I’ve been guilty recently of moaning about Apple’s apparent built-in inability to stock enough of its products. Sure, today it’s the iPod and iMac you can’t lay your mitts on, but this problem has gone back years. It’s an old Apple gripe: they price things too high, or announce months ahead of availability, or don’t make enough, or do all three, and the Macolytes mutter stuff about BMW and exclusivity and let them away with it.
But, at least in the case of the iPod, Apple may have a decent excuse. Via John Naughton, this Appleinsider report has some astonishing numbers. We’ll pause to admire, first of all, the analyst’s mighty price target for Apple in the next year – a heroic $78 a pop. At the time of writing they’re at an admirable $67 a shot, so that’s perhaps not a huge climb, but given the historical place for Apple shares – sloshing around the $20 mark, apart from an iMac/dot.com boom-based surge around 2000 – you might begin to see my point. This chart shows Apple’s recent climb outperforming the rest of the NASDAQ – this is no irrational exuberance, at least none on a market-wide scale.
Is it Apple-centric irrational exuberance? Surely the surge isn’t isn’t based on Apple’s fading computer business, which continues to see its market share slide? Well, I’d expect better news out of that once they iron out the – yep – supply problems for the new iMac. But for real good news, it’s obviously all down to the iPod.
Back in that Appleinsider report, there’s an analyst – who’ll have an inside tip from the company (this being How These Things Work) – upping his "estimates" for iPod shipments this quarter to 4 million units, up from previous "estimates" of 2.7m and 3.5m. That’s 4 million units in a quarter, when they’d only sold 4 million iPods total by summer this year.
Onto shakier ground, the analyst also predicts a flash-based iPod to be unveiled this year at MacWorld San Francisco. Jobs has always said "no" to such things, insisting such chip-based devices are naff because they can’t hold many songs, but he can always change his mind saying "we waited until we could release something great!" and "we’ve finally made flash devices cool!" and "this is awwwwwsome – the best thing we’ve ever made!". In the resultant flat-out Apple Store-bound stampede of slightly sweaty Mac fanboys, I doubt I’ll be hearing many dissenting voices. And it’s never a good idea to write off the chances of a device appearing only a month ahead of the show. Ahem.
More importantly, such a lower-end device would add volume, give Apple complete and utter dominance across the entire music player sector (as opposed to complete and utter dominance at the hard drive-based end). And, super super super importantly, it’ll increase the lock-in factor. This last point is key. If you’re selling four million players in a quarter, that’s four million more souls ready to use iTunes, buy music from iTunes music store, and build a collection of digital music that recoils at the very thought of Windows Media (WMA).
Even if Samsung, with the aid of Bill Gates, abducts Jonathan Ive, and forces him at gunpoint to create a real iPod killer (as opposed to those ugly devices branded as such almost every month in some gadget mags), you still have a vast audience of people who are facing real hassles, and hefty financial outlay, to make the move to WMA.
It’s not just the cost of the device any more. It’s the new PC software, it’s re-ripping your CDs, it’s waving goodbye to your iTunes Music Store purchases, it’s getting rid of that iPhoto collection and fiddling around with your Audible.com buys. And, if Apple does the sensible thing and introduces an optional subscription model for iTunes Music Store, as a third of young adults apparently would like them to, it’s about actually losing half your music if you leave the fold. You might think of quitting the cult, but you’ll never <i>really</i> get away…
In other words, these sales are quickly creating a market where technical supremacy becomes secondary. Just as long as Apple remains competent – and at the moment it’s on screamingly good form – it stands to win, because the total cost of moving to another player becomes more than it’s worth for the end user – even if their iPod has reached the end of its useful life, or they want to upgrade from flash iPod to hard disk iPod. Times that by two if the rumours of a media centre unit – please, Jobs, make it so – finally become reality.
Apple’s tight vertical integration, such a handicap in the decentralised PC era, suddenly looks like a formidable barrier to entry for music player hopefuls in the near future. And that could explain those investors piling in as fast as they can. They see a new market twisting into shape right in front of them, and suspect they know who the big winner is going to be.
Question remains, will they ever make decent iPod earphones? Or am I the only person who yearns for a decent fit without sacrificing the nice, status-symbol white of the supplied pair?
I wouldn’t write off a major competitor to Apple just yet. The numbers they’re selling at the moment are tiny compared to what the market could sell if the price was a bit cheaper. iPods are still out of most kids’ reach for example, and although many pairs of white headphones are to be seen around London, there are many non-white headphones still in evidence both there and elsewhere.
The hassles of re-ripping your audio are already being faced by people who’s current iPods either break or are lost or stolen – I’ve come across at least two people who had to start from scratch because they didn’t back up their audio on the PC. In time we’ll get better at our backing up regimes, but then drive capacities will rise and lossless compression will become more important.
I think that at the moment, most of Apple’s direct competitors are happy to take part of the pie at the current price levels, perhaps being just a bit better value. Once prices really start to get cut, as surely they must, then market dynamics will really change. And the nature of the devices means that there won’t be much difference in audio quality between cheap Chinese versions and pricey Apple or Sony examples. A decent pair of headphones would in most case even out the differences.