October 20, 2006 4:00 AM PDT

iPod at 5: The little gadget that could

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(continued from previous page)

Apple's unique print, television and outdoor advertisements featuring black silhouettes wearing the ubiquitous white earphones have been impossible to avoid for the last five years, Bhavnani said. And its minimalist design philosophy coupled with the elegance of the user interface and scroll wheel made it simple for tech novices to get into digital music, he said.

Demand for the iconic music player remains high going into the end of the year, when Apple will have fresh designs across its three major iPod categories for holiday gift-givers. Microsoft, however, is also planning to enter the market with its Zune player and music service later this year, and companies like SanDisk and Sony continue to push their own devices.

That said, there are still plenty of opportunities for Apple to increase its market share and overall shipment totals outside of the U.S., where its dominance is not as pronounced and where cultural norms around portable music players have yet to develop, Bajarin said.

Apple could also court additional users by unveiling a subscription service, Bhavnani said. Others have tried the rent-not-buy model with digital music to little success, but one of the reasons those efforts might have failed is because the services don't work with the iPod, he said. Should Apple try its own subscription model, it might court additional users willing to pay $10 or $15 a month for access to Apple's library of songs.

Digital music goes legit
That analysts today are arguing whether anyone can knock Apple off the digital music pedestal is, to some, remarkable. Five years ago, digital music listeners were operating on the fringe of legality. Napster, and later Kazaa, had allowed millions of college students and young professionals to pad their music collections with digital copies of their favorite songs and albums. Many also ripped their CDs into digital formats, but the proliferation of file-sharing services allowed tons of people to collect songs without visiting the record store.

At the same time, that created a problem. Digital music listeners were largely confined to their dorm rooms if they wanted to enjoy their collections. Portable music hadn't been cool in decades, since Sony popularized the concept with the Walkman. The Discman of the 1990s never quite felt the same as the Walkman, said Shaw Wu, an analyst with American Technology Research. "It was so '80s," he said of the bulky Discman.

Enter the portable digital music player. Companies like Rio and Creative Technology were out ahead of Apple with handheld devices that could play the new storage lockers of MP3 files. But the market wasn't sure to what to make of the new devices at first, and moving files from the PC to the music players, and back again, wasn't the easiest of tasks.

At some point in 2000, Apple started to make its move. In January 2001, it released the iTunes software for managing digital music collections. Later that year, the iPod made its debut. The first device had 5GBs of storage and cost $399, a price that analysts at the time considered a little high. But the price of that unit was later reduced to $299, and larger capacity versions were also introduced.

In 2003, Apple took what some might have considered a blasphemous plunge into the Windows world, allowing PC users to use iTunes to manage their music for the first time. After that, the momentum behind the device continued to grow, leading to the iPod Mini, the iPod Nano and the iPod Shuffle, as well as video iPods--a concept Apple's Jobs once mocked.

Whatever Apple chooses to do, and whatever challenges it faces, the company has created, rather remarkably, its second iconic product. "It's turned into a cultural phenomenon," Bajarin said. "Apple has to continue to keep it simple, integrated and keep it cool."

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22 comments

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no Q4 coverage from CNET?
No surprise to me since CNet seems to cover only negative APPL
news :P
Posted by BobBobBobBobBobBobBob (49 comments )
Reply Link Flag
Apple earnings coverage
We did this story on Wednesday, when Apple released its earnings.

<a class="jive-link-external" href="http://news.cbsi.com/Apple+results+beat+the+Street/2100-1047_3-6127255.html" target="_newWindow">http://news.cbsi.com/Apple+results+beat+the+Street/2100-1047_3-6127255.html</a>

There's a link to that story in the third paragraph, by the way.
Posted by Tom Krazit (436 comments )
Link Flag
8.4 million sold in 3 months!
Can anyways say Apple ?

almost 10 million units sold in only 3 months, how can Microsoft beat that ?

I don't see how.
Posted by rmiecznik (224 comments )
Reply Link Flag
Easy. M$ will make all Windows installs require a Zune purchase
They'll just tweak the code once again to force
<a class="jive-link-external" href="http://www.teckmagazine.com/reviews/software-reviews/roxio-easy-media-creator-9-review.html" target="_newWindow">http://www.teckmagazine.com/reviews/software-reviews/roxio-easy-media-creator-9-review.html</a>
every Vista user to purchase a Zune before they are allowed to see their OS desktop.
Strongarm tactics the M$ way!
Posted by cnutsucks (25 comments )
Link Flag
10 million units sold
<a class="jive-link-external" href="http://www.analogstereo.com/apple_ipod_commercial.htm" target="_newWindow">http://www.analogstereo.com/apple_ipod_commercial.htm</a>
Posted by Ipod Apple (152 comments )
Link Flag
70% Share - Will Fall In The Future
With increasing competition from a variety of sources, iPod's market share will slowly decline.
Posted by john55440 (1020 comments )
Reply Link Flag
John has spoken
Thanks for the detailed analysis.
Posted by DemiHampster (29 comments )
Link Flag
And you're going to die...
No really, someday we all will. Oh yea, sorry, that is SO OBVIOUS!
LOL
Posted by robot999 (109 comments )
Link Flag
That's what they said about Microsoft Word...
...and as much as I would wish it otherwise, Word is still the 800lb gorilla of apps. The difference with the iPod, of course, is that the majority of DLP users chose the iPod freely. When a given product reaches critical mass, it takes tremendous effort for a competing product to chip away at its market share. Much as I love the iPod/iTunes combo, I wouldn't mind seeing Zune get a little market traction, if for no other reason than to keep Apple from growing complacent. Wouldn't touch Zune with a bargepole myself, though. ;-)
Posted by amateriat (4 comments )
Link Flag
Not any time soon -- 70% is here for some time.
With their installed base, superior system (itunes + iPod) and
new offerings in 2007, this 70% is not going ANYWHERE anytime
soon.
Posted by dansterpower (2511 comments )
Link Flag
99 cents per song - is genius business
I buy from myself!!!
Posted by www.SMicFromHome.com (7 comments )
Reply Link Flag
Are You Blind?
You see what you want to see, and not much else. Open thine eyes!
Posted by Mister Winky (301 comments )
Reply Link Flag
Response to BobBobBob, etc.
:)
Posted by Mister Winky (301 comments )
Link Flag
2006's Zune == 1990's Windows 3.0 ?
History:

From 1985-1990, Macintosh dominated the GUI computing
market.

In 1990, the release of Windows 3.0 started eating into it.

In 1995, five years later, the release of Windows 95 finished off
the Macintosh's former dominance, and in subsequent years all
but wiped it from the map.


Present:

From 2001-2006, iPod dominated the large capacity portable
music player market

In 2006, Microsoft released the Zune.

Future:

In 2011, will history have repeated itself?


The differences, if they matter, are that this time Apple has Steve
Jobs in command, whereas Microsoft has all but lost its genius in
the form of Bill Gates, who has instead directed his attention to
donating money to improve the health of 3rd world countries.
Microsoft employees like to think they are a match for Apple's,
however.


Please note:

not being a troll here, I'm a happy iPod owner since a 1G (2001)
model and currently have a 60GB 5G (2005) iPod plus a 4GB
(2005) nano.

I was thinking (for a short while) about buying a Zune, but spent
my Christmas money on a Sony Reader instead.
Posted by dotmike (154 comments )
Reply Link Flag
Sorry Different Market / times
Microsoft got its monopoly status largely to them dominating the business market. It's easy to see people (many first time computer users) wanting the same computer they use at the business for home. Easy to see consumers wanting the same PC at home for compatibility reasons. Also lets not forget the illegal (mob) tactics of pressuring the OEM's to use only Microsoft software!

Today, Microsoft is an old dinosaur in the PC market. A market that is not the same as the consumer electronics market. The CE market is a fast moving, fast changing market. It's not just Apple and Microsoft at play here like the PC side. And they can not run the same illegal tactics they did on the PC side.
Posted by daveworld (123 comments )
Link Flag
Not This Time.
Microsoft will get a small share of the media player market
within 5 years. But this time, Apple will maintain the lead. The
base, the system and new stuff coming out in 2007 will Ice this
for sure.
Posted by dansterpower (2511 comments )
Link Flag
Congratulations! :)
Congratulations Apple iPod!

It's still the best MP3 player on the market IMHO and I think it will continue to be so after Microsoft's Zune is released.

Long live the Apple iPod! :)
Posted by Ryo Hazuki (378 comments )
Reply Link Flag
A GOOD five years!
Can't say that I'm blissful about much that has happened in the world during the last five years. Who would have thought 'terrorism' would be a word one read or heard every day? But, I purchased my first iPod a week after the original release and have owned each generation of full-size iPod prior to the recent 80 GB release. Overall, I've been a satisfied user. It is amazing to have gone from stares and people asking 'What is that?' to the current iPod Nation.

The funniest thing I saw regarding this article was the poll result saying there are actually iPodless people "waiting for the Zune."
Posted by J.G. (837 comments )
Reply Link Flag
Ah, Great Days to Be a Producer using Apple Gear.
Bravo Apple!

These are great days to be a 30 year User of Apple Hardware,
Software and Utilities to Produce the Creative Work that makes
me and my family our living. Excellent Operating System.
Hardware that works. Fantastic Production and Programming
Software.

I've still got my PC's with Windows here and there in our studio,
but if you ask me what I use -- and I can use anything I want as
a top producer and owner -- I choose the Mac with OSX. Rock
Solid Production and Programming System.

Hat's Off! Bravo Apple.

DJO
Posted by dansterpower (2511 comments )
Reply Link Flag
It doesn't always pay to be first...
Diamond Multimedia (Rio), Nike, Philips were out in front with MP3 players in 1998/1999, but they fumbled the football. Kudos to Apple for recognizing an opportunity and build a great product for a market that was hungry for a better solution.
Posted by hlwilson3 (1 comment )
Reply Link Flag
 

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