Apple's iPod to hit half-billion sales mark before cool-off

Posted:
in iPod + iTunes + AppleTV edited January 2014
The addressable market for Apple's iPod digital music players is so broad that the company will handily eclipse the 350 million unit sales milestone achieved by Sony with its Walkman players during the 80's and 90's before the first signs of fizzle set in, researchers at JMP Securities say.



Ingrid Ebeling, an analyst at the firm, made the comments in a research note distributed to clients on Wednesday, in which she offered a preview of the Cupertino-based company's fiscal second quarter results due April 25th.



"During Sony’s 15-year reign with the Walkman, the company sold over 350 million units, and we believe that Apple’s addressable market over time will exceed this number given the upgrade and replaceable nature of iPods as well as the overriding trend of consumers’ increasing use of digital media," she wrote. "The net takeaway is that this is a product category that is far from saturated, and we believe well over 500 million units will be sold before the product category hits maturation."



Ebeling said checks indicate that iPod sales fell slightly between the month's of January and February, but attributed the cool-off to unusually strong sales in January as consumers were making use of their iTunes gift cards acquired during the December holidays.



For the three-month fiscal second quarter ended March, the analyst estimates Apple to have sold 10.8 million iPods, or about half as many as it sold during the December quarter. Still, those sales should generate about $1.76 billion in revenue, representing year-over-year growth in units of 33 percent and revenue growth of 18.2 percent.



"First calendar quarter sales in consumer electronics are always the weakest of the year, and we wouldn’t view any perceived weakness as concern for the category and iPods," she explained.



Ebeling was similarly optimistic on EMI's recent decision to make its digital music catalog available to iTunes shoppers without copy protection measures, explaining that the move could act as a buy-in catalyst for consumers who may have previous been deterred by the iPod's closed ecosystem.



Touching on the Mac, the JMP analyst said she is expecting the upcoming release of Leopard to help further grow market share, as consumers may be holding off on a new Mac until they come pre-installed with new operating system. (An AppleInsider poll of over 1500 readers conducted on Tuesday evening revealed that more than 30 percent of respondents are currently withholding their Mac purchases until Apple releases machines with Leopard already installed. An additional 50 percent said they are delaying new Mac purchases as they await new MacBooks (25 percent), new iMacs (17.3 percent), and the MacBook ultra-portable (11 percent).)



"Despite the initial good results of Vista with consumers, Apple’s 'I’m a PC, I’m a Mac' campaign, the success of its 165-store retail strategy, the increasing use of a computer for managing digital media (one of Mac’s many strengths), among other things, are all contributing to expanding market share," Ebeling wrote. "A contact in the education market has confirmed that his district, largely a Windows-based system, is widening its use of Macs."



For Apple's March quarter, the analyst is forecasting Macs unit sales of 1.3 million and revenue of $1,898 million, representing year-over-year growth in units and revenue of 21 percent. "We believe we could be conservative with our average selling price, which we have forecasted to be just over $1,400 compared to $1,500 in the December quarter due to the shift towards higher priced laptops," she added.



In her note to clients, Ebeling also remained bullish on he prospect of Apple TV emerging as "a sleeper hit," saying checks indicate that the $300 wireless media hub is off to a strong start. "So far, reviews have been generally positive, and we believe our forecast of 1.1M units through [fiscal 2008] could be conservative, representing only 2 percent of the broadband Internet households in the US," she wrote. "While we believe the hype around the iPhone is real, we note that the Apple TV does not have nearly as many competitive products on the market as the iPhone will have, and consumers appear to be ready for technologies that bridge the gap between the PC and the HDTV and provide video on demand services."



The analyst reiterated her "Market Outperform" rating on shares of Apple with a price target of $100. Overall, she expects the consumer electronics firm to report second quarter earnings of 59 cents per share on sales of $5 billion, helped by 29.7 percent gross margins.
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Comments

  • Reply 1 of 64
    I'm going to have to disagree...



    The reason the Walkman died is because it played tapes. Tapes died, thus, so did the walkman. Then the Discman rose to power... Now CDs are being laid to waste on account of digital formats. Digital formats will live for a VERY long time... much much longer than a random media format like CDs, LPs, tapes, 8-tracks or whatever have you. As long as people use computers to store their music, computer-syncing players will have a place in society. I would say that variations of the iPod (and other music players) have another 20 years at least.



    (first post, w00t)



    -Clive
  • Reply 2 of 64
    markw10markw10 Posts: 356member
    I've always wondered with time if a better digital format with come along. MP3's aren't as good as CD quality but it was all about which format caught on as well as probably space issues. Now that memory is cheaper I'd expect another format with time to catch on for higher quality. Still mp3 is so large that this will take some time and without a doubt digital won't be going anywhere anytime soon.
  • Reply 3 of 64
    abster2coreabster2core Posts: 2,501member
    Quote:
    Originally Posted by Clive At Five View Post


    I'm going to have to disagree...





    About what?
  • Reply 4 of 64
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by markw10 View Post


    I've always wondered with time if a better digital format with come along. MP3's aren't as good as CD quality but it was all about which format caught on as well as probably space issues. Now that memory is cheaper I'd expect another format with time to catch on for higher quality. Still mp3 is so large that this will take some time and without a doubt digital won't be going anywhere anytime soon.



    "CD quality" just refers to the uncompressed audio on a CD, which has no bearing on the actual studio recording.



    While MP3 is a lossy format--removing bits of data from the high and low end of the audio spectrum prior to compressing--it can be encoded with a high enough quality to be indistinguishable to "CD quality".



    There are already many formats available. Some are Lossy: MP3, AAC (which iTunes uses but doesn't own) & WMA; and some are Lossless: FLAC & Apple Lossless. The increase in storage capacity hasn't yet put MP3 down, it has only made higher bit-rate MP3s more appealing.



    It is my opinion that Apple's dominance in online digital music and the new DRM-free 256kbps tracks will finally start to chisel away at MP3's ubiquity.
  • Reply 5 of 64
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by Abster2core View Post


    About what?



    The next paragraph he wrote explained what he disagrees with.
  • Reply 6 of 64
    brianusbrianus Posts: 138member
    Quote:
    Originally Posted by Clive At Five View Post


    I'm going to have to disagree...



    ...As long as people use computers to store their music, computer-syncing players will have a place in society. I would say that variations of the iPod (and other music players) have another 20 years at least.




    Convergence could doom stand-alone music players long before then, just as it has already made PDAs virtually extinct, but as long as you're including iPhone and like devices in the "music player" category, I can't see them disappearing until neural implants become the norm..
  • Reply 7 of 64
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by brianus View Post


    ...until neural implants become the norm..



    Then I'm definitely sticking with Apple. I'd rather have a simple glowing Apple logo on the back of my neck than an Intel Inside sticker next to a Windows Neuro Ultimate sticker.
  • Reply 8 of 64
    desarcdesarc Posts: 642member
    the reason apple will sell so many units so much faster than the walkman is that we are throwing away two year old iPods to buy the latest and greatest. i think i owned two walkmans in a 10 year timeframe. i'm already on my 3rd iPod in 5 years.



    of course there's eBay and resale, but we throw away WAY TOO MUCH. i'm obsessed with the latest and greatest - gonna get that iPhone on day1 and sell my [red]nano. our society is driving us to keep up with the jonses, and we're throwing non-disposable electronics into landfills faster and faster. [end of environmental tyrade, i'm as guilty as anyone]



    this does sound like another post generated by apple shareholders saying "buy our stock! it's gonna soar!"
  • Reply 9 of 64
    SpamSandwichSpamSandwich Posts: 29,330member
    This "analysis" is based on what's in the market today, obviously it does not reflect products on the drawing boards and in the testing phase at Apple. As Apple continues to broaden their offerings to include even more high-end and low-end customers it will enable them to improve their market penetration... And the last time I checked, the world's population was a little larger than when the Walkman was king, which only gives Apple more opportunity to segment and dominate this market.
  • Reply 10 of 64
    piotpiot Posts: 1,346member
    ""During Sony?s 15-year reign with the Walkman, the company sold over 350 million units"



    Well according to Sony's own press release, they sold 240 million units over 20 years!



    http://www.sony.net/SonyInfo/News/Pr...199907/99-059/

    It's all there in the first paragraph.
  • Reply 11 of 64
    it also depends on what is classified as an iPod. i could not make a phone call on either of the two walkmans or the discman i owned, but the iPhone, in its present configuration, can take the place of a nano. does that mean each iPhone counts in the iPod column too? this is especially relevant since iPhone sales will cannibalize some iPod sales.
  • Reply 12 of 64
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by piot View Post


    ""During Sony?s 15-year reign with the Walkman, the company sold over 350 million units"



    Well according to Sony's own press release, they sold 240 million units over 20 years!



    http://www.sony.net/SonyInfo/News/Pr...199907/99-059/

    It's all there in the first paragraph.



    Nice find.



    Quote:
    Originally Posted by Numbuh One View Post


    it also depends on what is classified as an iPod. i could not make a phone call on either of the two walkmans or the discman i owned, but the iPhone, in its present configuration, can take the place of a nano. does that mean each iPhone counts in the iPod column too? this is especially relevant since iPhone sales will cannibalize some iPod sales.



    I consider in the general bubble of the iPod as it has all the same functionally of the iPod. I really just see it as the evolution of the iPod with an interbreeding of a cell phone.
  • Reply 13 of 64
    melgrossmelgross Posts: 30,509member
    Quote:
    Originally Posted by Clive At Five View Post


    I'm going to have to disagree...



    The reason the Walkman died is because it played tapes. Tapes died, thus, so did the walkman. Then the Discman rose to power... Now CDs are being laid to waste on account of digital formats. Digital formats will live for a VERY long time... much much longer than a random media format like CDs, LPs, tapes, 8-tracks or whatever have you. As long as people use computers to store their music, computer-syncing players will have a place in society. I would say that variations of the iPod (and other music players) have another 20 years at least.



    (first post, w00t)



    -Clive



    Ok, you aren"t disagreeing with the basic premise, though you may think you are.



    The only thing you are saying that is different in any significent way is the long timeline, which I think is impossible.



    20 years is a VERY long time, these days. It isn't like when 78's first came out, and lasted almost 60 years, or lp's, which lasted about 40, or even cassettes, which lasted about 30. Cd's are slowly being phased out right now.



    You might notice that each new format lasted less time than the one before it.



    Whatever we will be using 20 years from now won't be iPods in any way that we now think of them. I have no idea what they will be, just that they will be something unexpected right now.



    Will Apple be the leader there as well? Possibly. Possibly not.
  • Reply 14 of 64
    melgrossmelgross Posts: 30,509member
    Quote:
    Originally Posted by solipsism View Post


    Then I'm definitely sticking with Apple. I'd rather have a simple glowing Apple logo on the back of my neck than an Intel Inside sticker next to a Windows Neuro Ultimate sticker.



    That's a good one!
  • Reply 15 of 64
    tbagginstbaggins Posts: 2,306member
    Quote:
    Originally Posted by brianus View Post


    Convergence could doom stand-alone music players long before then, just as it has already made PDAs virtually extinct, but as long as you're including iPhone and like devices in the "music player" category, I can't see them disappearing until neural implants become the norm..



    I dunno... the old "multifunction devices will kill off the iPod" saw has been rattled around seemingly forever now. I don't think it was true the first time I heard it and I don't think it's true now. Rather, I tend to agree with the point of view of the The Economist that dedicated music players and multifunction devices will both live happily together for the foreseeable future.



    For every teched-out geek I see braying that his uber-complex high-end Nokia does "Evvvverrrryyythingggg!", I see about a half-dozen Wal-Mart shoppers who are ecstatic that their phone "can take pic-chers, and can do that text thing too".



    For a lot of people, simplicity isn't just a virtue, it's a necessity. \



    Of course, that is the beauty of the iPhone. It makes the multifunction device more accessible, but even the iPhone, shocking as it sounds, may be too complex for some people, being more than they need (functionality-wise), or want (price).



    ..
  • Reply 16 of 64
    tbagginstbaggins Posts: 2,306member
    Quote:
    Originally Posted by markw10 View Post


    I've always wondered with time if a better digital format with come along.



    Some already have, but they failed... Super Audio CD, for example.



    Yeah, there's stuff in the near-term that looks nice... 256kbps AAC is pretty good, so is lossless, but most of this is based around a 44.1KHz sampling rate that many audiophiles find inadequate. Listen to classical music through a really good home audio system, and things like cymbals can easily sound like a kid wailing on a trash can lid. Of course, most people's systems don't have the kind of resolution that really highlights this (and most people don't listen discerningly to classical or jazz).



    Still, as storage capacities soar, you'd have to think that at some point someone will try to avoid being commoditized and/or will want to differentiate themselves by offering higher quality. At some point the sampling rate will be upped dramatically, and even the audiophiles will be happy.



    (Side note/digression: Strange as it sounds, the true 'lossless' media was vinyl. Every movement of the cutting head was captured in the physical media (the vinyl), so assuming it was done right, all the information was there, pretty much- unlike digital, which samples the audio thousands of times per second and plays 'connect the dots'.



    The b*tch with vinyl was getting all the info back upon playback. Your average turntable was bad at that (poor bearings, low tolerances, poor isolation/susceptibility to NVH), and thus sounded markedly inferior to CD. But really good turntables? They outdid CDs handily. It was very shocking to me the first time I heard a Goldman Studietto or a Linn Sondek turntable A-B'd against a CD player on a good system... on good recordings, vinyl kicked CD's ass, completely and forcefully.



    But of course, not many people want to buy a $1500-2500 turntable, and $10,000+ audio system, do they? )



    .
  • Reply 17 of 64
    superbasssuperbass Posts: 688member
    Quote:
    Originally Posted by desarc View Post


    the reason apple will sell so many units so much faster than the walkman is that we are throwing away two year old iPods to buy the latest and greatest. i think i owned two walkmans in a 10 year timeframe. i'm already on my 3rd iPod in 5 years.



    Don't forget that sony walkmen were pretty much indistinguishable from other leading brands' players - I'll bet the number of portable tape players sold since 1980 is well over a billion or more when you think of all the different brands... Most of asia is still on cassette, and walkmen clones are everywhere in Shanghai...
  • Reply 18 of 64
    lantznlantzn Posts: 240member
    Quote:
    Originally Posted by Clive At Five View Post


    Digital formats will live for a VERY long time... much much longer than a random media format like CDs, LPs, tapes, 8-tracks or whatever have you.





    I have to agree. The only thing I can think of that would be an improvement on the small compact digital format would be a wireless solution. You would have a small wireless device that would pipe your music to you. Your music would be stored on your computer or a server with your files. The world would have to be heavily plugged into high bandwidth by then.
  • Reply 19 of 64
    irelandireland Posts: 17,206member
    Quote:
    Originally Posted by Ingrid Ebeling


    "The net takeaway is that this is a product category that is far from saturated, and we believe well over 500 million units will be sold before the product category hits maturation."



    What this person fails to realise is that by the time the iPod reaches anywhere near the 200,000,000 mark both the nano and it will become some sort of iPhone, though the shuffle or similar may hang round for a while after that. Convergence is the way of the future, and most of Apple's players will become phones in the next couple of years, so they will lose the iPod moniker for iPhone and iPhone nano or whatever they call it. The yet-to-be-released iPod video will last for a while after that too, but very probably eventually Apple will make phones of all shapes and sizes.
  • Reply 20 of 64
    Quote:
    Originally Posted by melgross View Post


    Ok, you aren"t disagreeing with the basic premise, though you may think you are.



    The only thing you are saying that is different in any significent way is the long timeline, which I think is impossible.



    20 years is a VERY long time, these days. It isn't like when 78's first came out, and lasted almost 60 years, or lp's, which lasted about 40, or even cassettes, which lasted about 30. Cd's are slowly being phased out right now.



    You might notice that each new format lasted less time than the one before it.



    Whatever we will be using 20 years from now won't be iPods in any way that we now think of them. I have no idea what they will be, just that they will be something unexpected right now.



    Will Apple be the leader there as well? Possibly. Possibly not.



    See, I think what your argument is failing to take into account is that we are reaching a optimal form of music storage and music portability. Each prior form of media was replaced by something superior to it. Cassettes, for example, had terrible sound (tape hiss!!!!) and no "skip" feature... They were replaces with CDs, which had pristine sounds AND a skip feature... plus they didn't have to be flipped, and they could play a compareable amount of music.



    In our most recent case, until the early 90s it wasn't feasible to store all of your music on your computer. Either the bitrate would have to be terrible or you would have, like, 6 songs. Now it is plausible, as we all know, since most of us have music collections that challenge 20 GB or more. In addition to that, songs can be recorded/encoded with such precision that the human ear is unable to detect inaccuracies. While these compression rates aren't as commonly used and (by today's standards) take up a lot of space, such won't be the case in 5 years. In 5 years, we'll be seeing at least 5 TB HDDs... and for the case of an iPod-sized 1.8" HDD, possibly up to a TB. This will be ample space to encode my currently 20 GB collection of tunes at a bitrate which I will be unable to distinguish from a live band. It's not absurd to assume the iPod will evolve to encompass this ability... and take a few others. Many predict that the iPod will take on PDA-like features of the iPhone as early as this fall - but it will be able to do these things AND be the PMP that it is today.



    Obviously the Walkman wasn't a static device from its inception... It gained abilities... the power to listen to the radio, the power to play tapes - some might even say that the discman was an extension of the walkman (although it wasn't very pocket-friendly) - nevertheless, it died as the way we listen to music radically changes from analog/physical-media-playing to digital-music-playing. The only thing portable about PMPs is the player itself, not the media. This represents a monumental change in how we own/listen to/experience music.



    And this, I believe, is music/media in its near-optimal form.



    Others are correct, however... Things won't again change until my "iPod" is a tiny Wi-Fi card in my brain, controlled by thought, which I can use to call up and play media in the inside of my contacts and echo into the insides of my ear cavities. Until then, the basic premise of listening to music will remain the same.



    -Clive
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