The Death of the iPod

A short while ago, I was looking at buying an iPod for one of my kids. It was a pretty straightforward transaction. My kid likes music, while an iPod is great for carrying lots of music around and listening to it, especially on road trips. As parents, we encourage our kids to listen to music, preferably a broad and diverse selection.

But I didn’t. And the reason is smartphones.

It wasn’t that long ago – a decade exactly – that I sat in a Duke MBA marketing class in Bangkok. Our professor asked why Apple’s stock had multiplied over the last few years, in just one word? Everyone called out, “iPod.” Apple was a computer company, but had reinvented itself as the music device, or iPod, company.

Ten years later, for all intents and purposes, the music player market is dying, and Apple launched the first broadside. The iPod company has become the iPhone company, and killed its erstwhile business on way. Sure, iPods still show nearly $1BN in annual revenue, but that number is shrinking rapidly.

When Apple first released the iPhone, the cost of an iPhone was high enough to warrant a lower-priced but still profitable music player, the iPod. As flash storage prices dropped and the iPhone took off, Apple was able to release the iPod Touch, or iTouch, essentially an iPhone without cellular radios. The distinction still holds. As of today, an iTouch with 16GB of storage costs $199, while a 16GB iPhone 5S (not exactly comparable, but close enough) costs $549. One step lower, an iPod Nano with 8GB costs $149.

With cellular capability costing an extra $350, plus monthly mobile fees, it can make a lot of sense to buy an iPod Touch if all you plan on using it for is music, and it makes a great gift.

The music player market may be shrinking, as people who would buy a smartphone and music player opt for an iPhone or Android, but the lower priced music player still had value.

And then came the cheap Androids.

A high end Android is not that different in price than an iPhone. A Moto X, Nexus 5, Samsung S5, or LG G3 is cheaper than a comparable iPhone, but not massively cheaper.

But Xiaomi, OnePlus and now, especially, Motorola are releasing low-cost high-quality Android smartphones. The Moto E can be bought, unlocked and with no contract, for around $99; the Moto G, the next level up, is available for $179.

Many people will pay something of a premium for iPhone over Android (as the 3-4 hour lines for iPhones I saw in 3 Apple stores I passed over the last 3 days indicates). If one has to choose between a $199 iTouch music player, or even a $149 iPod Nano, versus a $350 or more Android phone, a music player is still compelling to many consumers.

But almost no one will spend $199 (iTouch) or $149 (Nano)  to get just a music player when $99 (Moto E) 0r $179 (Moto G) will purchase a better quality smartphone.

The music player market is about to be eviscerated. Who would have thought left-for-the-dead Motorola would help do it?

About Avi Deitcher

Avi Deitcher is a technology business consultant who lives to dramatically improve fast-moving and fast-growing companies. He writes regularly on this blog, and can be reached via Facebook, Twitter and avi@atomicinc.com.
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