Time For Apple To Kill The iPod

Yes, the game-changing device still accounts for about 7 percent of quarterly revenues. But Apple's money could be better spent elsewhere. Here's why and where.

According to several leaked parts and info coming from Apple's Eastern supply chain, the company is not refreshing the iPod Touch much on Oct. 4, if at all. Apart from perhaps an uprated A5 CPU, grabbed from the updated iPhone, and apart from a lick of white paint, the flagship of the iPod lineup is not even being redesigned. It's a minimal-effort update, because Apple's attention is better spent elsewhere right now. In fact, it's time for the entire iPod line to go, while it can leave on a high note, being regarded as one of the most transformational consumer devices ever made.

Apple sells four varieties of iPod today: The diminutive, screenless Shuffle for $49, the Nano for about $149, the touch from $229, and the Classic from $249. And Apple should kill 'em all. Here's why.

The Classic dinosaur still sports Apple's trademarked "clickwheel," and it hasn't changed much in engineering or UI design for years; it's only added storage space as the tech behind hard disks improves (now coming with a 160 GB hard drive, but at the cost of a quarter of the price of an entire MacBook Air or half an iPad). We predicted its death a while back, but Apple kept it on sale--presumably appealing to a niche hardcore music fan who prefers to take their entire music collection (40,000 songs) or 200 hours of video on the road with them. But Apple's moving away from magnetic drive storage altogether, and killing the Classic would be an easy decision for them, even if it's true the costs of making the thing must've been shaved down to razor thinness over its years of optimized production. We're guessing Apple will drop the hammer on the Classic next month.

The Shuffle packs just 2 GB of flash RAM. It's small, quirky, cheap, and appeals to the entry level (and perhaps youth) markets. Apple introduced it to energize the iPod line and sell to a more mass audience, and when it arrived in January 2005 it was the first iPod to use flash memory. It competes in a very crowded space with branded and rebranded products from a huge number of peers, and for its price it's possible to get a comparable MP3 player that has a screen--albeit without the Apple cachet. Apple likely doesn't make huge profits on the device, although its manufacturing costs and BOM must be pretty small--it's instead relying on profit by mass sales. Apple could easily exit this market and aim for yet more profitable segments.

The Nano has been through several innovations, and with its tiny touchscreen and iOS look-alike interface, it completely shook up the mid-price MP3 market when it arrived in 2010. We've seen that Apple has experimented with augmenting the Nano's capabilities--incuding with a camera, which may arrive in its 2011 refresh, but we'll talk more about the Nano later, as this could be the one iPod Apple shouldn't kill.

The Touch is the big Apple surprise--it's sales have been stellar since it launched, possibly because it offered the hugely desirable app experience offered by the iPhone at a lower price (and sacrificing phone and roaming 3G Net capabiltiies). According to some analysis, it's responsible for one third of sales of iOS devices to date (60 million sales, roughly, to mid-2011), matching the flagships iPad and iPhone. Apple's gently upgraded its capabilities and design as the years have passed, adding new features but always being careful to keep them lagging the iPhone so no cannibalization happens--apart from storage, which the touch beats the iPhone for. 

But Apple should kill the Touch after this latest minimal refresh, mainly because it's likely releasing the iPhone 4S--the cheaper iPhone "lite"--to appeal to a more entry-level smartphone market, including those in developing nations, as well as the enormous global pre-pay scene. This phone is expected to beat the iPod Touch, if only because it sports a 3G connection and probably a better camera system. It'll likely be comparably cheap, and in an era when everything is getting connected to the Net, and more emphasis is moving toward streaming content (as in Apple's iCloud) it's an example of how Apple will take its iPod line into the future ... as iPhones. Maybe users will exercise the option to turn off the phone functionality and go for a data-only price plan, just as iPad 3G owners do now. It's the natural successor to the iPod touch, especially next year when the iPhone 6 arrives, and the tech world will likely be flush with iPad-like tablets of all sizes.

Then there's this graph, which tells you almost everything you need to know about iPod sales:

In the last quarter of 2010, the iPod was responsible for just over 8% of Apple's total revenues, and then in the second quarter of 2011 Apple sold just 9 million iPods of all types compared to 18.7 million iPhones and 4.7 million iPads. This represented a 17% decline on the previous year's figures. By this time next year, and probably after an accelerated drop in sales as the world gets more used to iPads and cheaper iPhones (let's guess a 20% year-on-year decline which'll see just 7 million iPods sold in the second quarter of 2012), Apple's time and effort is just not going to be worth injecting into the iPod product line. That development cash (admittedly something Apple's not short of) and staff could be redeployed to make Apple more innovative elsewhere.

Of course, we're not suggesting Apple should merely throw away 6-8% of its quarterly revenues. It should transform its iPod into something new. Here's what Apple could make: It could learn its lessons from the iPhone and iPad and apply them to the Nano, refreshing it dramatically by injecting a small but powerful ARM chip and low-power Bluetooth 4 tech, along with the smallest VGA webcam unit Apple can find. This would turn it, as we've suggested, into a second-screen iPhone companion (and, yes, discrete MP3 player) that could access a whole new lucrative app marketplace. Think: specialized apps for sports fans, check-ins, wireless payment tech, and so on. It would innovate into a whole new market, pulling off a trademark Apple maneuver.

The iPod changed the consumer electronics world, and arguably the entire music industry, but its time is done.

Chat about this news with Kit Eaton on Twitter and Fast Company too.

[Image Flickr user nebarnix]

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14 Comments

  • John C

    I have an iPhone and an iPod touch.  While both serve two different, though sometimes overlapping missions, for me, I wouldn't dream of using my iPhone to play music with any regularity.  For one, I drive a great deal for my job and keep my ipod constantly connected to my car's radio.  During the work day while I am driving, I am constantly getting emails and texts on my iPhone for work.  I do not want to keep interrupting my music for the beeps and gongs of incoming data.  At home, my iPod is connected to my stereo.  While you may be right, in that perhaps the next-gen iPod can become almost an iPhone 4S-lite, (or mini-iPad with a 3G network) I still think there is enough of a market out there for music fans to keep the iPod market viable.

  • Michael

    I can't believe it, you've done all the hard work in this article, but not reached the (I think) obvious conclusion.  The only thing Apple needed to produce in order to kill off the iPod line is a replacement for the nano.  The shuffle and classic they will kill off without ceremony, but the nano is where they've been doing their most work lately.  The answer is that what they've been waiting for is the "iPhone nano" - which will be a re-worked iPod nano, just as the "iPhone 4S" will be a reworked iPod Touch.  The new line up will be iPhone 5, iPhone 4S and iPhone nano.

  • Jon

    Thankfully you don't work for Apple. You may indeed be right about the phase out of the iPod but that would be disappointing. I know I'm in the minority because I'm one of the160GB iPod owners you mention. I have converted 40,000 songs in my library to AALAC files and filled my iPod with 5000+ songs at 900+kps. The sound is the best available and it's truly a concert like sound.
    Killing the iPod eliminates the portability aspect of my music. I hope Apple doesn't do that.

  • dustin garrett

    I love my iPod nano touch. I think the shuffle should go but not the iPod lineup all together. The shuffle doesn't make much sense because there are other lcd screened music players out there for that much. but the clip on nano is great! Its very lightweight and small so if your cleaning the house or exercising it doesn't weight you down. 

  • Pamela

    The author of this article listens to talk radio only in the car as has a much greater chance of heart disease than me.  Car stereos aren't playing MP3s or podcasts or audiobooks from thumb drives   , and I'm in the car a lot.  I don't want to work out with my phone that beeps to interrupt me to tell me I've got email to my work address, heck, even my personal address, and I might not want any calls or texts to distract me, either.  Nor do I want the weight or the drain on the battery of the device I'm mostly to need outside of that workout.  In fact, while I love my ipod mini more than any, even my old iPhone has become more functional to me when it stopped being a phone and just a player, but Apple still made it incompatible with nearly every dock device.  We don't NEED drastic innovation to portable music players, they are already small enough to clip to a t-shirt, we just need them to be trusty and work.

  • Allie Kemp

    I second the idea that there is value in a stand alone music player. For exercise or travelling, for example, I like having just a music player. 
    If Apple stops selling ipods, people that want a stand alone music player will get them elsewhere. And that opens up the non-apple market to those people. When my carrier didn't have an iphone, I got an android phone. And i loved it. I now sync music on my phone with something besides itunes and have apps that aren't out of the istore. It's just a little wedge between me and Apple. 
    As long as people buy ipods, they are linked to itunes and the apple experience. Why mess with that? 

  • Vanessa Demske

    As an iPod Touch and smartphone (albeit, a DROID) owner, and a member of the 18-24 "early adopter" segment, I will be crushed if Apple decides to kill the iPod. When cell phones began to come standard with a camera, the quality of photos appearing on friends' blogs and social networks declined (hard to believe I'm the only resolution snob out there.)

    I'd have to think that when we combine the 'phone' functionality with the 'music player' functionality, something's going to give. The battery life on my phone (as well as my friends with iPhones) is atrocious, and it certainly takes away from the music listening experience when you need to conserve battery to call your mother at the end of the day. This leaves young, on-the-go urbanites like myself to either go coffee shop-hopping in search of an outlet to plug in to, or to use the device very sparingly. Until there's a smartphone with a battery life approaching that of my iPod, I will be cherishing my soon-to-be obsolete music player for a long time.

  • Taylor Trask

    There will ALWAYS be a market for music consumers who want to take their entire collection with them on one device.  The cloud isn't now nor will ever be the grand solution, as you can never guarantee ubiquitous connectivity.   And even if you could, the consumer should not have to pay more for data just to listen to music they could otherwise have on a single, solid device.

    Also, when I look at the graph above, I don't see a growing dis-interest in the iPod as a device.  On the contrary I see a market wherever every consumer already has one, and is happy with it.  Apple surely has a replacement cycle built into the release matrix, and it's absurd to think all of the users in that cycle will want to "trade down" from a 160 GB ipod to a 16 GB iphone.

  • digioiaj

    The stat on iPod sales declining in relation to overall revenue is all but helpful to the case you are making. Mainly because the core functionality of the iPod is a main feature in the two devices that are diluting these statistics in the first place: iPad and iPhone. The iPod classic alone is a legacy device that audiophiles everywhere still buy because of storage capacity (shout out ReedPrinters comment), why would you stop that revenue stream? Not to mention the Design America piece on here just outlined the designer of the watch form factor for the new nano, that is not turning the iPod into something new? Functional jewelery? Just saying.

    To say they should kill of the iPod as a headline for a story will definitely get a lot of reads and comments like this, but this is not quality in relation to Fast Company's, usually well thought out write ups. Sorry, Kit. I hope we are still cool.

  • anthony robinson

    I do not own an iPhone or an iPad...and I'm not about to buy an iPhone just to play my music. Nor am I going to strap some big a$$ iPhone to my arm when I'm working out or running or on my bike! You technophiles annoy me to no end. The iPhone is not God...get over it!!

  • John Wall

    Yeah, they should definitely kill the iPod, it's way too profitable now that they just crank them out and sell them without spending money tweaking the design.

    The percentage of total revenue stat means nothing, just because everything else has gone up doesn't mean that the line is not profitable. Tell me this is not just linkbait...

  • ReedPrinters

    I still love my ipod.. classics stores mad music! lasts long when I am working out!

  • Jason

    There's nothing in this analysis that ties in the amount of revenue generated via iTunes sales of apps, music, books and so on.  The iPod/iPad/iPhone app (as well as the Kindle) are kind of akin to game consoles in that they don't necessarily make a pile of money on their own, but because they have tremendous add-on value as people buy games and accessories for them, and people are to some extent tied into the ecosystem.  It's not just the "Apple cachet" that people are looking for, it's the "just works" experience that you get when you plug a new i-device into your existing ITunes setup.

    The "second screen" experience is a very valid point.  My spouse likes to have everything on her iPod touch -- all the podcasts, songs, and apps.  But she likes to keep a smaller playlist on a shuffle for when she works out, since the thing is unbelievably tiny, light and doesn't require some odd case to work -- you just clip it on your shirt.

    I could imagine the Touch going the other way, too -- starting at low end on the "Apple habit" for the kids, and then when mom/dad upgrade their iPhone to n+1 and the kid needs a phone, you have a new customer who uses the old one, generating more revenue and more money, while mom and dad do the same with the latest and greatest.

  • Nitin Alabur

    Another indicator  why Apple "will" discontinue iPod touch: Usually at this time of the year, Apple would have the back to school offers for Macs, where the education discount would give the buyer a free iPod touch, which was in a way made to get rid of the current gen iPod touches to make way for the next gen iPod touches that would come in.

    Having a cheaper version of the iPhone for $199 instead of an iPod touch would solve all the equations! Prepaid customers happy. would be iPod touch owners will now be iPhone owners. All leading to more market share for iOS devices!

    (wrote a blogpost about this a few months back, glad to see FastCompany/Kit Eaton having a similar opinion!)