Halloween has barely passed us by, and Thanksgiving has yet to arrive, but there is already a big red ribbon tied across the top of the Apple Store which can mean only one thing: ready or not, the holiday shopping season is upon us and Apple wants you to stuff at least a few stockings with nanos, shuffles and video iPods. If the analysts Playlist spoke with are correct, many of you will do just that.
The Christmas shopping season can make or break many retailers and products. Even a product as successful as the
iPod has to have strong sales at the end of the year, and for the previous few years it has done so. Apple banks on those end-of-year sales, and made no secret of the fact that it released its new line of iPods in time for the holiday season.
But this season comes with many questions that Apple hasn’t had to answer in previous years. The biggest of these is whether or not the market has reached a saturation point. The iPod has enjoyed “it” gadget status now for at least two consecutive holiday seasons, and has been on sale even longer than that, since 2001.This presents three challenges for Apple, (plus one other, unrelated, challenge) that the company must face if it is to have a strong quarter.
For the first challenge, upon which the next two are contingent, the company must continually re-invent its product line in order to hang on to its cool credentials. Apple cannot allow Sony, Creative, or any number of other competitors to win consumers’ mindshare with a newer, flashier gizmo. The iPod must remain atop of the gadget heap. Second, Apple must go out and find new customers who have not already purchased an iPod. This challenge becomes increasingly difficult with every iPod sold, especially as many consumers will never purchase an iPod.
Finally, Apple needs for its existing iPod owners to go out every few years and buy a new one. These can be
iPod mini owners who want more capacity, owners of second-generation models who want something with a smaller form factor, or even a fifth-generation (5g) iPod owner who wants a
shuffle to take jogging. The important thing is that Apple has to keep the product compelling enough that when its time to go out and get a new player (or even better, before that time comes) consumers think “iPod” and not “iRiver.”
According to the analysts Playlist spoke with, it would appear that Apple has met all three of those challenges and can expect solid sales leading up to the New Year.
“It will be another strong holiday season for the iPod,” Ross Rubin, director of industry analysis at NPD Techworld, told Playlist. “Apple has its best lineup yet and several strong competitors, notably HP and Rio, have dropped out from a year ago. We’ll continue to see accelerating growth this holiday season compared with last year as there’s still a lot of greenfield in this market. The iPod with video may also entice owners of earlier hard drive-based models to upgrade as well.”
And there are still plenty of new customers out there as well, notes Michael Gartenberg, vice president and research director for Jupiter Research.
“The market doesn’t seem to be anywhere close to a saturation point,” said Gartenberg. “We’re getting to a penetration that’s reaching the mass market but Apple has done a good job reinvigorating the product line—particularly with the iPod nano and video iPod, a lot of those devices are going to the install base.”
One method Apple has relied on to attract new consumers to buy iPods has been by going after different market segments. Not everyone needs, or can afford, a
60GB iPod with all the bells and whistles. For some, an iPod shuffle will do just fine.
But while Apple has continually introduced new iPod configurations, this year saw a major increase in that activity, with the release of three new iPods with radically redesigned form factors. The iPod shuffle, nano and full-sized 5G iPod (with video) all came out since last Christmas, and all appeal to different types of consumers.
“There’s definitely some overlap in the different segments and Apple is always trying to tempt you to be sold up to the next highest price point,” said Gartenberg. “For example, the 1GB shuffle, for a little more money, Apple says ‘we can get you into a low-end nano.’ Essentially you’ve got the shuffle being focused on the thriftiest ends of the scale, they want the iPod and they want the cachet. And an iPod is whatever Apple says it is.”
“The targeting of different demographics was more explicit with the mini,” said Rubin, “where the color schemes skewed to younger buyers and women. The nano will still appeal to the more style-conscious, while the full-sized iPod buyers will be more driven by features and price-performance. That leads to a de facto segmentation between women and men. The shuffle, of course, remains aimed at that value buyer.”
nano, analysts predict, will be Apple’s big seller this year, that crosses the most boundaries.
“The nano comes in really at the sweet spot. Most consumers have 1000 or less in their collection ,” Gartenberg explains. “And the form factor is unmatched in the marketplace. There is no reason to think that the nano is going to sell as well if not better [than the mini].”
The final, unrelated challenge we referred to earlier is a different sort of bird than the others: lawsuits. Just before the holiday season began,
Apple was hit with a class-action lawsuit claiming that the nano screen scratches too easily. Apple had already addressed the issue,
telling MacCentral that the screens are exactly the same as those found on the fourth-generation iPod, yet the suit pressed forward, eventually becoming
international in scope.
It’s the second time Apple has faced an iPod-related class-action suit—
it settled another dealing with battery issues just this June. So how will this new suit affect the iPod brand? Apple has little to fear, say analysts.
“Awareness of the lawsuit or the issues around it won’t deter many buyers and strong brands and products have thrived through far worse legal travails than the iPod faces,” said Rubin.”
“One thing about this country is that anyone can sue anyone else for just about anything,” notes Gartenberg. “I think we’ll see zero effect. It’s hard to imagine these lawsuits having an impact on anyone other than lawyers.”
Mathew Honan is a San Francisco-based writer and photographer. He writes regularly about iPods and digital audio for Playlist.
For more on the iPod, please visit the
iPod Product Guide.