How Much Cheaper Is the iPod Going to Get?
When the first iPod came out it held 5 GB of music and cost $400. Today that same $400 can buy a 60 GB iPod. That means in five years the capacity has increased by a factor of 12 while the price has remained the same. To help put that into perspective for you I have compiled some statistics on the history of the iPod as it relates to price, size and value.
(author’s note: due to their short existence the Mini, Shuffle and Nano are not included in this comparison)
Another way to examine the iPod’s value is to compare the price per GB of each model. The first iPod, at only 5GB, cost $80 per GB. However when the next model was introduced (the 10GB model) the price per GB dropped to only $50 per GB and it has plummeted ever since. Comparing the price per GB of the largest capacity iPod to the corresponding iPod of the previous generation shows with each new iteration the price per GB drops by 33% each time!
This means you are paying 33% less per GB every generation. That is why the first iPod was so expensive at $80 per GB while the newest one is a great deal at barely $7 per GB.
As harddrive technology improves prices will of course fall to the benefit of the consumer. However what the numbers and graph don’t show is that as the price of storage fell, the devices themselves were improved in other ways. They became thinner, got larger displays, longer battery lives, brighter screens and better interfaces. And though the traditional iPod always used harddrives as its storage medium, the Shuffle and Nano both use flash drives. And even though they haven’t been around long enough to merit that many new additions, in time they will become a much better deal than they are now. Much like the original iPod did.
There must eventually be an end to this cycle, though. Prices can only drop so far, likewise harddrives can only store so much data. Eventually the technology will progress to the point where digital music players are no longer special devices but rather cheap commodities. Much like the walkman and diskman eventually became.
At that point, regardless of how good Apple’s products are, they will lose marketshare. Some time in the future portable media playing devices will become cheap to the point where not having such a device isn’t even an option. And while Apple will certainly do well in this market, they cannot rely on it as an indefinite source of income.
I predict Apple has at least 3 years (but up to 5 at the most) in which they can enjoy a de-facto monopoly in this space. After 5 years the price for components will have dropped to the point where almost anyone can, and will, compete with the iPod. If someone emerges as a viable competitor to online media distribution (my money is on Amazon) then Apple’s dominance in this area will be over. By the time that happens though Jobs will have hopefully found a new star to hitch his wagon to.
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Comments
“Nobody will ever need more than 640k RAM!”—Bill Gates, 1981
James, didn’t you miss out the biggest point about computing evolution? Companies always find a way to increase demand for growing something.
What you’ve said here about the iPod, could have easily been attributed toward the cell phone 10, even 20 years ago! Yet the cell phone has found new ways to continue development and keep adding features, even though there are cell phones, people are still buying the expensive higher-end ones. I believe the same can be said toward the iPod.
For instance… did you take into consideration a growth in higher quality? I bet in a few years iTMS songs will grow in fidelity and file size. But also that people will be downloading HD videos to their iPods (not necessarily for watching on a mini hi-def screen, but acting as a HD player for connecting to a HD TV.) - EACH HD movie takes up to 15GB+
Plus there’s the jump when Apple will remove the hard drive and begin using the generation of mini hard disks (suchlike in the iPod minis) in their main line, decreasing size further, and this is before they revive the main line again with flash storage, decreasing size even further.
Sorry James, but I really can’t take your 3-5 year estimation seriously with the amount of further audio and video evolutions predictions I can put into a technology roadmap of the coming future.
“Due to the finite nature of mp3 players, they become a commodity and Apple’s monopoly on the mp3 player market will be over within 3-5 years”—James R. Stoup, 2006
^ I meant to say, “even though there are cheap cell phones, people are still buying the expensive higher-end ones.”
I think the Nano’s relative newness is a poor excuse for leaving it out of your comparison when it (and the mini/shuffle) are precisely what prove your argument wrong. At $249, the 4GB Nano is $62.25 per GB which puts the price right where it was when the iPods were first released and they even reduced the number of memory you’re getting at the same price from the Mini. Maybe in five years Apple will come up with something else to drive the price back up.
One thing that the iPod competitors don’t seem to realize is the importance of price point. If you are given a choice between two devices, both the same price, but one of them is the defacto standard with a huge variety of accessories available to it, then that’s no choice.
But make that competing device $50 or $100 cheaper, and the consumer is faced with an interesting option. Even with the availability of accessories and the ease-of-use with iTunes, the iPod loses customers because some people simply want to pay less for a music player.
Hell yeah. Even I’d buy a rival product if it was $100 cheaper than an iPod shuffle
lockup,
You are seeing what you want to see in my article and not what I actually wrote. Allow me to explain:
1. I never said I was your “average” consumer
2. At no point did I say that no one would ever need more than 60GB of storage
Also, I am thrilled that you have 70GB+ of music. Guess what? You aren’t normal. Your average user doesn’t have anywhere near that amount of media.
Second, I am aware of the emergence of video. But when Apple releases a true video iPod it will be a seperate entity from its smaller, music-centric cousins. Yes, portable video will catch on and larger storage capacities will be needed. But that doesn’t really affect those players out there (like the Nano) which only play music.
Luke Mildenhall-Ward,
You mention cell phones and unknowingly prove my point for me. You see, you are confusing the “market” with a “supplier”. Portable music is the market, Apple is the supplier. I am quite certain that the market will do just fine in the future. Apple success, on the other hand, is by no means guaranteed.
Let us look at your cell phone analogy. At one point only a few companies and service providers were in the market. And even then they didn’t command the lead that Apple does in the MP3 player market. And yet look what has happened these last 10 years. Cell phones have become a commodity. You can buy them from numerous companies. You can get different providers. You can buy disposable cell phones for Heavan’s sake! They have become a commodiy due to the driving down of their price.
Now, this isn’t very good news for any individual competitor, but it is great news for us and the market as a whole. Apple will face the same thing eventually. No matter how good a product they make, when prices fall to the point where EVERYONE can afford a device, they will simply be competing in an over saturated market where the margins are razor thin. You can’t maintain a monopoly in that scenario.
As to your video comments try and stay with me and focus on my original topic. I am NOT talking about video playing iPods. I am talking about devices that PRIMARILY play music.
That. Is. It.
Eventually in the PORTABEL MUSIC PLAYER market Apple will lose market share. However I see big things ahead for them in video, but that isn’t the focus of this piece.
And by the way, I don’t see harddrives going away any time soon. No matter how small they can make them people aren’t going to stop buying 60GB iPods because the 4GB Nano is smaller. There will be a market for harddrive based players for quite some time.
Bart,
The reason I left the Shuffle/Mini/Nano players out was due to the fact that they don’t have any history in the market. In 4 years or so we can look back and examine how their prices/GB have dropped. Untill then their data isn’t relevant.
“As to your video comments try and stay with me and focus on my original topic. I am NOT talking about video playing iPods. I am talking about devices that PRIMARILY play music.
That. Is. It.”
My mistake. I must have got confused by the fact you referred to “portable media players” and then went on and mentioned “online media distribution” and yet failed to make it clear you were specifically speaking about the mp3 player industry and not the portable media player industry as a whole.
Again- Sorry.
Re #23: But they do have a history in the context of all iPods and I’m finding your exclusion of them from your analysis a little selective. The iPod nano, the iPod mini, and the iPod shuffle are all iPods and in them Apple found a way of getting people (myself included… I own a mini) to pay relatively more for less. That’s a more significant point than showing that a specific subset of iPods has been getting more storage space for the same price… I imagine that Apple’s future depends more significantly on products like the mini/nano/shuffle (+ touch-screen video iPod?) than it does on the standard iPod.
I think Bart has a point actually. You could have put the mini and nano into your analysis- group the mini and nano together, because frankly they are the same: less storage for a smaller, cooler device. Although the shuffle still couldn’t be part as it’s another different market.
iPod 1G price:
Could it be that both of you guys are right (and wrong).
Well, I could be wrong, but still:
If I remember correctly, in November 2001 Jobs presented the iPod 1G 5GB model for $499. (no 10gig model) I´m quite sure, that this is so because I worked at an Apple store in Germany at the time and $499 equalled roughly 1000 marks (~500euros). I paid only 370€, as I got a 25% employee discount.
The 10gig model was introduced a couple of months later, for 499, while the 5gig was marked down to 399,-
Can anyone verify this?
Matt
^ That probably does sound correct actually. Thanks for pointing that out. So they were both right after all (=
When the first iPod came out it held 5 GB of music and cost $400. Today that same $400 can buy a 60 GB iPod.birthday messages
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