Apple’s iPod business has shrunk to the point where the company no longer even mentions it among its main product list at quarterly earnings. And while unveiling this year’s latest iPhones last month, Apple rolled out a new iPod color without little fanfare.
Some way to treat a product that sold 26.4 million units in the past 12 months and helped pave the way to the company’s current riches.
But as time goes by there’s simply no arguing that the iPod has become a less important Apple product, especially because it generates less and less revenue for the company. On the flip side, Apple’s iTunes business — which includes the App Store, iBookstore, and sales of music, movies, and TV shows — has evolved from the iPod’s sidekick into the matriarch of Apple’s offerings. It’s become a major part of how Apple differentiates its gadgets from competitors.
For its fiscal year, which ran through September and was fully reported on Monday, Apple sold 26.4 million iPods, down 35 percent from last year. That amounted to $4.4 billion in sales, or down 30 percent in revenue from the year before. By comparison, the iTunes Store and its surrounding businesses (which grew out of the iPod) brought in $15 billion in sales and grew by 22 percent.
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That’s a far cry from the massive strides the store made in the early days, which were fueled by an ever popular and growing iPod line. But that growth has continued amid the iPod’s dwindling popularity.
How iTunes stacks up
iTunes and its related software and services have become a key to how Apple makes money. In the last year, the profitability of Apple’s iTunes, software, and services business was second only to iPhone among all of the company’s business units, even though it only represents 8.2 percent of the sales Apple generated in the just-ended fiscal year.
However, iTunes has bumped up against some ceilings. Music-related products and services have grown in overall size, but they’ve been shrinking to a smaller slice of Apple’s revenue every year as the company’s hardware business has exploded. Rewind to 2008 and it was iTunes’ heyday as the world’s go-to place to legally acquire digital entertainment. And the App Store had only just begun.
Today, the world has a surfeit of retailers willing to sell you digital music, movies, and shows. In many cases, Apple is delivering consumers to its competition. Mobile music listening is gravitating toward subscription services like Spotify or online radio services like Pandora. Apple, through its App Store, is what’s bringing those services to device owners — as it must. The revolutionary premise of the iPhone was that the apps turned the device into a digital Swiss Army knife. The iPod as a walled garden evolved into a more open device, despite Apple’s desire to control every part of it.
Date: October 29, 2013