The Observer’s iPod FUD: Apple iPod is ‘wilting away before our eyes’

“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.]

Related articles:
CNET Alpha Blog: absolutely do not try Amazon Unbox – September 09, 2006
Attacks likely to prove futile against Apple’s iPod+iTunes de facto standard – September 01, 2006
Analyst: Microsoft’s Zune an ‘underwhelming’ repackaged Toshiba Gigabeat; no threat to Apple iPod – August 30, 2006
Analysts: Amazon’s ‘Unbox’ to be ‘Unsuccessful’ vs. Apple – September 08, 2006
Universal and SpiralFrog’s ‘free’ music will come with many strings attached – August 29, 2006
NPD: Apple retains huge lead with 75.6% share of U.S. music player market – August 17, 2006
Apple CEO Steve Jobs talks up much-rumored ‘iPhone’ iPod mobile phone – August 11, 2006
Zune: Apple cannot lose. Microsoft cannot win. – July 26, 2006
Apple still In ‘early stages’ of iPod expansion – May 24, 2006
Another iPod+iTunes FUD article keeps the disinformation flowing – May 14, 2006
SmartMoney publishes compendium of iPod FUD – May 11, 2006
In Cleveland, ‘tis the season for Apple iPod FUD – December 10, 2005
The New Zealand Herald serves up a steaming pile of iPod FUD – August 11, 2005
FUD campaign against Apple’s iPod+iTunes fails to stick – April 08, 2005

More blood on Apple iPod’s Click Wheel: Dell’s ‘DJ Ditty’ flash-based MP3 player is dead – August 22, 2006
More blood on Apple iTunes Music Store’s play button: MyCokeMusic is dead – June 20, 2006
More blood on Apple iPod’s Click Wheel: iRiver gives up on digital media player market – May 23, 2006
More blood on Apple iPod’s Click Wheel: Sony’s Walkman Bean is cooked – February 13, 2006
More blood on Apple iPod’s Click Wheel: Dell dumps ‘DJ’ hard-drive MP3 player line – February 04, 2006
More blood on Apple iPod’s Click Wheel: iRiver pulling out of Europe? – February 01, 2006
More blood on Apple iPod’s Click Wheel: Thomson gives up on MP3 player, CE markets – December 12, 2005
More blood on Apple iPod’s Click Wheel: BenQ withdraws from MP3 player markets – November 28, 2005
More blood on Apple iPod’s Click Wheel: Olympus halts production of portable digital music players – November 09, 2005
More blood on Apple iPod’s Click Wheel: Rio is dead – August 26, 2005
Apple’s iPod has blood on its Click Wheel: Virgin Electronics is dead – March 08, 2005
Apple’s iTunes Music Store has blood on its play button: BuyMusic.com is dead – March 28, 2004

68 Comments

  1. Apple should be a LITTLE worried. While the article is definitely over the top… the fact remains that for the last two quarters iPod sales have declined.

    Sooner or later, the iPod will lose dominance just as the Walkman did, no matter how much MDN likes to pretend it will NEVER happen. What Apple must do is make sure it stays on top for as long as it possibly can… and to that end, Tuesday’s announcement better be good.

  2. And even if the iPod fad is over, something new is very likely to come along. Fruity-colored Apple iMacs were all the rage when they came out, but that fad died away and Apple discontinued the line. So maybe the iPod was only the device of the turn of the century. Perhaps tomorrow (er, Tuesday) it will be the Apple TV or the Apple Personal Do-Everything Assistant (PDA).

    The point is that yes, some products will never be incredibly hot forever. Old clunky PCs were all the rage, but they are beginning to lose their market. Ice boxes were once all the rage, but they gave way to refridgerators. I can keep doing this ad nauseum.

    Apple is an intelligent enough company to know that iPods fill a certain niche but not a basic need of existence (like, say, Refridgerators). Consequently, there will always be something new to keep the consumer’s interest. Apple will still be on the map. Maybe 20 years from now the iPod won’t, but there will be other stuff down the line.

    Apple is not a one-trick pony.

    Microsoft, on the other hand…

  3. David Smith fails to mention how other digital music player sales are also performing over time. Are we seeing a saturated market or are users looking at other devices other than iPod? If users are buying devices other than iPods, what features are driving them to purchase alternate products or is consumer selection simply a matter of price? After reading Smith’s less than informative blather I am left with more questions than answers.

  4. I think the point should be that even without new iPods this year, either model refreshes or a new form factor (for example the introduction of the shuffle in Q2 2005), that Apple are will probably sell 38 million units this year.

    Of course if Apple do not come up with something major, they will start to lose both sales and market share.

    Hopefully they will introduce products for the Xmas season. I myself am waiting for a new video ipod.

  5. Hah!

    Listen: I attended the Grand Opening of the Apple Store Carrefour Laval in Quebec today. The place was packed. So … I got my freebie AppleT-shirt and strutted it around on the city streets of Montreal for several hours afterward. On the front of the T-shirt there’s nothing but a little teensy weensy white Apple Logo followed by the words ‘Carrefour Laval’ in little tiny white lettering.

    Regardless as to the subdued nature of the logo and lettering however, every teenager that I encountered on the streets of Montreal riveted their focus onto that AppleT-shirt and kept it there until we had passed each other.

    Apple has mind-share locked in. Absolutely. Apple isn’t going to lose jack squat in any market any time soon.

    YouTube Video of today’s Laval Apple Store Grand Opening:

  6. Well, Apple certainly didn’t wait until this coming Tuesday to bump the iMac or mini lines, so that fueling the speculation that “there’s got to be something more coming” and all the focus is on iPod… not necessarily a bad thing for Apple to have to be dealing with unless, of course, everyone’s expectations get all bent out of whack when they don’t hear what they want to hear because THEY THEMSELVES allowed it to happen. No matter what Apple announces, it will be met with those who instantly complain that Apple didn’t do this or didn’t do that. Well, they very likely weren’t sitting in the boardroom, or in the managers’ offices, or in the design labs or on the production floor or in packaging when those things were happening, now, were they?

    Just go with the flow and let what happens happen. Feel free to speculate and chase rumors and listen intently to the announcements this coming Tuesday, but DON’T BLAME APPLE when your over-the-top hopes are wrong. It does you, and them, no good.

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