Decline of the iPod explained

29 Jul 2011

It seems the soaring success of smartphones and tablet computers is killing demand for single-task consumer electronics devices. This no doubt explains the obvious decline of the iPod, which according to Apple’s recent results, fell 20pc in sales.

Apple’s stellar third quarter, in which it delivered revenues of US$28.5bn and profits of US$7.3bn, was fuelled by sales of the iPhone and iPad, which were up 142pc and 183pc respectively.

The trusty iPod that sparked a whole new direction for Apple in 2002 is now just really an app on the iPhone and iPad and sales declined 20pc with just 7.5m devices sold.

According to IHS iSuppli, this is actually a cross-industry trend that marks a fundamental shift in the history of the consumer electronics industry. Expect navigation devices (PNDs), like GPS systems and other single-purpose media devices like MP3 players, to decline, too.

It says that rising sales of devices like smartphones and media tablets are resulting in the long-term decline of single-task consumer electronics devices.

Shipments of smartphones and media tablets will rise at compound annual growth rates (CAGRs) of 28.5pc and 72.1pc, respectively, for the years 2010-2015. In contrast, shipments of portable navigation devices (PNDs), portable media players (PMPs)/MP3 players and digital still cameras (DSCs) will either decline or remain flat during the same period of time.

“The success of multipurpose electronic equipment, often coming at the expense of devices dedicated to a single task, is reshaping the landscape of the consumer electronics industry,” observed Jordan Selburn, principal analyst, consumer platforms, for IHS.

“For example, the once-ultrahot MP3 player market has commenced an irreversible decline, not because consumers are no longer interested in music, but because other systems, primarily smartphones like the iPhone, also include audio functionality as part of a much broader suite of features.

“Other products, such as PNDs and DSCs, have been affected, as well, with declining or flat sales after years of robust growth. In many cases, users can replace a slew of dedicated systems with just one multipurpose device, gaining functionality and portability while simultaneously saving money.”

Adding to the woes of single-task consumer products is the arrival of the media tablet. “Media tablets, predominantly the Apple iPad at present, are truly a jack of all trades – and master of most,” Selburn said.

“This will put even more pressure on sales of single-task gear. “Although not directly acting as replacements for pocket-sized equipment, the media tablet increasingly will play an expanding range of roles for consumers, acting as an e-book reader, music and video player, browser, calendar, alarm clock, gaming platform, PND and camera all in one box.

Survival of the fittest

“The story of consumer electronics is an ongoing survival of the fittest, and multitasking systems, such as media tablets, will have a hand in turning yesterday’s hot consumer electronics gear into tomorrow’s fossils,” Selburn said.

Shipments of media tablets will rise to 262.1m units in 2015, up from 17.4m in 2010. Smartphone shipments will increase to more than 1bn units in 2015, up from 294.3m in 2010.

In contrast, global MP3 shipments are set to fall to 126.8m units in 2015, declining at a CAGR of negative 6.8pc from 180.1m in 2010. Showing how dramatically market conditions have changed, MP3 shipments rose at a CAGR of 38.7pc during the previous five-year period from 2004 through 2009.

For their part, PND shipments will decline to 37.2m units in 2015, with a CAGR of negative 2.2pc from 41.5m units in 2010. This compares to a booming 88.9pc CAGR from 2004 to 2009.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years