Analysts: Brand appeal keeps iPod sales surging
Apple’s iPod line has gone months without an update. It’s been nearly a year since the portable music player added new capabilities, such as the ability to play video, or appeared in a new form factor, like the slimmed-down nano. In the rapid-fire world of technology toys, that’s usually the sign of a product line that’s gotten long in the tooth.
And yet, iPods continue to fly off the shelves just as fast as Apple can make them.
The reason for this conventional wisdom-defying turn of events? Analysts and trend watchers credit the iPod for finding a market that isn’t as focused on recent product updates as much as it is having one product that “just works.”
“The reason people are buying [iPods] is to play music, and it does that very well,” says Josh Rubin, editor in chief of Cool Hunting, which tracks consumer trends. “The Macworld [Expo] keynote-watching, blog-reading, Apple obsessed person will watch for the refresh. But the broader consumer base is just interested in having a music player that's easy to use.”
No updates, no problem
Aside from the updated U2 iPod, which added video-playback capabilities in June, all of the other iPods released since last October have been refreshes to existing lines. The iPod nano got a February update when Apple released a 1GB version. The iPod has been stuck on its fifth-generation incarnation since the fall; 30GB and 60GB models continue to sell at the same $299 and $399 prices they were introduced at. Similarly, the iPod shuffle has never seen a refresh since its launch in January of 2005, though Apple has cut the price on its flash-based player.
However, the lack of activity hasn’t seemed to affect sales. Earlier this month, Apple reported it had shipped 8.1 million iPods during its fiscal third quarter. That’s a 32 percent increase over its year-ago quarter, when the company shipped 6.1 million iPods.
The third quarter also saw Apple’s third best quarter ever in terms of iPod sales—topped only by the first quarter of this year when Apple sold 14 million iPods, and the second quarter of 2006 when it sold 8.5 million.
One key to this might be that the iPod has transcended the traditional market that Apple and other technology products typically reach. With nearly 60 million units shipped, the device has crossed over from the technology market into the realm of a general consumer product, analysts say.
“Digital music players are becoming mainstream,” Cool Hunting’s Rubin said. “It’s no longer on the outer edge of the long tail.”
Another key to the continued growth could be the shorter time consumers are waiting to upgrade their music players. A May 2006 report from Robert Semple of Credit Suisse First Boston noted that the lifecycle of an iPod has dropped from two years to 1.5 years. This makes Apple less dependent on finding new consumers to go out and buy iPods, according to Semple.
“The key takeaway is that if any company can accelerate its product replacement cycle, it becomes less dependent on new user penetration for growth,” Semple wrote.
Mike McGuire, research vice president at market-research firm Gartner offers another explanation: Many consumers are still making the switch to digital from physical media. And that’s helping fuel strong iPod sales even in the absence of updated models.
“Over the last several versions [Apple] hit some sweet spots in the market, but it’s still a new marketplace,” McGuire said. “I think a big chunk of this is that the online music industry and digital online media is still relatively young in the minds and experience of a lot of consumers I think a lot of people may have had portable CD players, and resisted the first three to four years of the iPod onslaught.”
Meanwhile, analysts say the iPod brand has become so synonymous with the digital music player that when average consumers decide to make the transition to digital music, they look for an iPod rather than consider the iPod product cycle or other MP3 players.
“It’s similar to Band-Aids and Kleenex and Rollerblades, where the brand has become synonymous with digital music players in consumers eyes,” Rubin said.
The iPod may be synonymous with portable digital music players in most shoppers’ minds, says Jupiter Research analyst Michael Gartenberg, there’s still an important distinction to be made. “Kleenex is a generic brand for all tissues. You go to Walgreens and any box of tissues is ‘Kleenex.’ ‘Tivo’ is a generic term for DVR, any DVR is a ‘Tivo,’” Gartenberg said. “‘iPod’ is not generic for an MP3 player. Woe unto the consumer who bought something else as a gift thinking they were buying an iPod. It has not become a generic product; it’s a very specific product, from a very specific company, with white headphones, and heaven forbid the consumer erred and got that wrong.”
Despite the iPod’ strong continued sales, however, many analysts expect to see an update to the product line this fall in time for holiday shopping. That product, whatever it may be, could well be a complete replacement for one or more products in the iPod line, Gartner’ McGuire said.
“As they did with the mini to nano, [Apple] reset the rules, at the height of a product’s popularity,” McGuire added. “And they did that for one very important reason: If the competition gets close, and if you have something to pull out of your pocket that’s as good or better, then you kill it. And you do what a lot of companies haven’t done or can’t do, or are afraid to do, and eat your own young. If you really want to stay ahead and keep your competition one step behind you all the time, then when they start aiming for that famous product, you take it out and replace it with something as good or better.”