Should Apple ditch the iPod?

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For the moment, the Apple doom-mongers have been silenced by another record quarter. But there’s one area where things are down, and still dropping. It’s the iPod division, and it’s the closest thing Apple has to a dead man walking.

Sales of the music player continue to plummet as more people buy iPhones than ever, and listeners move away from music downloads toward streaming services like Spotify, Pandora and iTunes Radio.

Should Apple ditch the iconic product line that first signaled Apple’s expansion beyond computers — or is there some way the business can be turned around?

Read on to find out where things currently stand.

By introducing the iPhone, Steve Jobs put the iPod on notice.

When he introduced the iPhone, Steve Jobs put the iPod on notice.

In a very real sense, the writing has been on the wall for the iPod for at least half its lifetime. When Steve Jobs introduced the iPhone back in 2007, he described it as a revolutionary mobile phone and a breakthrough Internet communications device, but also as a widescreen iPod with touch controls.

In some ways, this was Apple's first stab at an iWatch.

In some ways, this was Apple’s first stab at an iWatch.

By doing so, he was signing the iPod’s death certificate by raising the question of why anyone would buy any of these three items separately when Apple had so neatly packaged them together in the form of the iPhone.

Forget the iPod’s marketing pitch of “one thousand songs in your pocket” — who wanted three different devices when they could be easily replaced by one?

Steve’s prediction proved to be right on the money, since iPhone sales overtook those of the iPod just a few years later in mid-2010 — becoming the company’s top-selling product line in the process. Rather than vanish, however, the iPod responded by growing smaller.

Although Apple continued selling previous models of the device, the iPod’s most dramatic reinvention came with the sixth-generation iPod nano in September 2010. It was a great way to differentiate the iPod, and it worked. At least at first.

When the sixth-generation iPod nano launched, Jobs noted that an unnamed Apple board member had claimed they planned to wear it as a watch. While it was less a serious attempt to take on the fashion watch industry than it was to come up with a way to keep the line relevant by letting it be clipped onto clothing, it is interesting to look at now that plans for an iWatch are coming together. Although it was far from Apple’s biggest hit as a product, the cottage industry that sprang up around the iPod nano — embracing its watchlike functionality — perhaps gave Apple pause to think about a more serious kind of wearable.

With the iWatch now poised to replace the iPod, the question is what Apple should do with the iPod division. As far as I can see, there are three possible moves:

Attempt to restore the iPod to its former glory

Let’s face it: This is the option that is least likely to happen. But could it?

The truth about the iPod is that, despite media playing being its raison d’être, it’s no better a media player than either of Apple’s other iOS devices. That’s not going to change with the arrival of the iWatch. Although most stories about the iWatch have focused on its health-tracking capabilities, it is its position as a media player, driving iTunes purchases, that is the most proven business model for Apple.

For the iPod to be differentiated from its siblings, the device would either need to be much better at working with streaming media services than existing iOS devices or offer another “value added” function like higher-quality sound. The iPad and iPhone are both perfect for streaming music, thereby not really leaving a space the iPod could capitalize on in this area.

As for higher-quality music? Neil Young recently raised $2.5 million on Kickstarter (against an $800,000 goal) for his “high definition” PonoPlayer.

Young’s idea is that there are many people out there who have been waiting to hear 24-bit audio sampled at 192 kilohertz (kHz), rather than the lower-resolution audio found on an iPod or CD.

But is there? Anyone who remembers the sad story of Super Audio CDs (and if you don’t, that sort of proves my point) should realize that there is likely not a mass audience out there so unhappy with the sound of regular iTunes music that they’ll shell out for a whole new device and format.

Even if Apple decided this was a route worth exploring, the cost and risk of creating a separate, higher-definition iTunes for iPod isn’t going to happen in a million years.

Sorry, iPod, you’ve simply outlived your usefulness!

Abandon the iPod

The other end of the spectrum is getting rid of the iPod altogether. Closing shop completely on a still-profitable product line is the kind of thing most companies wouldn’t dream of. Of course, Apple isn’t like most companies. When Steve Jobs returned to Apple in 1997, one of his first moves was to greatly streamline the company’s product lines, creating a basic grid of products with only one or two in each category. Even though Jobs eliminated some perfectly acceptable products, his idea was that in the long haul a simplified, non-confusing matrix of devices would help welcome new customers, while also ensuring that Apple poured its resources into doing a few things very well.

Apple has strayed from that formula a bit since then (and its pourable resources are a world away from what they were in the late-1990s), but the central concept has remained the same. As a company, Apple has always been good at cannibalizing its own product lines before other companies could do it for them. (“We have to have the courage to eat our babies,” was how a former Apple engineer once phrased it to me.) It’s also never been scared of getting rid of what it views as antiquated technologies — such as the floppy disk or optical disc drives — simply because it can.

Why would Apple want to kill a product line that is still making money? To avoid diluting its other lines. It could be that there is a certain base of customers currently buying iPods who could be convinced to invest in a lower-cost iPhone 5c. With a huge amount of pressure on the iWatch to be Apple’s next insanely great product, Apple might also want to ensure that customers only have one option for a wearable music player that isn’t a phone — and avoiding that confusion in the marketplace could be reason enough to kill the iPod.

Keep the iPod going until it becomes unprofitable

“Unsuccessful” takes on a whole different meaning when analysts are talking about Apple. It doesn’t mean unsuccessful in any real sense, but rather “not iPhone successful.” In this way, people can dismiss Apple TV as unsuccessful — despite $1 billion in sales over the past year and 28 million units sold since 2007. There is no doubt that iPod sales are dropping. Recently announcing sales of 2.8 million units, they are down 50 percent from the 5.6 million sold this time last year.

But Apple’s iPod business is still worth $5 billion. In a recent report from mobile ad traffic tracker Opera Mediaworks, a single iPod — the iPod touch — was reported as accounting for more global web traffic (3.14 percent) than BlackBerry (1.14 percent ) and Windows Phone (0.18 percent) combined. That’s barely a ripple in Apple’s overall web traffic dominance (38.17 percent) — and neither BlackBerry or Windows Phone are the most successful businesses to look at — but it’s still enough to suggest that reports of the iPod’s death have been greatly exaggerated.

And while the iWatch looks like it’s eventually going to take the iPod’s place in the Apple ecosystem, how long did it take for the iPhone to overtake the iPod in sales, despite its obvious advantages? If those three years are anything to go by, then the iPod could continue eking out sales until around 2017 — provided the iWatch launches later this year, as many think it will.

Of these options, it seems pretty clear that Apple is opting for the last one. The iPod will continue, but we’ll probably not see a refresh of it this year — suggesting the company isn’t too concerned about rehabbing its tarnished image.

The iPod touch is a much better idea than creating cheap iPhone models.

The iPod touch is a much better idea than creating cheap iPhone models.

And why should it? To modern consumers, the iPod means very little as a brand. Refurbishing the iPod as a viable product line would take not only a radical rethink of the device, but also a concerted marketing effort, neither of which Apple seems interested in.

All the criticism of the iPod is justified. No, it doesn’t play media any better than other iOS devices; yes, whatever cachet the iPod has left will likely be all but wiped out by the arrival of the iWatch; and yes, the device is a relic of the digital downloads age in a world embracing streaming music.

But the division’s not losing money for Apple, it offers a cheap entry point into the Apple ecosystem, and keeping the iPod touch around is certainly a much better idea than a low-cost iPhone.

In all, the iPod’s not ready to go off to the iScrapyard in the sky just yet.

Agree? Disagree? Post your comments in the box below.

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About the author

Luke DormehlLuke Dormehl is a UK-based journalist and author, with a background working in documentary film for Channel 4 and the BBC. He is the author of The Formula: How Algorithms Solve All Our Problems, And Create More and The Apple Revolution, both published by Penguin/Random House. His tech writing has also appeared in Wired, Fast Company, Techmeme, and other publications. He'd like you a lot if you followed him on Twitter.

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