How Apple is Handling the Mature iPod Market

Wow!  Look at how quickly the iPod jumped to Quadrant 3 in Moore’s model!  Apple is now facing market saturation with iPod and, despite very little growth from iPod and a slowing US economy, is managing to do quite well.

iPod with iTunes is a lot like how we sell ink into our printers.  A big difference, though, is that the iPod is priced considerably higher than it costs to make so Apple actually makes money on the device.  Apple also allows users to put content from sources other than iTunes on the iPod without repercussions.  Yet, Apple doesn’t seem to be screaming about people not using iTunes and, in fact, iTunes has recently become the #1 retailer of music.  Why is this?  Well, despite my hatred, iTunes is drop-dead easy to use and at $.99/song or cheaper if you buy the entire album, Apple isn’t charging outrageously for music.   Topping all of this, iPod is a great product that customers love and it seems that Apple has parlayed this love into getting people to buy Macs.

An interesting thing this article talks about is how the different iPod products are highly differentiated.  Let’s look at them:

They look very different, except for the mini and the classic, however, if you compare the size, you will see that the mini is tiny compared to the classic model.  Each product has very different capabilities and memory capacity.

Shuffle — 1 or 2-GB, no screen, all music is shuffled, clips onto clothing
Nano — 4 or 8-GB, screen, small form factor
Classic — 80 or 160-GB
Touch — 16 or 32-GB, touch screen, wireless internet, accelerometers

For instance, the Nano is great for the gym, the mini is cheaper alternative to the classic for those that don’t have a large music collection yet.  The touch is basically a little mini-internet-browser-computer wrapped in a cool music player.  These products clearly speak to different customer wants (nobody “needs” and iPod) and iPod owners have been known to have more than one iPod to meet a lifestyle want.  Unfortunately for us, as houses integrate computers onto a home networks, households only need one networked printer rather that one printer for each computer.  This is great for the consumer, but a change for us because this inherently means, going forward, there will be fewer and fewer install bases for our supplies. (I suppose it’s good that we are de-emphasizing sales in terms of the number of boxes.)

I think the important thing to observe about Apple is how they have taken customer’s interest in a hot product like the iPod to draw people to their stores and to lead customers to explore other Apple products in general.  The iPod experience is quite pleasant and that tends to paint Apple in a good light.  I imagine since people like iPod, then they think, well maybe Apple makes a good computer too and then give Apple a chance.  Apple is small company compared to to other MS based computer manufactures, but they are a threat as shown by their sales growth in Macs.  There is a point at which Mac use becomes compelling enough for folks to look beyond the “morality” of the Mac vs. PC question and onto price and features.  Like what has been said before, a great company will emerge from an economic slump stronger than before the downturn.  Apple’s got cash and growth despite the downturn.  In the absence PC innovation through this rough patch, Apple could really surprise everyone in a year or two.

Here’s a link to the article.