touch is the future. The Classic will go away once the Touch gets the 128GB flash drive. We will end up with the Shuffle, a different Nano, and the iPod Touch. It wouldn't surprise me if Apple dropped the next iPod Touch price to $199.



    The touch would have to come out with shuffle-like headphones with the remote control on them. The biggest nicety is I can change volume and songs by touch, so I don't have to take the classic out of my pocket. Plus, with the Touch, I have to unlock it every time it goes to sleep; the classic and nano you don't have to worry about that.
  • Reply 12 of 40
    nasseraenasserae Posts: 3,167member
    Quote:
    Originally Posted by johnmcboston View Post


    The touch would have to come out with shuffle-like headphones with the remote control on them. The biggest nicety is I can change volume and songs by touch, so I don't have to take the classic out of my pocket. Plus, with the Touch, I have to unlock it every time it goes to sleep; the classic and nano you don't have to worry about that.



    The new shuffle will probably come with those headphones (similar to the ones with iPhone 3GS). With the new Apple remote headphones you can do everything without having to take your iPhone (and maybe the next Touch?!) out of your pocket. Also, I am certain that Apple will include the voice command feature in the new touch.



    Why do you have to unlock the Touch when it goes to sleep?! The volume control on the Touch and the play controls on the headphones work even when the screen is sleep.
  • Reply 13 of 40
    dimmokdimmok Posts: 359member
    OFF WITH THEIR HEADS!!! Bring on the next logical path.....iTablet.



    Hoping for a small form factor desktop machine...looking at my G5 tower to my right, I cant help but wonder why its SO BIG....especially when its sits next to my 15" Macbook Pro.....
  • Reply 14 of 40
    aiaddictaiaddict Posts: 487member
    Quote:
    Originally Posted by GQB View Post


    OK, all together now (so the 'analysts' can hear us)...



    THE iPHONE AND TOUCH ARE iPODS!!!!



    Sorry for shouting.



    No they are not. They call the Touch an iPod, but it and the iPhone are pocket computing devices, not dedicated media players. While the iPod success was leveraged to launch the new platform, even Apple treats them as seperate product categories. It makes sense, the market is different, competition is different, customer usage patterns different etc.
  • Reply 15 of 40
    teckstudteckstud Posts: 6,476member
    Quote:
    Originally Posted by MacVicta View Post


    Does the shuffle re-design have anything to do with the decline in iPod sales?



    Well when you get basically mediocre reviews for it that state it's not an improvement over the last model, what do you think?
  • Reply 16 of 40
    al_bundyal_bundy Posts: 1,525member
    Quote:
    Originally Posted by JavaCowboy View Post


    I find it interesting that Apple is generally regarded as a company that sells products to high-end markets (ex Macs are generally regarded as a "premium" product vs. regular PCs) yet it sells to the low (shuffle), medium (classic, nano) and high (touch) ends of the music player business.



    The iPhone is a device aimed squarely at the high end of the mobile phone market. It definitely does not cater to the low end, and is arguably just now beginning to cater to the medium end (iPhone 3G 8Gb model).



    If Apple expects to do business in all levels of the MP3 player market, then it will most certainly start losing share when low-end phones begin to offer higher storage (4 Gb and up) and reasonably user friendly music player capabilities. The fact that no low-end phone manufacturer offers such a feature doesn't make a whole lot of sense, since adding reasonably user friendly music playback and decent storage shouldn't be that complicated. The only thing I can think of is that none of the service providers have added these features to their checklist of features required from phones.



    Still, it's only a matter of time before they do. So what does Apple plan to do if it loses the low end of the music player business. Do they care?







    Low end phones already offer 4gb of storage. Just put in a microSD card
  • Reply 17 of 40
    melgrossmelgross Posts: 33,584member
    Quote:
    Originally Posted by JavaCowboy View Post


    I find it interesting that Apple is generally regarded as a company that sells products to high-end markets (ex Macs are generally regarded as a "premium" product vs. regular PCs) yet it sells to the low (shuffle), medium (classic, nano) and high (touch) ends of the music player business.



    The iPhone is a device aimed squarely at the high end of the mobile phone market. It definitely does not cater to the low end, and is arguably just now beginning to cater to the medium end (iPhone 3G 8Gb model).



    If Apple expects to do business in all levels of the MP3 player market, then it will most certainly start losing share when low-end phones begin to offer higher storage (4 Gb and up) and reasonably user friendly music player capabilities. The fact that no low-end phone manufacturer offers such a feature doesn't make a whole lot of sense, since adding reasonably user friendly music playback and decent storage shouldn't be that complicated. The only thing I can think of is that none of the service providers have added these features to their checklist of features required from phones.



    Still, it's only a matter of time before they do. So what does Apple plan to do if it loses the low end of the music player business. Do they care?



    Apple likes to move on. If they see that a market is moving to saturation, they want to be on something else. While I think that in the long run, there will still be a growing music player market as India and China increasingly move aboard, that could still be a few year off. When they do, Apple will have products for them.



    Meanwhile, cell phone makers sell ten times as many. Even though that's a mature market, relatively, its a big market in total. In addition, the smartphone portion, which is where Apple is competing, was just 10% of that when Apple entered, but is expected to become 75% in a few more more years. The kind of young market Apple likes to enter.



    So what about those cheap iPods? Does Apple care. Sure. Or they wouldn't be selling them. Not everyone can afford an iPhone or Touch.
  • Reply 18 of 40
    bsenkabsenka Posts: 801member
    I don't care if they drop the Classic as long as the Nano's capacity exceeds 160GB someday.



    There will always be a market for large capacity and tactile controls. I literally never use my Touch anymore, because I find the touch controls annoying when I use my iPod on the go. With the Classic, I never have to actually look at the device to adjust the controls, I can keep my eyes on what I'm doing.
  • Reply 19 of 40
    melgrossmelgross Posts: 33,584member
    Quote:
    Originally Posted by AIaddict View Post


    No they are not. They call the Touch an iPod, but it and the iPhone are pocket computing devices, not dedicated media players. While the iPod success was leveraged to launch the new platform, even Apple treats them as seperate product categories. It makes sense, the market is different, competition is different, customer usage patterns different etc.



    Jobs referred to the iPodTouch (remember the name!) and iPhone, as the best iPod Apple ever made.



    Apple doesn't break sales of the Touch out from sales of iPods in general.



    Yes, it's a computer as well.
  • Reply 20 of 40
    Quote:
    Originally Posted by JavaCowboy View Post


    I find it interesting that Apple is generally regarded as a company that sells products to high-end markets (ex Macs are generally regarded as a "premium" product vs. regular PCs) yet it sells to the low (shuffle), medium (classic, nano) and high (touch) ends of the music player business.



    The iPhone is a device aimed squarely at the high end of the mobile phone market. It definitely does not cater to the low end, and is arguably just now beginning to cater to the medium end (iPhone 3G 8Gb model).



    If Apple expects to do business in all levels of the MP3 player market, then it will most certainly start losing share when low-end phones begin to offer higher storage (4 Gb and up) and reasonably user friendly music player capabilities. The fact that no low-end phone manufacturer offers such a feature doesn't make a whole lot of sense, since adding reasonably user friendly music playback and decent storage shouldn't be that complicated. The only thing I can think of is that none of the service providers have added these features to their checklist of features required from phones.



    Still, it's only a matter of time before they do. So what does Apple plan to do if it loses the low end of the music player business. Do they care?



    Tomi Ahonen (see the Nokia Q2 results thread) predicted around 2006 (or earlier, I don't remember) that phones in general would eat the IPod eventually, especially from the low end. Apple itself recognised the same thing, hence the iPhone. And Apple being Apple started at the high end where the biggest profits are.
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