Player Blog Category Archives: Apple
November 15, 2004
iPod Flash Editorializing
Editoral mode on: We're still scratching our heads over this one. We can think of so many reasons why Apple wouldn't want a flash iPod, but far fewer good reasons for the iPod Flash. First off, the low price will cannibalize regular iPod and iPod Mini sales. Second, we can't imagine that iPod Flash margins will be that large anyway.
Third, how much can Apple differentiate the iPod Flash from the iPod Mini? The iPod Mini and 4G iPod are already quite small, how much lower can Apple go? Not much if it has a click wheel and an LCD of any size. The iPod Mini already added color choice, so expect the flash version to come in colors as well. Finally, and we feel most importantly, how can Apple sell people on a 256MB device when a 4GB or 20GB device doesn't cost much more?
On the positive side, however, a flash device will probably have great battery life. But then again, Apple sold plenty of 3G iPods with pathetic battery lifetimes.
The iPod Flash pros both come with a couple of big ifs. First is that Apple may only be using the iPod Flash as a low-cost way to lock consumers into the iTunes Music Store, keeping them away from competing, Microsoft-based online music stores. This only makes sense if Apple makes its money from the store (blades) rather than the devices (razors).
Second, it's also possible that Apple thinks that a flash iPod won't cannibalize iPod and iPod Mini sales, but we flatly disagree.
"First off, the low price will cannibalize regular iPod and iPod Mini sales."
No, it wouldn't. For one, it probably won't have the dock connector, meaning it will be less functional than the others. It will have a smaller LCD, again less functional. Also, expect a boost in the mini storage capacity. And expect it to be less costly. People will pay for the dock, greater capacity, and greater functionality.
Secondly, this is the only area where competitors are cannabilizing at Apple's market share. They might as well do it to themselves rather than letting other companies do it.
"Second, we can't imagine that iPod Flash margins will be that large anyway."
Why not? Fewer and cheaper parts. Less material. Flash prices dropping fast. No need for battery, just AA batteries. Margins should be better.
One can expect that Apple will still be at the high end for equivalent Flash players but sell well. In other wors, better margins than competitors for the same type of device.
"Third, how much can Apple differentiate the iPod Flash from the iPod Mini? The iPod Mini and 4G iPod are already quite small, how much lower can Apple go? Not much if it has a click wheel and an LCD of any size."
Quite a bit of differentiation. It'll be too small for the dock connector. It will be smaller. It will be Flash based instead of HD. It will have a much smaller LCD... think the one line displays that Sony uses in its remotes. The click wheel could get quite smaller or not be present at all.
"Finally, and we feel most importantly, how can Apple sell people on a 256MB device when a 4GB or 20GB device doesn't cost much more?"
Because it'll probably have more than 256MB, be priced at $100, and the minis will get a capacity upgrade.
"First is that Apple may only be using the iPod Flash as a low-cost way to lock consumers into the iTunes Music Store, keeping them away from competing, Microsoft-based online music stores."
It's just as important to get consumers using AAC over WMA, whether or not Apple, or anyone else, is selling music downloads.
"This only makes sense if Apple makes its money from the store (blades) rather than the devices (razors)."
It makes money from both already.
"Second, it's also possible that Apple thinks that a flash iPod won't cannibalize iPod and iPod Mini sales, but we flatly disagree."
Of course some cannabalization will occur. It happened with the mini as well. But that didn't hurt the overall iPod sales. In fact, I think it's clear that their are segments to the market... Some people simply won't buy a high capacity player... So why not sell the product they want?
Another way to look at it is: Apple went after the most desirable consumers first-- the music devotees with large collections and a desire for high capacity. But everyone listens to music; the majority of them, however, only have a few albums or a few hundred tracks. You do not build a market and revolution upon these consumers, but you don't ignore them either.