News

Apple iPod Sales not Affected by iPhone - So Far

Wednesday, July 25th, 2007 at 7:00 PM - by

In Apple's fiscal third quarter earnings report, it was revealed that Apple had seen no cannibalization of iPod sales due to the iPhone so far. However, the iPhone sales period has been short, and they are watching the situation closely. Apple's long term view of the iPhone strategy was articulated. Absent from the report was information about Apple TV or movie sales.

When asked about iPod cannibalization, Peter Oppenheimer said, "We saw no obvious evidence during the June quarter. We will obviously monitor that this quarter and report this quarter and the October conference call." In fact, iPod sales were 9.8 million, up 21 percent over the same quarter a year ago.

Overall, Apple's music business accounted for 40 percent of their revenue. Based on data from NPD, Apple reported that the iPod retains 71.5 percent of the MP3 player market. Apple also reiterated that they recently surpassed Target and Amazon to become the third largest retailer of music in the U.S.

Regarding the iPhone, during the Q&A period, Mr. Tim Cook was asked about the customer preference for 4GB or 8GB iPhones. "We don't disclose the specifics ... but I would tell you that the mix skewed to the eight gig for early sales in June," Mr. Cook said.

In terms of the hoopla regarding the early iPhone sales, Mr. Cook had some measured words: "And so our view is the starting gun has been fired and we have gotten off to a great start. However, our primary focus is not on initial sales. We're focused on building a third great business for Apple over the long term along side our Mac and iPod businesses. Both of which you can see from the results reported today are doing very well. It won't be easy to build this third business, because the competitors are large and end trenched and it will not be done overnight. Our perspective is measured in years, not months, but the rewards we believe are huge for Apple."

Apple did not report specific sales numbers for the Apple TV nor did they provide additional information about on-line movie sales for the quarter.

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A guest said: (hide)

Wed Jul 25, 2007 8:54 pm

Personally, I see the iPod and iPhone as two totally separate markets; so, it's not surprising that there would be no cannibalization of iPod sales. As it is, the iPhone can only really compete with the iPod nano anyway (due to storage capacity) and the iPhone costs more than twice as much. If there is any slowdown of iPod sales, it would probably have more to do with the age of the current design (5Gs being almost two years old now). As for me, I would love a 6G iPod that was an iPhone without the phone (so long as the price points and capabilities remained the same) as I have zero interest in a $600+ phone.

As for the AppleTV and movie sales, they probably weren't significant enough to mention as a separate sales figure (without embarrassment).

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gslusher said:

member since 13 Nov 2002 with 2003 posts, unranked, send him a message or view his profile

Wed Jul 25, 2007 9:12 pm

Quote
Anonymous wrote:
As for the AppleTV and movie sales, they probably weren't significant enough to mention as a separate sales figure (without embarrassment).

Apple seldom gets down to that level of detail in its public releases. They don't say how many Airport Extreme base stations or cinema displays they sold, either. They don't even break out iMacs vs Mac Pros or MacBooks vs MacBook Pros--they just report "desktops" and "laptops."

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A guest said: (hide)

Wed Jul 25, 2007 10:13 pm

Quote
gslusher wrote:
Apple seldom gets down to that level of detail in its public releases. They don't say how many Airport Extreme base stations or cinema displays they sold, either. They don't even break out iMacs vs Mac Pros or MacBooks vs MacBook Pros--they just report "desktops" and "laptops."

True enough. Movie sales would probably get lumped into iTunes Music Store sales, but the AppleTV isn't an iPhone, an iPod, a desktop, or a laptop; so it should be listed in it's own category separately. Apple does get down to that level of detail when a product reaches easily marketable milestones in round numbers ("100,000,000 iPods sold since 2001!", "270,000 iPhones sold the first weekend!") or when they want hype the success of a particular product. The total lack of any specific information on AppleTV sales (a new product, in a new category for Apple) speaks volumes.

Pity they don't (same for the rest of the industry). It would be interesting to see how each model stacks up against it's Windows based competition in real numbers (rather than nebulous quantities like "market share" - which only tell you about sales percentages at a particular moment in time, rather than hard numbers of installed base or units in actual use).

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Terrin said:

member since 29 Jan 2006 with 350 posts, unranked, send him a message or view his profile

Wed Jul 25, 2007 10:20 pm

Apple TV is similar to Airport Express. It serves much of the same functions. Apple has never broke out figures for that product either. By Apple's own terms, it never expected Apple TV to be a break away product like the iPod. Apple said from the get go it was most likely Mac users who would at least initially embrace the product.

As far as this article goes, I find it silly. The iPhone was only out for two days this quarter. That is not enough time to see if any cannibalization is going on.

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j.martellaro said:

member since 07 Dec 2006 with 76 posts, TMO Staff, send him a message or view his profile

Thu Jul 26, 2007 12:04 am

Regarding cannibalization, Apple (and enthusiasts and media) promoted the iPhone for six months before it shipped to customers. During that time, there was plenty of opportunity for customers to defer an iPod purchase. However, iPod sales were up 21% compared to the same quarter last year. I think that's what the analyst who posed the question was thinking about.

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