After six years in the iPod era, Apple is still the leader in portable music players. Along the way, however, currents have shifted, according to Tom Krazit at C|Net on Tuesday. iPods were expensive at first, then inexpensive to expand the market, and now Apple has to steer clear of the commodity MP3 player market, build from its base of strength, and figure out what the future holds for the next generation iPods.

After years of double-digit gains in sales, the growth of the iPod has started to level out. The market for the classic iPod may be getting saturated. Now, Apple is undergoing a revolution, and Apple has sent a clear message that it thinks the iPod touch and iPhone are the future of the iPod business.

iPod touch

However, just how many people are ready to step up to that level of device is the next question. Sales peaking combined with revenue growth suggests that customers are, in fact, making the jump to more expensive models. Revenue growth is good, even if the stratospheric climb of quarterly sales has passed. However, how Apple designs the product line to protect its base yet move to devices with more capability in the future is the challenge.

"At the moment, there doesn't appear to be any competitor making meaningful gains at Apple's expense, even in the low-end market. That suggests people are still buying their MP3 players based on design, brand identity, and the need for more storage."

Even so, there may come a day when Apple doesn't need to concentrate on the low-margin commodity iPod business. New business models will likely arise, including special services. "Apple has a bit of a luxury in this area that it doesn't have in the Mac or iPhone market, in that it enjoys a dominant position from which to make its next move," Mr. Krazit noted.

"Service-oriented iPods mixed with handheld computers might be the best way the keep the iPod gravy train going," Mr. Krazit concluded.