WOW, Apple, I had no idea

I had no idea what the iPod really represented to Apple. Here's the quote of the day from Variety:

For the holiday quarter, Apple made $3.4 billion in iPod and iTunes revenue, compared with just over $2 billion from PCs and software. In other words, it is now a digital media company that sells PCs and software on the side, a dramatic reversal from the company's first 25 years.

Mind blowing. Also makes you question why Microsoft hasn't taken the space seriously yet. Yeah I know, they are coming out with something. But you can't tell me Ballmer wouldn't have liked to have some of that $3.4 billion added to his sales last quarter. Sometimes the speed that Apple can move at, not having to worry about hardware partners, proves the "we do it all" business model. But can they keep that leadership position? History says "no", but then if you'd asked me 4 years ago if the iPod would still have 75% of the mp3 player market in 2006 I would have asked you to share the crack pipe you were smoking with with me. So I guess the answer is, until they get some serious competition, they can continue to pwn this space for as long as they like.

I was also stunned by this quote from the article:

As for adding movies to iTunes, Jobs personally heads up most negotiations, although VP Eddie Cue has taken up some of the slack as competing studios are wary of doing business with a member of Disney's board.

Last year when Apple announced they were going to put a podcast directory into iTunes, I wrote a blog post asking "how do I get TPN's shows into iTunes?". A few days later I got an email from sjobs@apple.com telling me to speak with... Eddy Cue. I thought Eddy was some schmuck down in spare parts. Turns out he was a veep. That's impressive.

Comments

[Paul Greatbatch]

Just goes to show you that you never know who's going to listen to what you have to say.

[thomas Barta]

"But can they keep that leadership position? History says "no", but then if you'd asked me 4 years ago if the iPod would still have 75% of the mp3 player market in 2006 I would have asked you to share the crack pipe you were smoking with with me."

The thing that amazes me is that 4 years into the iPod revolution, all the competitors continue to be lame. I guess that says something about the design-by-committee culture of our corporations.

Another point: I have an iPod that was a gift. I love music but have NO interest in spending my evenings looking for music to download. But, automatically recieving podcasts of my favorite radio shows so I can time-shift them? That works for me! I think lots of the Apple wannabes are fixated on trying (unsuccessfully) to take on the iTunes Music store instead of focussing on trying to design decent HARDWARE. It is the hardware that matters.

[anonymous coward]

"For the holiday quarter, Apple made $3.4 billion in iPod and iTunes revenue, compared with just over $2 billion from PCs and software. In other words, it is now a digital media company that sells PCs and software on the side, a dramatic reversal from the company's first 25 years."

This is a bit disingenious because iPod sales tend to peak for the Christmas season, this time Apple has sold 14 million iPods and of course the Mac revenue was dwarfed. The rest of the time they're selling about 6 or 8 million iPods. Take a look at the previous and the next quarter.

Results for Q4 05 (july-september 2005): $1.47 billion for iPod+iTunes and $1.90 billion for Mac hardware+software.

Results for Q2 06 (january-march 2006): $2.19 billion for iPod+iTunes and $1.89 billion for Mac hardware+software.

[Miriam Parkinson]

In my opinion the main reasons why the iPod have been so successful is that
Firstly they released the first mp3 player that wasn't ugly. Not only that, but it was a work of art... soo pretty... why must they be so evil... *cough* excuse me.
Secondly its that damned click-wheel thingy. It really is a brilliant navigation tool and no one (not even the people who invented it) have manged to come up with an alternative that matches it.
Thirdly and most importantly even though we all know that they are an evil empire and that iPods all self-destruct as soon as their circuitry gets the 'I'm out of warranty' signal etc we all still want them.

It will take a LOT of work to build a brand that can compete with the monster that Apple have created.

[Cameron Reilly]

hey coward - good point. But that trend could also show that iPod sales, as a percentage of revenue, are increasing Q on Q?

[jbelkin]

Yes, the hardware is world class but here's what their competitors have to beat or at least tie:

I can buy/view music, audiobooks, podcasts, music videos, movies & movie trailers

have it DOWNLOAD.

AND have it sync to my device

with ONE CLICK. YES, ONE CLICK.

good freakin' luck competiting with that.

there is NO foreeable competition ... MS has been trying to clone the Palm OS for 8 years and STILL, NO ONE will claim the PocketPc/Mobile PC/Win CE OS is as easy to use as the Palm ... and the Palm is no itunes/ipod combo ... basically the latest Q phone is tte closest and this is after 8 years with palm often tettering into financial straits and still MS cannot beat it.

As for ipod sales, they have been increasing exponentially (200-300% rise per quarter) peaking this holiday quarter with around 8 million ipods. It seems to be stable at around 8 million ipods a quarter (projections for the next quarter are around 8 million even though it's not a holiday selling season) - quarter to quarter and year to year are a difficult gauge since until last year, the cheapest ipod was $249 - it's now $69 but with 50 million ipods out there and over 20 itunes stores, even a couple pennies at 1.5 billion tracks will add up to "real" money.

AS for MS missing the boat - they also missed the boat on search with Yahoo & Google (as Steve ballmer admited)... kind of like missing the advent of television ... MS is so clueless about consumers.

[Bob M]

Cam, interesting post.

With respect to iTunes and podcasts, I just find it so much easier to browse and download podcasts there than anywhere else. These days, podcasts from iTunes are the only (new) thing I put onto my iPod. The ease of use of iTunes shouldnot be underrated.

If it wouldn't cause any detriment to your business, could you give us an idea of the proportion of downloads TPN has through iTunes versus other channels?

[anonymous coward]

"that trend could also show that iPod sales, as a percentage of revenue, are increasing Q on Q?"

Yes you're right if we forget about the holiday quarter. It was not to say that the iPod is not important, or there wouldn't be an iPod division alongside the Mac division at Apple. Going forward the iPod revenue is likely to continue to grow way faster than the Mac revenue, but the holiday season was not a particularly representative example IMHO, and during the rest of the year there is no dramatic difference in quarterly revenue… yet. :-)

iPod sales as a percentage of Apple revenue
Q4 05: 33 percent
Q1 06: 50.5 percent (up from 34% a year ago)
Q2 06: 39.3 percent (up from 31% a year ago)

iPod + other music sales* as a percentage of Apple revenue
Q4 05: 40 percent
Q1 06: 59 percent (up from 40% a year ago)
Q2 06: 50 percent (up from 38% a year ago)

*Other music sales consists of iTMS sales, iPod services, and Apple branded and third-party iPod accessories

[Phillip Molly Malone]

One click syncing? Huh! I just plug my iriver in and it syncs! Seems like a waste of time having to do a click!
Molly

[Tony]

I dunno about one click syncing. I have all my songs and podcasts setup as smart playlists in iTunes and in preferences select which ones I want it to automatically sync when I hook up my iPod.

There is one click for subscribing to podcasts if that what was meant. Apart from that iPod is very easy to use even Molly could use it :P