Analysts: iPod nano solidifies Apple's dominance

When Apple Computer released the iPod nano just over a week ago, replacing the popular iPod mini, they effectively solidified their place of dominance in the MP3 player market. While the company has released no official sales numbers, industry analysts have been closely watching the progress of the device.

“Customers are basically doing back flips over this thing,” Gene Munster, senior research analyst with Piper Jaffray, told MacCentral. “People see the ads and they see it on the Web, but until they actually have one in their hand they just don’t get it.”

Munster contacted 20 Apple retail locations and found that all stores were sold out of the 4GB black iPod nano, some stores were sold out of the 4GB white models and none of the stores were sold out of the 2GB models.

“Their grip is getting stronger in the market,” said Munster. “The nano basically gave them another year in the drivers seat.”

It’s the iPod experience

Buying an iPod is more than just purchasing a digital music player; it is a complete experience that no other manufacturer can offer at this time. Sony once enjoyed the iconic status of the Walkman, but they have been unable to successfully move its strategy to the digital market.

“Sony revolutionized portable music with the introduction of the original Walkman, but they were late to market with a digital solution and have been unable to market its portable music solution to create any excitement,” said Technology Business Research Analyst, Tim Deal.

Even though Sony is a huge competitor in the market and has the potential to give Apple strong competition in the future, they are still missing one of the most important factors — the experience.

“Sony is not going to be able to get an edge on this,” said Munster. “It’s not like you are selling a Walkman that you are putting a tape in — you are selling an experience and that’s what Sony doesn’t have right now.”

Tim Deal agrees that the iPod experience is an important factor for Apple.

“The user experience for the iPod is one of its most compelling features,” said Deal. “The fact that I can plug my iPod into my PC or Mac and have the integration between the device, the software and the online service creates a very positive experience.”

The iPod patent

In recent weeks Apple has found itself on the wrong end of two patent issues. First, Apple was denied a patent for some user interface elements of the iPod — the patent office cited a similar claim submitted by Microsoft Corp. five months before Apple’s claim. Second, Creative Labs was issued a patent that describes how files on a digital music player are organized. Creative claims the patent covers not only its own Zen and Nomad jukeboxes, but also Apple’s iPod.

The analysts were not that concerned with the patent disputes and agreed that most consumers won’t give the legal issues a second thought when determining which music player they will buy.

Ultimately, Piper Jaffray analyst Gene Munster, feels that Apple will get around the iPod patent issues.

“You can’t patent the alphabet,” said Munster. “Creative and Microsoft seem to have similar claims and the reality is, there are a lot of variations you can do with the interface. One of two things will happen: Apple will get around the claim or they will tweak their existing interface enough to get around the claim.”

The counter-culture that is Apple

Apple has one of the most recognized brands in the world. The brand stands for different things to different people, but past ad campaigns challenged consumers to “Think Different” — that message is helping the company in the digital music world.

“Apple became a counter-culture phenomenon,” said Deal. “They represented those people that went against the grain and they capitalized on that with the Think Different campaign. They created a cultural computer icon of the Apple brand that represented a completely different type of computer user and that has translated beautifully into the introduction of the iPod. That counter-culture icon dovetails nicely into the idea of digital music. Where do you want to get your music? You want to get it from someone that has symbolically gone against the grain — that’s what music is about; that’s what Rock and Roll is all about.”

One of the most important things that Apple has been able to do since the introduction of the original iPod is have its brand associated with digital music players. When people think of buying a music player, the name that automatically comes to mind is iPod. Simply put, owning an iPod has become a status symbol.

This is what Sony was able to do in the past with the Walkman brand and it is also one of the reasons other companies will have a difficult time removing Apple from its dominant role in the market.

“Apple is so firmly entrenched in the market right now — it would be hard to imagine what kind of misstep it would take on Apple’s part to lose this dominance,” said Deal.

This story, "Analysts: iPod nano solidifies Apple's dominance" was originally published by PCWorld.

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