Even with iPhone added, iPod growth is slowing

As CNET News.com reporter Tom Krazit reports, Apple shipped 22.1 million iPods in its October-to-December quarter, up a mere 5 percent from same quarter last year.

But as I've argued before, you must count iPhone unit sales for a fair year-to-year comparison because each iPhone takes the place of a potential iPod sale. It's essentially the highest-end, most expensive iPod.

Apple must have sold a lot of iPod Touches during the quarter because iPod revenue grew much faster than iPod unit sales.

(Credit: Apple)

But even with the 2.32 million iPhones it sold, that makes a total of 24.42 million, for a total of 15 percent unit growth over the previous year's quarter. That's respectable and Apple's doing spectacularly well elsewhere--for example, iPod revenue (not including the iPhone) grew 17 percent over last year, suggesting Apple's selling a lot of high-end iPod Touch units. But compared with the previous quarter, which showed 17 percent unit growth in iPods--and 30 percent growth if you add in the iPhone--this is a definite slowdown.

I doubt people are buying other MP3 players instead of an iPod--I don't expect Microsoft to report anywhere near a million Zune sales for the December quarter, for instance. (Microsoft reports earnings Thursday.) Rather, I'm guessing that we're seeing the maturing of the MP3 player market. The early adopters were in three or four years ago and have already gone through one or two replacements. The mass market's been in for at least a year now, and now it's coming down to bargain hunters and the normal replacement cycle.

[lmasanti]

quote:
"Rather, I'm guessing that we're seeing the maturing of the MP3 player market."

Maybe, there also some other "considerations" like U.S. economics?
(at least, you should cite that, to turn this in a "journalist article".)

[kstafferton]

Maybe, but this is a blog not an article so the author is allowed a personal opinion.

[john55440]

A Bloomberg article states "IPod growth rates have been declining for 10 quarters" , so the problem extends beyond recent economic problems.

[jelloburn]

I would agree that it is probably just a maturation of the digital audio player market. although, it would be interesting to see all the sale numbers from the competitors (although Microsoft's Zune sales will probably be artificially inflated similarly to Vista's).

[CoreyNorman]

I am not sure whether these numbers cover just the American market or if they encompass global sales, however, as someone from Canada I can say that I have held out purchasing another Ipod as I await the introduction of the Iphone. The problem is that Apple has either decided not to, or has been held back by regulation, from delivering several of its products to all its markets. I think the appleTV is another case in point. While they have released the hardware, customers are unable, here in Canada, to make the most of it because they aren't yet able to purchase movies or even most TV shows that make the product attractive. There may, and I am speaking from my own point of view, be a collective waiting for things to take shape before entering the market on some of these things.

[Waam]

Definately a maturation of the market. The MP3 player has all but replaced the walkman/portable cd-player. The iPod, still the king of the hill is the undisputed champion of this age. Microsoft's zune seems like a defensive maneuver aimed at fracturing Apple's hold on the market. If and when the Zune ever becomes the equal to the iPod in sales and in mindshare, it will be at the twilight of the MP3 player generation when we have already gone on the the next best thing.

[MattRosoff]

To Imasanti: Yes, the economy's obviously troubled. I might agree with you, except for the fact that sales of video game consoles and games were at an all time high. That suggests people are still willing to spend several hundred bucks on a "fun" but non-utilitarian electronic device. See http://www.news.com/U.S.-game-sales-up-28-percent-in-December/2100-1043_3-6226732.html?tag=item

To jelloburn: it's harder for MS to fool with the Zune numbers. With Vista, they can count sales of Vista to corporations who paid for it in advance (as part of a license agreement that covers lots of other software) but haven't deployed it yet. They can also count sales to people who then strip Vista and downgrade to XP (although that's weird--usually people would just order their new PC with XP). With Zune, all they can count is number of units shipped to retailers, which isn't the same as sellthrough, but is pretty standard for consumer electronics (and videogames).

[forkboy]

I don't know about anyone else, but there may be plenty other families out there just like mine, who aren't too thrilled with the MP3 player market (Apple or otherwise). We have purchased five MP3 players in the past 2.5 years and of that total three have completely died or suffered from a malfunction serious enough to render the device unusable.

Maybe folks are just getting tired of re-buying the products when they fail way sooner than they should.

[moonetta2]

I agree, I have bought 2 MP3 players within 3 years and they all either froze on me or the battery ************! The last one I had, within 2 days of the expired warranty it broke completely. People are just tired of wasting money.

[Goodman.seth]

More than just the maturation of the market, I think that saturation has started to become an issue related to growth declines. And not only does everyone have one, but their replacement cycles are getting postponed because hard drive size is actually going DOWN with the new models. It will eventually go back up when flash capacities rise, but apple has started a product transition that will stifle growth temporarily, at least until 3rd, 4th, and 5th gen. ipod owners are ready to upgrade to the smaller capacity touch features. If someone doesn't own an ipod by now, they probably just don't want one....so it comes down to replacements for current owners.