The end of ‘iPod’ journey after 20 years – Cannibalization in Apple Inc.

Dr M Rahman, Associate Professor, Galgotias University

Apple announced the end of ‘iPod’ journey on May 10, 2022, two decades after it was launched in Oct 2001. iPod, a digital music player, was a revolutionary product that not only changed the way people listened music but also the fortunes of Apple Inc itself, when its PC business was not doing well. The stunning sales of ‘iPod’ is given due credit by experts for Apple’s global success. Today, Apple is a leading global company with a strong sales revenue of 365.82 billion US dollars (in Indian currency Rs 25,607 billion) and net profit of 94.68 billion U.S. dollars (in Indian currency Rs 6,627 billion) in 2021.

However, sales declined rapidly when iPhone (with iPod within it) was introduced in 2007. The advanced features of’ iPhone’ smartphone cannibalized ‘iPod’ since its launch leading to its closure.

So, rather than wait for someone else to do it, Apple cannibalized its iPod by releasing ‘iPhone’ in a planned manner.

(Note: Product cannibalization refers to a phenomenon that happens when there’s a decreased demand for a company’s existing product in favor of its new product.)

iPod Journey (2001-2022)

iPod is considered to be one of the most innovative products in music product category of 21^st century. It is a pocket-sized portable digital music (mp3) playing device launched by Apple in 2001 and sold across the world.

It was an amazing device that could stock ‘1000 songs in pocket’, when other portable music players were able to hold just a few songs in the device.
Despite higher initial price @$399, iPod was highly accepted in the market and the growth was rapid due to its innovative features. Since then, Apple sold an estimated 450 million iPod products across the globe. However, sales declined of late due to the launch of ‘iPhone’ in combination with other factors.

Since the introduction of the iPhone in June 2007, average quarterly sales of the iPod (as shown in Fig 2) decreased dramatically from over 50 million units in 2007 to less than 15 million units in 2014, after which Apple stopped reporting sales figures for the iPod separately. In contrast, iphone sales increased dramatically to over 160 million units in 2014 and 234 million units in 2021. (Source: Statista)

The consumer appeal of ipod started declining with the launch of ‘iphone’ that was a combination of iPod+internet+phone+minicomputer. The increased functionalities on iPhone subjected the iPod to the diminishing utility principle.

In addition, the advent of fast, cheap internet, alongside music streaming services like Spotify, Prime Music, etc meant substantially narrowing use for the iPod reducing its consumer appeal.

Conclusion

Apple built its world-dominating status by being brave. Not only did it create hit products, but it never worried about “cannibalizing” existing products to make way for other products of future. So, rather than wait for someone else to do it, Apple cannibalized its iPod by releasing another product‘ iPhone’ in a planned manner.

References
Apple performance in COVID
https://www.apple.com/newsroom/2022/05/the-music-lives-on/