According to yesterday’s Q2 analyst conference call, Apple shipped 5.3 million iPods in the second quarter—that’s 58,888 iPods a day, 2,453 per hour, or nearly 41 iPods a minute.
Apple’s CFO Peter Oppenheimer suggested that the newly released iPod shuffle already accounts for about 43 percent of the flash-based MP3 player market and the company continues to dominate the hard drive-based music player space with a whopping 90 percent share of the market. Apple’s music properties (iPod and iTunes Music Store) generated over a third of the company’s total revenue and grew 280 percent compared to the same quarter a year ago.
At the risk of repeating myself,
damn, that’s a lot of iPods.
Naturally, the news caused Apple’s stock to drop over 9 percent as investors did whatever investors do to make logic stand on its head.
As far as I can determine, investors are ignoring the distinct possibility that, barring divine intervention, a worthy competitor to the iPod will arrive just about the time Zambia takes the gold medal in the Giant Slalom. Similarly, they appear to be disappointed that Apple is underrepresented in the MP3-player vending-machine market.
Sure, the iPod has killed every wanna-be MP3 player released in the past three years, and, okay, so other commercial online music services have done little more than keep their lights on and glance nervously at their empty aisles, wondering if maybe someone forgot to unlock the front door.
That makes not a whit of difference to The Investor. The Investor wants the Next Big Thing. Of course, that Next Big Thing in the case of a Sony or Creative is a music player that’s worth a damn. Apple’s already done that and is expected to go one better.
What should that be?
With the iPod shuffle, Apple has filled the one gaping hole in its music player line-up. The entry fee for being an iPod owner is now $99 and from there you can jump in $50 increments to the next better iPod on up to the $449 60GB iPod photo. Apple can continue to increase the storage capacity of its iPods while maintaining their current price, issue new colors, increase play time with better power management, give all iPods a color screen, and offer a few more rounds of $29 accessories, but none of these smack of the NBT.
A video iPod? Better. Apple would be crazy not to be working on some kind of portable video device, but it would be just as crazy to release such a beast without also being able to supply buyers with content to put on it. The stars are aligning in this regard. QuickTime 7 includes a new video codec that produces great looking movies at low bit-rates. Sony’s PSP demonstrates that a good-looking color display capable of showing movies can be placed on an affordable portable device. Increasingly broadband is becoming a household standard and it won’t be long before pulling a gigabyte of data across the Web will be the norm rather than the exception. I would be shocked if Apple and the movie companies haven’t had some serious discussions about licensing and distribution.
The iPod phone? The Motorola/ Apple deal tells us this is already in the works. Other agreements to deliver music to mobile phones show this is no mild flirtation. If you buy the idea that the phone is
convergence device, seamless music delivery to these devices must happen. The Investor might like to see Apple step into this market with the same authority that it did the digital music space.
Or something else? Apple gets a lot of credit for innovation, but what’s often overlooked is that the company also excels at taking crap technologies and turning them into gold. The iPod wasn’t the first MP3 player on the market. There were several of these devices out in the world when the iPod was still in utero. But they were crap—too little storage, dog-slow data transfers, and ultra-funky interfaces. Apple got it right to the point where other companies are in an unenviable position similar to Grok, the prehistoric transportation designer, who learns that Ubgack, the competitor across the swamp, has just invented the wheel.
The safe bet is on choices one and two, but I’m prepared for something out of left field. Where would you put your money?