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Why Apple is not worrying about the iPod – its better to eat your own

While Apple is preparing to announce another quarterly result seeing their share price reach record heights, the iPod is for a change receiving some column space. While tech journalists might worry about the iPod there is little indication that Apple is.

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In his recent Apple 2.0 article Philip Elmer-Dewitt high-lighted how sales of the iPod range has declined ever since it peaked at 22.7 million units during the Christmas quarter of 2008. Since then sales have slumped year over year, with this quarter expected to be down by 7.2% compared to same quarter last year, based on pre-results analysts reports.

While iPod sales might have slumped, the rest of Apple and their products have grown at a rate that would make any company out there envious, and that is also part of the reason why Apple is not worried about the iPod.

These days portable music is integrated in pretty much every smartphone / mobile phone out there, and given the growth of that market it is natural that the market for the stand alone media player in the iPod is declining. Yes, there is the iPod Touch, which could be considered an iPhone lite without the call functionality, but that one as well will see declining sales sitting alongside the iPhone and iPad, as it becomes the low cost version of something better.

There is a saying in marketing that “it is better to eat your own”, which means that it is better to cannibalize your own products than to have others eat into your marketshare. What is happening with the iPod range at the moment feels very much like that, Apple is allowing the growth of their other iOS products to cut into the iPod market/sales. It makes perfect sense as they are actually making customers move up the price range, to more expensive products that has a higher margin, and more ancillary products/services sold alongside them. This is about clever product lifecycle and portfolio management from Apple, and less about protecting a single product range.

While i don’t think that Apple will retire the entire iPod range any time soon, i think it might not evolve at the same rate any more as the iOS range of products (which includes a possible iPod Touch 5). Apple will be maintaining the iPod product cycle at a declining rate, taking advantage of any opportunities for milking the range for all its worth. For the iOS range however i expect big things and many changes to come in the next few months and years.

If you are worried about the iPod, don’t, instead keep an eye on the bottom line.

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Filed in: Apple iPod, Lead Story

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