Apple’s incredible shrinking iPod

Has anyone tried to work out through the increase of revenue the approximation of numbers of iPod Touches sold per quarter, especially since Apple never give those details out?

Well said Garrett, you gave the nail in the head. This is what EVERY greedy bussines man does EVERYWHERE. They live by the numbers and the worst of it is that the make everybody else’s life go round the numbers as well. This is the world we live in. This is why we have this huge global economic situation. Because a bunch of greedy guys are scared about losing 1 cent more.

Hi All,

Went through the article as well as the comments. I feel the iPod is still one of the hottest selling Apple product. But the difference in the share of revenue it has might be low as the price of an average iPod keeps decreasing from one quarter to quarter. Eg: last quarter Apple sold 1million iPods at say $35, and this quarter the price has come down to $25 and had sales of a little higher than 1.5million. But the total share of revenue will definitely be less due to the price reduction and that doesn’t mean the demand for iPods have come down.

The maths:

iPod = 55% of revenue in 2006 (doesn’t say which Quarter so we’ll have to assume each quarter).

Take Q4 2006:
$4,837m x 55.6% = $2,689m

Now Q4 2008:
$11,682m x 14.2% = $822m

That’s quite a drop for the pure mp3 player. Looks like the future is mobile phones that play music.

[ex ped: Not sure about your maths. Here's what I've got, direct from Gene Munster's spreadsheets:

iPod sales q4 2006: $1,559 million (8,729 million units)
iPod sales q4 2008: $1,660 million (11,052 million units)

In other words, iPod revenue is basically flat; although sales are up, ASP is down. Meanwhile, Apple's total revenue has grown sharply, thanks to the Mac and the iPhone.]

Garrett W -

If you are so smart, you’d calm down. This is business - just an analysis of sales. Don’t turn it into a middle school drama.

Forget the Apple name. We have a company that have just had an astronomic gain in market share and profit with an admirable cash mountain during a time of economic crisis. It has a number of product lines, all growing in sales and market share. One line is reaching maturity and not growing as fast as it was, and it now has a new line which has proved more popular than anyone predicted. And the share value drops faster than Ford and GM -who are losing $1bn a month.
Daft

I’m sick of people bashing Apple. If the bashers are so G*d D*#n smart, why don’t they come out with the iPod or iPhone killer? In other words invent something that changes the way we listen to music now or come up with their next generation “iPhone” that’s better. Then have the balls to sit on as much cash as Apple has for R&D and help a company make it through the mess the wall street has created for itself. Did I mention that Wall Street is the bashers?

My suggestion to Steve Jobs….. Split the stock to put main stream private investors in your corner and quit trying to please wall street. Your fan base of consumers is growing and we are loyal.

You could not give me anything but Apple Products!

“Unless Apple finds some way to make the iPod stand out amongst all the other MP3 players out there this source of revenue will just grow smaller. ”

Jason,

iPods don’t stand out from the vast majority of MP3 players, because the vast majority are iPods. As a source of revenue it is growing but as a reported source of revenue it is growing relatively slower than iphone as Iphone is new and its accounting treatment is different.

“A good idea for this would be allow iPod users to ditch the bloat called iTunes and sync with whatever program they would like.”

The vast majority of users prefer itunes & ipods integration to other products.

Anyway Jason, I hope that your Zune works for you.

During the original release of the iPhone Apple called it their best iPod ever…

Uhm, iPhones ARE iPods. When Steve Jobs announced the iPhone back at MWSF07, he specifically stated that the iPhone was also the very best iPod. And, guess what, when I bought my iPhone, it was a choice between that and the iPod Touch, so it very clearly is a choice.

Interestingly, Zaky’s non-GAAP numbers almost match my own that I calculated on the back of an envelope, back in April, when there was alot less info to work from. I was stressing that Wall Street was missing out on Apple’s deferred revenues. I posted then that Xmas last year was $10.5B non-GAAP and not $9.6B, and $8B in the following quarter, not $7.5B. In each case, Zaky differs from my own estimate by $0.1B. Not bad for an envelope calculation.

If you want to read what I wrote on this topic in April, you only need go to Macdailynews’ Opinion page. It’s been sitting there since April.

I know people including me would love to have SIRIUS/XM content on IPOD. That will drive up revenue and subscribers.

So total revenue almost doubled from Q4′07 to Q4 ‘08. The percentage of the revenue derived from ipods is halved. The ipod line sells on average for less per unit now than it did 1 year ago. This tells me that the actual number of ipods sold has not decreased but instead has slightly increased. The ipod is far from dead it just is a smaller piece of the overall puzzle now that a third revenue source has come on line in the form of the iphone.

It’s not that ipod sales are down — just that the rest of Apple’s business is up, making ipods a smaller percent of their total revenue. I think ipod revenue still grew last quarter.

Please read Zaky’s original article. iPod sales are NOT falling. They continue to grow! But they are decreasing as a percentage of Apple revenue, because the iPhone and the Mac are doing so incredibly well. The original article is not bemoaning the fate of the iPod, it’s cheering the rise of Apple’s other, more important categories.

The article does not mention this, but the iPod Touch is doing phenomenally well, and it’s increasing the overall price per unit of the iPod line. Other than the broader economy, there is no bad news for Apple on any front.

show us your angry face maddawg and enlighten us…

Iphone is not an ipod but I bet any company would love to have the problem of diversifying your product portfolio. I don’t particularly like Apple but who makes portable digital music player in almost everyone’s pocket? And who makes smartphone the talk of the town (http://www.jkontherun.com/2008/10/smartphones-as.html)? Yes, ipod sales is shrinking but this just makes Apple even more well positioned to lead the industry.

I think the iPod days are over. They now have to learn how to play nice in the sandbox like all the other mp3 players. They cornered the market, but not people know it was the name you were buying more than anything. Sorry Apple, I bought the competition

Bottom line is that If Apple loses a few iPod sales to the iPhone or touch it’s still ends up an Apple sale and is good. Do you really think Apple is concerned about that? I think not.

hey dizzy,

iphones R NOT ipods…if they were, they’d be called……um………ipods.

this argument is valid and your comment is, like most other fanboy comments, taken out of obscurity and molded to fit the disillusioned reality you keep only in your mind.

get your head out of your ***.

U iTard lemming that can’t even comprehend basic facts and numbers.

How people think iPhone = iPod I will NEVER figure out. It’s two totally different markets. This is coming from a person who owns an iPhone 3G too. I still have a separate MP3 player for capacity and battery life.

The real problem is that the market is saturated with MP3 players now and with places like Amazon that offer DRM free music for the price as the DRM infected stuff from iTunes the other MP3 players are viable options at a much lower cost. Not to mention those who want an iPod already have one.

Apple is a victim of its own fortune with this. The digital music niche that Apple created is no longer going to be the huge cash cow it once was because it has topped out. Unless Apple finds some way to make the iPod stand out amongst all the other MP3 players out there this source of revenue will just grow smaller. A good idea for this would be allow iPod users to ditch the bloat called iTunes and sync with whatever program they would like.

Even in a jacked up economy I’d place my bets on Apple. They are innovative and make good stuff. That saying about building a better mouse trap still applies.

The article points out that the traditional Q1 revenue spike has been replaced by a Q4 spike. Wrong interpretation!! Q4 2008 is an aberration induced by the huge success of the iPhone. I expect that the pattern of Q1 revenue dominance will continue. What we’re actually seeing is predictive evidence of huge revenue growth for Apple. In 2009, Q1 will dominate as before, and we should see a Q1 growth over Q4 that matches the traditional Apple revenue pattern, maybe more if you consider the growth rate of Macs and iPhones. I admit that the current state of the economy might mute this, but we’ll have to wait and see.

iPhones *are* iPods. So, this iPod revenue argument is not valid.

@ Andy Zaky,

I don’t need a cellphone. I don’t need an mp3 player. But I have both, the former as it costs only $10 more per month on the family plan and keeps the wife happy but I use perhaps only 10 minutes a month; the latter as I won an iPod Touch in a raffle, but I hardly use it.

How did we live before cellphones and mp3 players? I know how. I’m only 30, and tired of these damned devices. Leave me alone to my time; get out of “my-space”.

Two things:

First, how smart is Apple? A LOT smarter than most “anal”-ists! The Ipod and the Iphone are used as HOOKS to draw people into the storefronts, where people are getting hooked on Apple’s main product, its computers. And boy is it working!

Second, my wife bought me a brand new top of the line Ipod Touch for my birthday in March. Then we both bought Iphones just after the new ones came out. As a result my Ipod Touch sits gathering dust. I’d sell it, but it’s monogrammed to me personally, so I’m keeping it for now. Besides, it does have a ton more storage space.

In other words, my Iphone is now my Ipod. That makes it a type of Ipod. Period. End of discussion.

Sarbanes Oxley has nothing to do with subscription accounting. You’re right on the concept though.

Okay. Everyone is missing the point of the article. The iPhone is not just an iPod. It’s a mobile phone. It’s in a totally different market. Just because the iPod market is part of the ven diagram that make up phone sales, it doesn’t mean that the entire market for an iPhone comes from the MP3 market. Apple has three distinct devices that even Jobs’ likens to a tripod of Apple’s business. The iPod and the iPhone are distinct products that appeal to distinctly different audiences whose markets happen overlap at the boarders If that weren’t the case, then iPhone sales would severely cannibalize iPod sales. That hasn’t happened. Hence the accelerating growth rate in iPod sales. Even Apple has conceded that Apple has seen very little cannibalization from iPhone sales. People really need to start seeing these two things as different devices that cater to different markets. One market is a 200 million unit per year market and the other is much larger - 2 billion units per year. I really don’t know how else I could explain this or in how many different ways.

Focus on this picture for ten minutes. Perhaps then, you might figure it out:

http://img.tfd.com/cde/VENN.GIF

RE: “… But the days that Apple was driven by the iPod are over …”

=====================
The iPhone is an iPod that can make telephone calls. As Steve Jobs said, he would love to replace every iPod sold with an iPhone.

With the iPhone, Apple is given users a choice of having one device make calls and play music.

The iPod by itself will be for users of OTHER mobile phones that want the iPod as a mobile music player, such as users that are required to use a BlackBerry by their company.

Incredible perfomance…regarding comparison the point is that ipod business reduced it’s share over total company due to the increase of the iphone…it would be necesary to compare $ vs $ and then as a % over total figures.

@Tom,

Why is everyone saying this today? The mobile phone market is well over 10 times larger than the MP3 market. They’re two totally different devices that cater to two different markets. Not everyone who buys or is interested in an iPhone buys MP3 players. Everyone needs a cell phone, but not everyone needs an MP3 player. Hence the 1.8 billion unit disparity between iPhones and MP3 players.

I half-agree with Tom. Adding the iPhone in a way that you can distinguish iPhone from (phone-less) iPod would be a very useful addition to the graph. But if/when I buy an iPhone, it will not be to replace my iPod, but to replace my current cell phone. (My mostly-classical music collection exceeds my 80gb iPod, and I don’t see any intent to get to high-capacity iPhones any time soon.)

I completely agree with Tom. iPod + Phone = iPhone. With the price cut to $200 you can not expect the iPhone not to cannibalize on the “traditional” iPod sales… and they just sold 6.9 million of them.

the ipod was never the main growth driver for Apple
laptops ad desktop is the driving business in terms of revenue… if there was no iphone we would see a different number but that’s obvious

You forget the Mac. Having earnings from your entertainment product eclipsed by powerful growth from your core product can not be seen as a bad thing, particularly in light of the previous comment.

Yes SO VERY TRUE!

Do people not realize the iPhone IS an iPod.

iJah420 says analyst schmanalysts….. BAH!

Very True.

Since we’ve had our iPhone, we’ve transfered music to it from out huge iTunes library. The selection it holds is nowhere as big as our iPods but on a daily commute basis it’s more that enough. The iPhone certainly is Apple’s best iPod - I just wish it’s storage capacity was larger.

When counting iPod sales though, the IPhone definately should be counted and not overlooked…

I disagree, the I-phone is a different product from the Ipod and should not be included in the graph.

Subscription accounting a la Sarbanes Oxley, does not involving ‘hiding’ income PED, that gets you sent to jail you know (!). It means deferring taking credit for the income except as the 24 month deferred accounting period unfolds.

To make this graph more accurate, you need to include the iPhone numbers too.. after all, it’s really just an iPod with a phone built-in.