Apple was widely expected to announce a press event for a brand new product on Wednesday — the iPad Mini. Instead, the company doubled down on an old and sometimes overlooked product, the iPod.
Apple aired a new commercial for the iPod on Wednesday night, which was the first new iPod ad since November of last year, according to TBWA/Media Arts Lab, the agency behind it.
The commercial is the latest sign that Apple isn’t giving up on the 11-year old product just yet. Apple announced a major refresh of the iPod line last month, updating the iPod Touch with a bigger screen and several new color offerings, and releasing a much thinner iPod Nano with built-in fitness features.
The iPod re-energized Apple’s brand in the early 2000’s and helped kick start its transformation from struggling has-been to the world’s most valuable company. In recent years though, the iPod has taken a back seat behind Apple’s two other hugely successful mobile i-Products, the iPhone and iPad. The ads showing silhouettes dancing to music on their iPods are a distant memory, replaced now by lonely celebrities yammering to Siri on the iPhone.
Even though the iPhone and iPad now account for far more of Apple’s revenue than the iPod, the line of music players does still have a role to play in Apple’s business.
A Billion Dollar Business
For the most part, iPod sales have declined year-over-year since 2008 — the year after Apple released the original iPhone — but the product still brings in more than $1 billion in revenue each quarter for the company.
Apple sold 6.8 million iPods in the June quarter of this year, resulting in $1.06 billion in revenue. That represents about 3% of Apple’s overall $35 billion in revenue for the quarter, but it’s still more than the company makes from software and peripherals.
However, those numbers don’t give a complete picture about the value of the iPod.
Dominating the MP3 Player Market
As Apple pointed out in its last earnings call, the iPod continues to dominate the market for portable music players, making up more than 70% of the market in the U.S. Some might roll their eyes at the idea that Apple touts being the leader of a market that it itself is cannibalizing. That said, the iPod continues to be one of the leading ways that people consume music.
According to the most recent data from the NPD Group, 43% of online users 13 and older listen to music on portable music players, a category that does not include smartphones or tablets. The same percentage of those surveyed say they consume music through online radio services. So the iPod dominates a means of music consumption that is as popular as Pandora and Spotify.
Russ Crupnick, an analyst covering the entertainment and music industries for NPD Group, suggests that part of the reason for this is that many consumers continue to prefer to have a “dedicated music device” for specific use cases.
“Apple has usage situations that are unique to the form factor of the iPod,” Crupnick told Mashable. For example, many consumers may be more comfortable taking the iPod Shuffle to the gym than their iPhone, for fear of losing or breaking the latter, not to mention the fact that the Shuffle is smaller.
A Gateway to Apple’s Ecosystem
Perhaps the biggest reason that the iPod is still useful to Apple is that it serves as a gateway to its brand, and more importantly, its ecosystem of products.
Crupnick and NPD have found that the iPod and iPod Touch are far more popular among children 14 and younger than the iPhone, iPad or Android smartphones. In total, about 28% of U.S. households surveyed by NPD say their children use iPods and iPod Touches regularly, compared to 7.4% for iPhone and 7.5% for iPad. The iPod Touch is particularly popular among those at the upper end of that age bracket.
“When the kid starts to get older and deserves their own device, parents aren’t spending the money on a full-blown tablet, or on a data plan, but an iPod Touch is a perfect compromise,” Crupnick said. As a result, he says that the iPod gives Apple a way to reach younger consumers.
Children aren’t the only demographic that Apple can reach with the iPod. As Crupnick points out, half of Americans still don’t own smartphones. “There are lots of people who think the economics of a smartphone don’t make sense, or they don’t have a need for it, or else the kids are a little too young or the adults are a little too old,” Crupnick says. For many of these consumers, an iPod — or more likely an iPod Touch — can serve as a substitute.
What’s more, considering that the iPod Touch is essentially an identical experience to the iPhone minus the data plan, it may just condition some of these hesitant consumers to eventually transition to the iPhone, which is now Apple’s core business, even if it’s not as exciting as a new iPad Mini.