The iPod Is Dying
Well, not exactly, but iPod shipments fell 7% to 10.2 million.
To quote Tim Cook (via the WSJ):
"We sold 10.2 million iPods which was down from 11 million in the year ago quarter. There were two key reasons for this decline: First, we reduced channel inventory by over 400,000. Second, sales declined by 4% year-over-year."
Furthermore:
"We expect our traditional MP3 players to decline over time as we cannibalize ourselves with the iPod Touch and the iPhone."
In other words, the iPod is a mature product. Demand still exists, but the dramatic sales spikes of years past are history. People already have one. Or are switching to the iPhone and iPod Touch, which have less storage.
Remember the space race? The larger and larger hard drives in iPods over the years, so you could transport your entire collection? At one point, Apple was selling a 160 gig iPod, now the largest the company offers is a 120. The largest iPhone and iPod Touch you can buy is 32 gigs. We’re going backwards. In more ways than one. People need less because they want to carry less, and what they want to carry is oftentimes not even music. And music is becoming something you stream…
Spotify is in front because of its user interface, which mimics iTunes and is almost as easy to use, proving once again, that it’s not about concept, but execution, not about hardware, but software. MySpace says you can stream anything… Can you find anything? Napster and Rhapsody sport ancient interfaces. As for Web-based competitors, it appears we’re moving towards standalone apps…
So, Apple is winning the hardware race because of software. You can make a hand-set that looks like an iPhone, but it won’t work like an iPhone (even the Pre, which Apple excluded from synching with iTunes last week). So, we can see that Apple is one step ahead of everybody else, because their products work, in a way that their competitors’ don’t.
But what’s most interesting for the music business is that rights holders are always arguing about the past, losing valuable revenue while the future arrives.
In other words, decline of iPod sales is a harbinger of the reduction of P2P music acquisition. True, the iPod market is saturated, but why do you need a bigger one if you don’t have to carry around your music? The labels could have licensed P2P, beginning with Napster, and reaped all that revenue before the window on file-trading started to close, entering its sunset years like 8-tracks and cassettes before. To license P2P now is akin to regulating CB radios. Huh? Time has marched on, the behavior has been eclipsed. We’re moving to a streaming world. So best to license streaming apps and try to gain as much revenue as possible, before the next technology arrives.
It looks like streaming/on demand is going to have a long run. It’s just a matter of how the music is delivered. So play now, earn now, or forever leave that money on the table.
Going back to the iTunes Store… Instead of raising prices, the labels should have a going out of business sale! Dropping prices to ten or fifteen cents, loading customers up on files before they realize they don’t need them anymore!
Apple is no longer dependent on the major labels. The App Store is driving the sales of their next technology, i.e. iPhone/iPod Touch. Apple moved on before the previous technology peaked. This would be like the labels embracing file-trading before CD sales tanked. But we know that didn’t happen…
The tech world moves very fast. Today’s hit is tomorrow’s rubbish. Resurrect AOL and Yahoo? Revive MySpace? Are you kidding? That would be like everybody who got a divorce getting back together with his old spouse. And that ain’t gonna happen. You don’t go back, you move on!
As for revenue generation of streaming services… Fascinating question. The key is to make everyone a customer, charging a low price for everything. Still, the market for recorded music may never hit its old heights. But that doesn’t mean that the music business won’t grow. Will Page at PRS says it already has!
