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Analyst: iPod to retain lead ‘for years’

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By LC Angell

Contributing Editor
Published: Tuesday, December 13, 2005
News Categories: iPod

The combination of price and design will keep the iPod in the lead for years to come, according to one Wall Street analyst. After comparing competing MP3 players, Piper Jaffray’s Gene Munster said he believes that other companies simply cannot compete with Apple because they can’t match the iPod’s pricing or its “cool” factor.

“While non-iPod devices often have similar, if not broader, feature sets than the iPod, none of these devices have shown that they can compete in two key areas: 1) user interface and 2) ‘cool’ factor,” Munster wrote in a research note obtained by iLounge. “We believe that non-iPod devices must compete on price to gain adoption, but Apple has such massive relative shipment volume with the iPod that other MP3 player manufacturers are not able to replicate the economies of scale achieved by Apple. We believe this reality will allow Apple to sell iPods at the lowest prices in the market, thus retaining the iPod’s pole position for years.”

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Comments

21

As long as Apple and Jobs pushes enough hot buttons with each successive iPod design and the infrastructure that supports them (i.e., iTunes, iTMS), they will continue to be “cool”, period.

The iPod family is the standard-bearer by which all others are measured, as much as its competition wants to claim otherwise. To date, Apple’s creativity has defined the genre of MP3 players; other DAPs may have considerably more features or do certain things better, but NONE has done enough to convince the overall consuming public that they are actually better overall and more worthy to own than an iPod. And as long as the general public continues to look at iPods in that light, its ‘coolness’ is not going to change.  All the third-party vendors and suppliers are ample proof of that.

Like it or not, and whether by actual product or deft marketing, Apple continually defines the belt and suspenders of the DAP marketplace. Everyone else to date are merely reactors.

Posted by flatline response on December 15, 2005 at 6:16 AM (PDT)

22

I just don’t see the iPod as having the true general public penetration that many do. Sure, if you go out and poll 1000 people at random and ask them to name the first DAP that comes to mind, the iPod would win. Then ask those same 1000 people if they own one, the numbers would be irrelevant in the grand scheme of things.

For all of *our* focus on DAPS and iPods, and even the multi-billion dollar industry that has grown up around them, these things are still exceptions. Yes, go to a college campus and they’re everywhere, go to major urban centers and they’re everywhere, but even if we assumed that every single iPod ever sold was still in service and that they were all in the United States, that’s still only about 10%-15% or so of the population with one. Compare that against how many people own a cell phone, DVD player, or a television and it’s clear that this is a market that can change overnight.

The more unbiased view is to realise that no matter how good the iPod is, no matter how good the competition is, the vast majority of people still don’t see the point of buying *any* DAP. It’s that untapped vast majority that will decide whether or not the iPod remains king, not those of us who already have one and like it.

Posted by Code Monkey in Midstate New York on December 15, 2005 at 7:01 AM (PDT)

23

Code Monkey,

You should never underestimate the power brand recognition. NASCAR sponsors understand THAT concept all-too-well.

If you compare iPods, Zens and other DAP products against the enormity of the cell phone market then yes, you’re right…DAPs don’t have the sort of market penetration as those devices. And they probably never will, unless cell phones become as ubiquitous a DAP as the iPod (or Zen) already are.

But if you compare iPods against past portable musical devices like Walkmans or personal CD players, then the iPod is more than likely AS popular—if not more so—and has at least the same sort of market penetration as the most popular of those other personal music devices ever did.

Not everyone will want a DAP, just as back in the day not everyone wanted a Walkman. But for the consuming public who knows just enough about MP3s and digital audio…the effect of iPod on that consuming psyche has to be undeniable. Even the word “iPod” is now synonymous and interchangeable with ‘MP3 player’. Just like how Sony enjoyed the same sort of identification dominance that ‘Walkman’ had with ‘personal cassette player’.

Personally, I don’t see that there’s any sort of untapped market, other than those that iPods currently aren’t sold in. The vast portion of the populace that Apple DOES market in that doesn’t already own an iPod probably will NEVER own an iPod (or Zen or iRiver or any of the rest, for that matter). But that’s not necessarily because they’re not convinced that an iPod is the best, but because they just don’t see the NEED for carrying music everywhere they go, or for changing away from whatever format they use now, like CD media.

Even my very senior parents know what an iPod is and recognize the brand—right or not—as THE quality product; if they go shopping for the grandkids THAT’S what they’ll ask and insist upon (and no, I didn’t coach them). They’re as much a slave to product identity and market trends as the average person in the iPod’s typical target audience. That “coolness” factor is as important to them, dyed-in-the-wool NON-iPod users they are, as it is for the Apple fanboy. It’s a bit like Beta vs. VHS all over again; we all know who won out just by sheer power of popular adoption despite which one was supposedly technically superior.

I see more of those cheap Apple white earbuds ALONE out in the wild these days than I EVER saw of ALL headphones during the heyday of Walkmans. I’d say as long as Apple continues to spin out their timely and significant yet incremental improvements with each successive iPod redesign, the casual tech consumer will continue to view Apple and its iPod as the only real choice in the DAP marketplace.

Of course if some technology DID come along that makes the iPod, MP3s, AACs and other current DAP models and formats as outdated as the Walkman became, then all bets are off…but then that’s all-new radical tech and not just a new, flavor-of-the-week DAP redesign as Creative and the rest think is reason alone for not buying Apple. Just like CDs finally killed off cassettes, which themselves would’ve finished off vinyl LPs had not those pesky compact discs came around.

Who knows when that’ll happen? But until it does, Apple’s business model reigns supreme until Creative or Microsoft or someone else yet unseen proves otherwise, which I simply don’t see happening. The iPod brand is just too strong and carries far too much momentum; even easy-to-scratch nanos and 5Gs haven’t hurt business.

Posted by flatline response on December 16, 2005 at 12:22 AM (PDT)

24

The ipod is sure to continue its dominance for at least 2 more years. While its price, features and look keep getting better, Microsoft, Creatives’ and Sony’s sleepless nights is sure going to slow down the tide for ipod in 3 years time.

EMECHETA

Posted by emecheta on December 16, 2005 at 6:57 AM (PDT)

25

@ FLR

I just don’t buy the argument that 2 years (tops) of market share dominance in a 7 year old market means anything with regards to longevity. Apple wasn’t even a competitor at all until 2001 and it took them 2-3 years to establish their dominance largely through the convergence of factors which have little to do with the merits of the player. The dominant player manufacturers in 1998 don’t even exist any longer as DAP makers. Nor do I believe you can make analogies between a market that is so young to the Walkman (as a generic concept). Walkmans remained ubiquitous and popular throughout the 80s and much of the 90s and Sony was nothing more than one player in a large sea for most of that period. I owned numerous “Walkmans”, not a one of which was manufactured by Sony. Nobody ever got to see their name synonymous with portable CD players which are still popular. There’s simply no good reason to assume that a single brand will maintain dominance; with the exception of operating systems and office products, I can’t think of any market that remains so locked in to one corporation.

Heck, the real achievement is that anyone got to see their branding become synonymous in the first place. Apple deserves some sort of nod for that, as it’s rare, but nobody holds onto that that for long, it’s a flash in the pan and it’s odd that so many want to argue for Apple’s ability to do so. The market and the consumer is not served at all by one corporation defining a market and the sooner people get over this brand worship the better for all of us.

Posted by Code Monkey in Midstate New York on December 16, 2005 at 7:58 AM (PDT)

26

As if ANYONE didn’t see this coming.

Posted by Jack on December 18, 2005 at 10:00 PM (PDT)

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