“The Mermaid, Puddle Dock, is not the first place you might go in search of the cool and cutting edge. That will not stop an expectant crowd gathering at the conference centre in London’s Blackfriars this week for a live satellite broadcast from San Francisco that could make or break one of the consumer icons of the Western world,” David Smith writes for The Observer.

MacDailyNews Take: Tuesday’s media event “could make or break” Apple? Damn, you know for sure they’ve got some strong stuff in London now. We’re getting a contact high from all the way over here across the pond.

Smith continues, “The iPod, the digital music player beloved of everyone from Coldplay’s Chris Martin to President George Bush, is in danger of losing its sheen. Sales are declining at an unprecedented rate. Industry experts talk of a ‘backlash’ and of the iPod ‘wilting away before our eyes.’”

MacDailyNews Note: iPod unit sales:
• Q4 03: 336,000
• Q1 04: 733,000 (holiday quarter)
• Q2 04: 807,000
• Q3 04: 860,000
• Q4 04: 2,016,000
• Q1 05: 4,580,000 (holiday quarter)
• Q2 05: 5,311,000
• Q3 05: 6,155,000
• Q4 05: 6,451,000
• Q1 06: 14,043,000 (holiday quarter)
• Q2 06: 8,526,000
• Q3 06: 8,111,000

During no quarter have year-over-year iPod sales declined.

Smith continues, “On Tuesday the eyes of iPod-lovers the world over will be on Steve Jobs, the co-founder and chief executive of Apple, when he seeks to allay fears that it could follow Sony’s tape-playing Walkman into the recycling bin of history.”

MacDailyNews Take: Whose fears?

Smith continues, “Analysts warn that the iPod has passed its peak. From its launch five years ago its sales graph showed a consistent upward curve, culminating in a period around last Christmas that saw a record 14 million sold. But sales fell to 8.5 million in the following quarter, and down to 8.1 million in the most recent three-month period. Wall Street is reportedly starting to worry that the bubble will burst. Tomi Ahonen, a technology brand expert and author, said: ‘For the first time the iPod has had two consecutive falls after 17 quarters of growth. If I were the manager, I would be wanting my people to explain what is going on. The iPod is wilting away before our eyes.’”

MacDailyNews Take: Again, during no quarter have year-over-year iPod sales declined. And Christmas comes but once a year.

Smith continues, “The company is facing growing competition on every front. Last week Amazon launched a digital TV and film download service in the US, and the supermarket giant Wal-Mart is in talks with Hollywood studios about a similar website. Later this year a new online music store, SpiralFrog, will undercut iTunes by offering a huge catalogue of music for free while relying on advertising for its income. MySpace, the immensely popular social networking site, also poses a threat. Three out of every four MP3 players sold are iPods, but the device could be challenged later this year by Zune, the contender from Microsoft, whose billionaire founder Bill Gates is not used to losing. Samsung is also betting heavily on its new K5, which has the option of built-in loudspeakers.”

MacDailyNews Take: Is this a comedy piece?

Smith continues, “James Beechinor-Collins, editor-in-chief of T3 consumer gadgets magazine, added: ‘It’s cool across the board: everyone from my seven-year-old niece to my 60-year-old uncle has one. But as the leader Apple needs to keep innovating, not resting on its laurels. We haven’t seen a new product for a year, so Tuesday’s announcement had better be bloody good.’”

Full article here.

MacDailyNews Take: This is a semi-annual article that’s dusted from time to time for republication. The formula: Ignore cyclical holiday buying patterns to show “declines” in iPod sales, dig up some out-of-context focus group lines that iPod is “losing its cool,” and insert this year’s “threats” to iPod+iTunes (oh, David, basic iPod FUD 101: you forgot “iPod scratches,” dummy). Then we’ll have Apple’s announcements, new iPod quarterly sales figures that show continued year-over-year increases and the article will be forgotten until Smith and/or his insipid ilk dust it off to rerun next year. In short, it’s boring, old, recycled FUD.

On May 23, 2006, Credit Suisse analyst Robert Semple wrote in a report to clients, “We believe Apple is still in the early stages of its product expansion and that the company can grow its iPod units at least 20% for the foreseeable future.” Peter Kang reported for Forbes, “The analyst’s prediction comes from what he sees as the low penetration rate of the iPod, estimated at about 10% of PC users, or an ‘active installed base’ of about 40 million units worldwide. One region looking ripe for growth is Europe, which has an estimated penetration rate of 7.1% compared with 15.5% for the United States, according to Credit Suisse. In addition, customers appear to be replacing their iPods with new models quicker; Semple estimates the current ‘lifecycle’ of the iPod at approximately 1.5 years, down from two years. The Credit Suisse analyst compared the current pace of iPod shipments to that of the Sony Walkman and Discman portable music players. ‘We believe that over time Apple’s iPod can easily exceed Sony’s 309 million cumulative Walkman and Discman shipments,’ he said. ‘For comparison, it took Sony over 10 years to sell 50 million Walkmans, while Apple reached the same milestone in half the time despite lower market share and stiffer competition.’” Full article here.

Contact info: Stephen Pritchard, Readers’ Editor, The Observer, 3-7 Herbal Hill, London EC1R 5EJ, tel 020 7713 4656, reader@observer.co.uk

[UPDATE 11:28am EDT: Added Credit Suisse analyst Semple's notes on iPod market saturation and estimates for iPod cumulative shipments.]

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