The New York Times’ Pogue states iPod’s Law: the impossible is possible

“Apple’s iPod music player and iTunes music store may have 75 and 80 percent of their worldwide markets. But according to a Piper Jaffray analyst, the end is near. ‘Nobody can sustain an 80 percent market share in a consumer electronics business for more than two or three years,’ he told CNN. ‘It’s pretty much impossible.’ Apple’s new Nano music player has several features that are not found in other iPods, such as the ability to display the lyrics of whatever song is now playing. Well, he’s right about one thing: Apple’s market share won’t stay at 80 percent. It’s about to go up,” David Pogue writes for The New York Times.

“If you doubt it, then you haven’t yet handled the iPod Nano: a tiny, flat, shiny wafer of powerful sound that Apple unveiled last week. Beware, however: to see one is to want one. If you hope to resist, lash your credit card to your wallet like Odysseus to the mast,” Pogue writes. “It weighs so little (1.5 ounces), you don’t have to worry about dropping it onto pavement; even if it flies from your hands, the earbud cord catches it like a leash. Once again, Apple has mastered a lesson that its rivals seem unable to absorb: that the three most important features in a personal music player are style, style and style.”

Pogue writes, “The Nano will not come as good news to the growing membership of the curmudgeon club: people who resent the iPod’s success (22 million sold so far) and its trendiness. They’re fond of declaring that other players offer more features for less money. This time, however, they’ll have a tough time. Want to know what happens when you pit other players against the Nano, mano a mano? You give up, because no other flash player on the market offers anything close to the Nano’s capacity… So are the analysts right that the sun will soon set on the iPod Age? The truth is, the iPod has faced stiff competition from some of the industry’s best-known companies since the day it was introduced. Yet somehow, all the Dell’s horses and all Sony’s men haven’t made a dent in the iPod’s dominance. And with the introduction of gorgeous, functional and elegant iPod Nano, that’s not about to change.”

Full article here.

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34 Comments

  1. The analyst from Piper Jaffray is quite right to say ‘Nobody can sustain an 80 percent market share in a consumer electronics business for more than two or three years,’!!!!!

    But what he seems to not understand is that the iPod is not just a piece of consumer electronics … it is bound to iTunes and this makes it a Platform that has “Complements” (all the 1000+ accessories) and also “Switching Costs”.

    There is also an Element of scale which is becoming increasingly important. So lets take a look at what they mean

    1) Complements:
    Like any platform the iPod has a number of complementary devices that make the user experience better than its competition.

    The same can be said for Microsoft OS vs Mac back in the old days, but here the complements were software as well as printers etc, and just like the iPod the player who has the largest share has the most complements. In time the complements will become more universal and connect to any player, but for the moment iPod has a distinct advantage in user experience

    2) Switching Costs:
    Once you have downloaded all your music onto iTunes, and most importantly, once you have started buying hundreds of songs on ITMS it becomes increasingly difficult to switch. If you rate all your music and spend hours cataloging it this effect is exacerbated. A competitor no longer needs to be a little better to convince me to change … they need to be a LOT better. Given the rather simple nature of the products (they play music) this is very difficult to acheive. Through ITMS and iTunes in general Apple has created incredible customer captivity.

    3) Economies of Scale
    Scale is starting to become important … not only because apple has buyer power (i.e. can get NAND drives from Samsung at a much lower price than competitors by ordering 40% of their production). Buyer power will eventually go away as electronic components are essentially commodity products and supply will catch up with demand. Scale is really important because it allows Apple to absorb large fixed costs such as R&D and Advertising. If Apple spends the same amount per player as Creative does on advertising it can have 10x the presence, or inversely, if it cost 10m to design a new MP3 Player that is only about $1 per player for Apple and $10 per player for Creative … this impact is huge and Scale is likely to make Apple increasingly competitive on Price (see the Nano) and impossible for others to compete in such a Marketing sensitive segment.

    Now if only you were to give me the e-mail address of the Piper Jaffray analyst we could have a word or two

    Ciao

  2. This article describes the essence of industrial design. Something so simple so integrated into your lifestyle that you don’t realise it is there. It almost becomes part of you. You just notice it when you don’t have it or when you are part of the competition.

  3. “If I may be a wet blanket, I think the 75 to 80% figure he quotes is actually for the US. Market share is similar in the UK, but worldwide is much lower (a third to a half of all players maybe) but growing.”

    the last number I remember was 50% world wide. I can’t remember where I heard it, though.

  4. Mark my words, the iPod nano is the final straw that breaks all of the other’s backs. By this time next year, over 50 million iPods will have been sold since it’s release in 2001. And all of those 50+ million iPods will be eternally bound to both iTunes and the iTMS, regardless of whether it’s running on Windows or a Mac. Apple’s final dominance over the digital music medium will be complete.

  5. ‘Nobody can sustain an 80 percent market share in a consumer electronics business for more than two or three years,’ he told CNN. ‘It’s pretty much impossible.’

    -Microsoft
    -Nokia

    Can’t think of others off the top of my head right now…

  6. AS SOON AS… someone comes up with the bright idea of a iStereo/DSL/music store combination for under $200 that doesn’t need a computer and the REST OF THE WORLD can use it instead of some computer geek.

    Then we will see the end of dominance of Apple.

    Gosh I wish I had a few million dollars to start my own buisness.

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