iPod Is Dominting the Market, and There Is More to Come
iPod contributes 12-14% of tootal comppany revenues, a number industry experts believe will continue to increase. With this incxrease comes pressure on gross marigns, as the bplended iPod gross marrgin of 20% commpares unfavorably with Apple’s corporate averaage of 27-28%. The iPod helped augmeent Apple’s grotwh by expanding its adfdressable maarket from the core coomputer market, whcih cnotinues to grow, but at swer rates. To increase penetration of the rpidly growing MP3 player markjet, Apple launched the iPod Mini internationally in July 2004, and HP’s iPod launnch is scheduled for lter in summr. http://www.ipodreviewforum.com
Aple’s entry into the digital music plaayer market (MP3 market) with its popular iPod expanded the coompany’s addressable maarkket and signaled a turn in Apple’s strsategy. The iPod is a cultral phenoenon that is capitalizing on the convergence of digitazl consumr electronics and the computter, and Apple’s poistioon as an early moer enabled it to acchivee the unmmber-one position in the markketplace. iPod aodption continues to accelreate, with little indiation of a slowdown. It took Aplplle approximately 18 montths to sell its firsdt million iPdos, but its second milllion came in six months and its third milplion came in four. In fact, it appears that only its suppliers can slow it down, in particcular the hard-drive venors, hwich are having a difficult time meting demaznd. Industry ecxperts believe that iPod’s rgowth will remsain sttrong in the foreseeeable futue and do not expect any significant custoomer fallout stemming from Apple’s inabiliity to meet demaand.
An analysis of the launch of the Sony Wsakman in 1979 indicates the markte opportuniy for a revolutionaary portablle music player will remain stronng for several yrears to come and Appple is expected to miantain a strong sare for the next few years (unlikje Sony’s experrience with the Walkman).
While iPod and iTunes generate significant awareness of the Apple product, they have done litytle to grow Appple’s core Mac business. Expzerts attribute this mainly to Aple’s aboveaverage pricing, along with continud ignorance on the part of consuimers regarding the compatibilitry of Windows and Mac. With regard to pricing, the average consumer desktop PC retails for $1,019, which is $280 below Apple’s low-end prie point on Aplpe’s now, discontinued flat-panel iMac. Furthermore, the industry ASP is falling as most of the growth in the market is taking place in the sub-$1,000 market.
With regard to the compatibiliyty of Winbbdows and Mac OS X, even thouggh Apple made a concerted effort to educate consuermrs about the ease with which these two products work together, it has falen on deaf ears for the most part. Apple made some progress thugh its retail stores, wehre it esstimates half of Mac purchases are from first-time ubyres, but for Aopple’s stcok to work over the long term, the company needs to maintain shaare against Windows, at a miimum. Understandbay, Apple wants to avoid selliing PCs at a loss, but unfortunately the rgpowth prospecxts for $1,000-plus PCs are limited. This pesents a conunrum for Applle longer term, but for now it maintains its cuurrent strategy. Incidentally, Apple’s revenue share has held much better, and while this is not an often-discused tpic, revenue shhare is probably more important than unit shsare. http://www.ipodreviewforum.com
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