The iPod Effect

In a time when everybody suddenly seems to be looking to Apple for the next exciting piece of new technology, I’m forced to look back and wonder when everything all of a sudden started to go ‘right’ for them.

Things haven’t always been this rosy for Apple; back in 2001 the ailing technology company posted a year loss of $25 million on revenues of $5.3 billion however, just 7 years later, they posted a $4.8 billion profit in 2008 based on revenues of $32.5 billion.

Such a turnaround is quite remarkable and seems to coincide very much with the release of the iPod; a revolutionary portable media device which enjoyed its first full year of sales in 2002. Initially released in October 2001, the iPod was easy to use and included a large hard drive which had an incredibly large storage capacity compared with the flash media based players of the time. Suddenly, rather than just being able to store a couple of albums on their media player, users were given the ability to store thousands of songs on a device small enough to fit in the pocket.

Over the years the line has been revised several times with the largest commercial available iPod created topping out at a 160GB storage capacity which is enough to hold around 40,000 songs. The current series of iPod touch units feature a touch sensitive colour screen, motion sensor, Wi-Fi and a more realistic maximum 64GB of storage.

Presently Apple claim to dominate the portable music device market with a 73% market share, having sold over 210 million units to date. On top of the revenue generated by the sale of hardware, there is also the huge revenue generated by iTunes which is the associated song download site for the iPod. Having signed the five major record companies up to its service, iTunes boasted total sales figures of over 6 billion songs at the beginning of this year. The service now also offers video content such as TV shows and movies for users of newer machines.

The most interesting point to note is the halo effect that has occurred with other areas of the Apple business following cultural acceptance of the iPod as a ‘cool’ piece of technology. Users appear to have subscribed to the Apple brand and very few analysts would deny that the tremendous uptake of the iPod has had a positive effect on other areas of the business.

The most notable spin off has been the Apple iPhone which since its release in June 2007 has sold over 21 million units. Although we cannot attribute the high number of sales directly to the iPod, there are strong similarities between the two devices in terms of design and desirability.

If we look at the Apple Mac computer, suddenly it has been accepted as a sexy alternative to the boring PC. The market share is still at a relatively small 11% worldwide however this compares favourably with the 4.1% figure that was circulating back in 2001.

I think it is fair to surmise that Apples current good fortune in recent years is predominately down to the new found desirability that allows the products to command their high price tags. In order to ensure this status isn’t lost tomorrow they will need to build on this momentum so that products of tomorrow remain more than simple items of technology, but rather objects of desire.

Author: Chris Holgate