In October 2001, Apple promised to unveil a revolutionary media product. Few of us expected an MP3 player. Who could have predicted that a little white box would lay the foundation for an empire that turned into the world’s most valuable IT company ten years later?
The Apple in 2001 was a different Apple than it is today. The company had a market cap of less than $10 billion and we doubted the products the company as introducing. When Steve Jobs pulled a white box out of his pocket and described it as a “gorgeous” product that would, in combination with iTunes 2, change the way we would listen to music, I have to admit that I had the feeling that Jobs was exaggerating.
The original iPod had a 5 GB hard drive and was advertise to hold “1000 songs in your pocket.” It had a basic 160×128 pixel monochrome display, had a Firewire (400) interface only for data transfer and charging. back then, the iPod concept was, in its general perception, not so revolutionary. The industry tried to figure whether to use Flash or HDDs for MP3 players. The capacity of the iPod wasn’t at the top at the time and we had concerns that it may be too expensive ($399) to succeed. What few of us understood at the time, was that the iPod was the first product of a new Apple that created a cohesive, intertwined product line that laid the foundation that eventually delivered the most admired IT company today.
The iPod turned into a synonym for MP3 player over the years, and quickly captured market share. It took 19 months to sell 1 million iPods. The surge in sales began to quickly accelerate when the company launched its iTunes music store in April 2003. back then Apple said that it sold (back then DRM-infested) 1 million songs at 99 cents each during the first week of availability of the store. By the end of 2003, iTunes had sold 25 million songs and 2 million iPods. 12 months later, Apple announced 200 million songs and 10 million iPods sold. By April 2007, Apple said it had shifted 100 million iPods and 3 billion iTunes songs. In January 2009, Apple removed DRM from its iTunes songs. Today, iTunes downloads are at more than 12 billion and more than 320 million iPods have been sold.
Apple and the music industry have been engaged in a fierce tug-of-war over revenue sharing and royalties over provided music content, but the music industry has to largely thank Apple for transitioning the music publishing industry from physical disc sales to digital sales and rescuing it from illegal files haring that blossomed with Napster and grew plenty of successor networks after it was shut down. From the very beginning, Steve Jobs was very careful not to alienate its content providers. Even at its original presentation in October of 2001, when Apple gave away hundreds of “beta iPods” to the attendees of the presentation, each device came with 25 commercial CDs, whose content the company transferred onto each iPod (yes, about 300 attendees went home with an iPod and 25 CDs). The first iPods came with a translucent sticker on their displays that read: “Do not steal music.”
I still display the first iPod in my office and I keep it as an example of great product design – especially the physical click wheel of the Gen 1 iPod stands out from every other iPod that followed (the Gen 2 kept the scroll wheel, but grew to 10 GB and was offered for Windows PCs as well). The significance of the original iPod was not so much based on its tech specs, but its design and certain features that people considered as problems at the time. For example, there was no well-designed MP3 player at the time that you would have proudly displayed in public. Also, the Firewire interface solved painfully long data transfer times and the scroll wheel was an ingenious interface that enabled users to deal with large music libraries very effectively. In comparison, we had bulky HDD MP3 players, such as the Creative Nomad Jukebox (6 GB), that was about the size of a portable CD player, or there was Intel’s rather strange Pocket Concert MP3 player with 128 MB of memory for $400, which dies when the company killed its consumer electronics division in 2002. Like so many other products, the iPod did not invent its segment, but perfectly executed the idea of an MP3 player and fixed the ideas others had made before. The first MP3 player, by the way, was the $250 Eiger Labs MPMan with 32 MB of memory, which was shown at the CeBIT tradeshow in 1998. The first widely successful MP3 player was the Diamond Rio PMP300, which was also released in 1998.
Since October 2001, Apple released 22 different iPod models and claims to hold more than 50% market share of MP3 players worldwide, and more than 70% in the U.S.
In 2006, Microsoft decided that it would compete with the iPod and announced the Toshiba-built Zune. Unfortunately, like other products before, the Zune was merely a copy of the iPod and it was too late to make a dent in Apple’s empire – especially since Microsoft shot itself in the foot with awkward color choices such as brown casing and questionable features such as crippled Wi-Fi in the first-generation product. About a month ago, Microsoft quietly announced that it would stop making Zunes.
Apple still sells iPods, but the market has slowed down substantially. The company sold 6.6 million iPods in Q3, down from 9.1 million one year ago. A substantial share of iPod sales has transitioned to iPhones, which have become the effective successors of the iPod.
While we mainly see Apple’s iPad and iPhone today, it has been the iPod that created Apple’s mobile devices business and is, in large parts, responsible for the Apple as we know it today. Happy Birthday!
Wolfgang Gruener in Business Products on October 24
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