Generally, Apple has very little use for anniversaries. Recent milestones—like 2006’s
30th anniversary of the company’s founding, the Mac’s 20th anniversary in 2004, and the
iPod’s fifth anniversary last fall—passed without much official to-do from the company. But when
Apple sold its 100 millionth iPod recently, the company made sure not to let the occasion go by without comment.
And for good reason, tech industry analysts say: “Obviously it’s a big threshold for Apple and industry,” said Tim Bajarin, president of high-tech consulting firm Creative Strategies. “ This clearly reinforces Apple’s dominance in the market.”
Both analysts and executives at Apple expect the iPod’s hold on the market to continue, even as more “iPod killers” emerge to take their shots at the music player.
“It’s interesting,” said Greg Joswiak, Apple’s vice president of worldwide iPod marketing. “2004 seems to be when the floodgates of competition opened and that’s the same year we saw our market share soar. The competition had to relate themselves to the iPod—this is one of those rare situations where more competition actually helped us.”
“I don’t think anybody knows what it takes to knock them [Apple] off,” Bajarin said. “They are in a leadership position that is not threatened by anyone.”
With the latest would-be iPod rival, Microsoft’s Zune, failing to make much of a splash—
recent media reports have the Zune losing market share between December 2006 and February 2007—the only questions facing Apple as the iPod surges past the 100 million mark seem to be how the company managed to sell so many devices in the past five-and-a-half years, and whether there’s still room to grow.
The secret of the iPod’s success
There’s little doubt that the iPod strikes a nerve among consumers. “People have an emotional connection with music and the iPod allowed them to reconnect with their music,” Joswiak said. “The iPod is so easy, the emotional connection is preserved—with the competition, the product gets in the way, so the connection is countered by the negative experience of using the product.”
If that’s true, then how did Apple get the formula right? Joswiak credits the company’s ease of use—both with the music player itself and with the iTunes software that connects the iPod to either a Mac or a PC. The total package only became stronger when Apple added digital music sales via the iTunes Store, launched in 2003.
“We’ve always said the music market was very diverse and nearly everybody loves music,” Joswiak added. “It was the matter of making the right product for that broad range of people. Nobody else has the best hardware, software and services—they may have control of one of those items, but we control all of the pieces to the puzzle and that allows us to move quickly in this market.”
What lies ahead
And it doesn’t appear that Apple is resting on its laurels. Starting next month, the company will team up with record company EMI to
offer online music without any digital-rights management technology through iTunes. The DRM-free tracks will sell for 30 cents more than the standard 99-cent downloads, but they’ll also be encoded at a higher bit-rate.
In theory, that could open up the iPod to increased competition. Songs from iTunes that have DRM restrictions will only play on the iPod; DRM-free tracks can play on any device. But Apple is betting its consumers will continue to turn to its music player because of such innovations and enhancements.
“We’ve been driven by the fact we need to make the best products,” Joswiak said. “That’s what is required to be leader in this market. Doing what’s best for the customer is what makes you a leader.”
And analysts think that’s a pretty safe bet. “Apple has stayed on top because they have done a couple of things right consistently,” Creative Strategies’ Bajarin said. “First, they continue to innovate around the style and design of the iPod and second they stay competitive with pricing.”
In fact, says Phil Leigh, president of market-research firm Inside Digital Media, making DRM-free tracks available at iTunes could actually help Apple by driving more music lovers away from peer-to-peer sites.
That’s why analysts like Leigh think Apple will be able to hold on to its dominant share of the music-player market—and perhaps even see a significant boost to the rest of its business. “This is going to be something more than just the doubling of [Apple’s] market share,” Leigh added. “I think it will go from 5 percent to 20 percent. It will have a much more significant affect than what Microsoft have let themselves believe.”
No wonder, then, why the sale of the 100 millionth iPod is more than just a blip on the radar screen.
“It’s a reminder to anyone that seems to have forgotten that people are having a favorable experience with Apple,” Leigh said. “It will very likely will lead to decreasing market share for Microsoft.”