iPod sales now driven by style more than storage
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| Flash-based models such as the new iPod touch are increasingly upstaging Apple’s hard drive-based players. Photo: Jon Fortt |
In the iPod’s world, storage isn’t the selling point it used to be.
That’s one clear lesson from the sales rankings at the Apple Store, which posts a regularly updated list of the most popular iPod models. Though the iPod classic, which uses a hard drive to store music and video, offers a whopping 80 gigabytes of storage for $249, it is being outsold by the iPod touch. This, despite the fact that the touch has a tenth of the storage space and costs $50 more.
Why is the touch beating the classic? For one, the iPod touch has the benefit of good looks – it’s almost identical to the iPhone, this year’s must-have gadget. The touch also has a large display, built-in WiFi and web browsing. (The iPod touch is isn’t Apple’s best-selling model; number-one is the slim iPod nano, which starts at $149. It doesn’t use a hard drive either.)
The iPod sales trend is important as Apple (AAPL) today reports earnings for fiscal 2007. Apple’s iPod has been the product that most visibly fueled the company’s turnaround over the past few years, and it has allowed Apple to dominate the burgeoning digital music business. The iPod commands about 70 percent of the digital media player market, and Apple’s iTunes Music Store is the go-to place for media downloads.
But recently Apple is seeing increased competition. Rivals such as SanDisk (SNDK), Microsoft (MSFT) and Sony (SNE), which were slow to catch on to the iPod’s popularity, are introducing sleeker models. Apple also faces more credible rivals to its iTunes store. Amazon (AMZN) recently began selling MP3 downloads without copy protection that will play on any music player, including an iPod; Microsoft plans to launch a similar store next month.
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| The iPod classic. Photo: Apple |
So it’s especially noteworthy that mere storage capacity doesn’t seem to be the main factor driving iPod sales. This detail actually bodes well for Apple; the more it can position its device design and software interface as unique selling points, the harder it will be for competitors to dethrone the iPod.
Storage wasn’t always so passé. When the iPod first came out, Apple priced the models based on how much music they could hold. The entry-level iPod had a 5-gigabyte hard drive, and higher-capacity models were more expensive. It was generally understood in the marketplace that the higher-capacity iPods were more desirable.
That mindset began to change when Apple introduced the iPod nano. Rather than rely on a bulkier, higher-capacity hard drive, the nano used flash memory, a type of semiconductor that stores digital information. (Corrected from an earlier version. Readers remind me that the iPod mini was hard drive-based. Thanks, readers, as always.) Flash memory is smaller than a hard drive, and requires less power to run – but it also stores less data.
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For a long time, Apple didn’t seem to expect consumers to embrace flash-based players. On several occasions in the iPod’s early days, I pressed Apple worldwide product marketing chief about when the company might begin using flash storage for devices, as many of its competitors were. He typically responded that hard drives held far more music, and would do so for the foreseeable future, so there wasn’t much reason for Apple to embrace flash.
But when Apple offered the iPod nano, that mindset changed. The nano, became the bestselling iPod model, thanks to its slim, pocketable size and low price. Now the flash-based iPod touch is taking that trend to another level. Remarkably, even though the iPod touch costs more than iPods that hold more content, consumers appear to find it more desirable.
At least for now. Steve Baker, analyst for NPD Group, notes that the iPod touch has only been on sale for about a month, so it’s early to draw too many conclusions. Some of the iPod touch’s popularity might be due to its similarity to the popular iPhone. But still, demand for the touch makes sense, he said.
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“The base of users who need to upgrade their 30GB player to 160 GB drives is pretty small,” Baker said, referring to the highest-capacity hard drive-based iPod. Demand, he says, “has more to do with the touch being a different kind of product.”
Might it also have to do with the fact that downloadable video still isn’t easy to come by? While Apple has millions of songs available for purchase on iTunes, Hollywood studios have been less eager to offer their video libraries to Apple. Studio chiefs feel Apple demands too much control over how downloadable movies and TV shows are priced, and have complained that Apple’s main objective is to provide cheap content to drive iPod sales, not to create a healthy marketplace for content.
If Apple and the studios work out an agreement sometime soon, or if some other retailer begins selling iPod-friendly downloads, perhaps consumer tastes will shift back toward higher-capacity hard drive-based players.
But until then, big screens, Internet connectivity and advanced software seem to be more important selling points than raw storage capacity. And for Apple, that’s a good thing.
the article’s a little off base, i think… sure, sales of flash-based ipods now are higher than hard-drive based ipods… but it doesn’t take into account how many of these people who are buying the flash-based ipods *already own* a hard-drive based ipod.
the real comparison should be between first time ipod buyers… it wouldn’t be entirely right to ask existing owners, either, because the hd-based ones were available first…
bottom line is, apple’s making money hand over fist…
jf: Sales of flash-based iPods have so far outpaced hard-drive based iPods that it wouldn’t be a meaningful comparison. The flash-based iPod nano has been the best-selling model for a long time.
I think that the iPod plays an important part of certian life styles and thus speaks to it’s popularity.
I see iPod Nano’s at the Gym, School, and at Airports – the size and playing time of the device is very important. The flash drive are also big enough to hold enough music so you don’t get bored from lack of selection. You do not see many people use it to store calanders or phone numbers, the PDA thing is strictly business not pleasure.
Yadgyu-
“People do not have 160GB of good music to listen to. ”
i odnt htink that is true at all. many people have that much music ,or more. its only a mtter of time before there is a 160 gig flash ipod avlaible. bigger storage is always better as long as it is priced right.
also consider more and more people are choosing to keep higher quatliy music on there pods taking up more space. i see a time when people are storing there flac files in a ipod.
when the price of solid state memory comes down you will see high capiacity apple products.
Personally, I think that the iPod touch is so popular because it is flash based. The price isn’t the selling factor, it’s the storage medium. I can’t tell you the number of times I’ve locked up my iPod or caused music to skip when I jostled it while the memory buffer was being fed. At 16 GB, the iPod touch is getting near to the 20 GB models that Apple used to sell, plus it doesn’t suffer from the problems of a rotating hard drive. As it is, I think the fact that 16 GB of flash can be had for a reasonable price is why Apple is seeing competition from the likes of SanDisk.
Refurbished Zune(s) can be had for as little as $80 refurbished (hint: woot)
They have wifi, but sadly no browser as of yet.. perhaps adding these functions as well as more codecs can sway tech savvy consumers. Yes, we all know how difficult it is to navigate on a mini portable device, but if anyone can COME LATE TO THE BROWSER PARTY, it’s Microsoft!
my, gosh, that little thingy looks so delicate, with my self, i could me breaking it after two weeks.
i would definitely choose the ipod hard drive model. songs are nice, but its audiobooks, self-hynosis programming intensives, audiodramas and radio shows are what i would want to include on it.
Might it also have to do with the fact that downloadable video still isn’t easy to come by? While Apple has millions of songs available for purchase on iTunes, Hollywood studios have been less eager to offer their video libraries to Apple. Well, that’s interesting when you consider that a) the entertainment industry considers iPods and the like to be a tool of piracy, assuming most of their contents to be ill-gotten, and b) movies and TV shows, ripped from DVDs or captured off broadcast, are quite easy to find online. If there’s not as much demand for high-capacity iPod Classics, and if that’s an indication that people don’t need as much space for their mobile video, then maybe that in turn suggests that the claims of video piracy are overblown. If it’s easy to get all the movies you want, for free, off the internet, and fill a 160 GB classic with them, and if people aren’t actually doing so, then maybe Hollywood’s rhetoric is overblown.
FWIW, I replaced a 10 GB iPod and decided that novel as the touch is, that 16 GB was too small. So I got the 160 GB classic, figuring it was pretty future-proof, at least capacity-wise. I ripped my 700 CD collection and didn’t even fill half the classic. Even with video podcasts and a few TV shows from iTunes, I’m still not half-full.
People do not have 160GB of good music to listen to. People usually play about 50 songs on a regular basis and switch songs as needed. Plus the iPod touch looks cooler than the other ones. The cool factor heavily outweighs the storage capacity.
Style? how about Style and Funtionality! The I-Touch offers web browsing and on the fly downloading with a direct connection to I-Tunes. The I-POD classic offers a little more eye candy than its 5th gen older sibling but doesn’t offer more functionality – just more storage space.
Seriously,,,, Flash vs. Disc based responses generated at a rate of one every two minutes? Step away from the computer. Life is just outside your door.
Great article Jon, except for one pretty significant detail. The iPod Mini was also a hard drive based device. It wasn’t until the first gen. nano that apple used flash memory (unless you include the shuffle – which has always used flash memory).
I think that classifying anything other than storage capacity as “style” is overdoing it. Clearly size has as much an impact on functionality as style (a Shuffle or Nano works a lot better when running than a full-size model).
Also, the iPod Mini used a Microdrive (1″ hard drive), not flash memory…
“Rather than rely on a bulkier, higher-capacity hard drive, the mini used flash memory, a type of semiconductor that stores digital information.”
quick fact check : Mini was still hard-drive based. Then when Apple switched to Flash memory, they dumped the entire “mini” brand and created a new “nano” one.
The iPod Mini was disk-based. The Nano v1 was the first flash-based iPod.
Um… I believe the iPod mini used a compact flash II hard drive and not flash memory.
The Ipod mini was never flash based. That was the novelty of the nano. It was smaller because it used new 1″ hard drives that had just become available.
Actually, the iPod mini is also hard drive based, albeit with a smaller drive, both physically and in terms of capacity. The Shuffle and then the Nano were the first flash-based iPods.
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@invalidname
The reason why people do not put their illegally downloaded movie collection on it is because the movies need reformatting first which may take a while to do. so many people are downloading movies, why should the numbers be wrong?
A 160GB hard drive is okay but a minority of people would need even an 80 or 30 GB music player if not used as a backup.