Continued Decline in iPod Sales Expected, A Solution Proposed

Philip Elmer-Dewitt:

iPod sales hit 22.7 million in the Christmas quarter of 2008 and have been going downhill, with seasonal spikes, ever since.

Analysts predict iPod sales to drop 7% Y/Y to 8.39 million units in FYQ3’11.

The iPod line includes: the $49 iPod shuffle, $149 iPod nano, $229 iPod touch, and the $249 iPod classic. In my opinion, the iPod line is crowded; there are too many options.

The iPhone is to blame for taking away some iPod sales, but like I have argued in Why The Flip Died, the total potential market for iPods are significantly greater than smartphones:

One bil­lion poten­tial cus­tomers for single-purpose devices like the Flip. That’s pretty big. Did the global trend toward con­ver­gence devices like the smart­phone and dig­i­tal cam­eras kill the single-purpose video-capturing Flip? Highly unlikely.

Too many options can paralyze a potential customer. I would be if I were in the market for a MP3 player and even if I had dwindled down the choices to those with an Apple logo.

My suggestions to Apple: get rid of the iPod classic, eliminate the iPod shuffle, and bring down the price of the iPod nano to $99 with a 4GB version. Make the iPod nano run iOS, a nano version if necessary. The iPod nano, with iOS, has the potential to be Dick Tracy’s watch. And finally, do away with pricing tiers based on storage altogether.

With Spotify, I’ve seen the future. And the future is without local MP3 file (or AAC files in this case) storage. In Spotify:

Let me say this up front. Spotify decou­ples arti­fact own­er­ship from the expe­ri­ence of lis­ten­ing to music. In my opin­ion, this is the future.

With a Spotify-like iTunes, some songs might be cached on an iPod but for the most part they would in the cloud. With this digital artifact-free music listening experience there is no need for large local storage. The iPod classic along with its 160GB hard drive won’t be necessary to take your entire music library with you. The entire library of music, 15 million songs in the case of Spotify, follows you in the cloud. All you need is a connection to it.

The same could be said of videos and games: for a certain monthly subscription fee you get access to every video, every game on iTunes. They’d be in the cloud and streamed to you at your beck and call.

In this alternate future, the iPod line would be composed of just two models: a $99 4GB iPod nano and a $199 8GB iPod touch, both with 3G options. The choice is simple: extreme portability or merely really good portability with a larger display.

Combined with a Spotify-like iTunes where the world’s library of music, videos, and games are in the cloud, and a streamlined iPod line composed of just two models (iPod nano, iPod touch) that are 3G enabled, I don’t see declining sales. Instead, I see sales exploding.

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