When Apple introduced the iPod, it pretty much changed my mobile music life. Before, I depended on a Sony Walkman and cassette tapes. But, like many of us in tech, we liked the concept of the early MP3 players but they were hard to use and difficult to find content or music to play on them. I was working with one of the early vendors of MP3 players and, from the beginning, I saw firsthand its potential as well as its problems since, at that time, getting music onto them was not for the faint of heart. Apple changed all that with the iPod. While the iPod itself was a great product, the real value came via Apple’s dedicated area to download music and the ease of side-loading music from the Mac to the iPod.
Over time, all of those iPod music features were rolled into iPhone and the need for a dedicated iPod player declined. Even so, there is still demand for a dedicated iPod and Apple recently introduced an updated version with new colors, particularly a gold one that will have great appeal in China. It has an M8 coprocessor that makes your iPod capable of supporting ambient activity and it has an A8 chip for faster processing. There is a new camera too, which makes the iPod a solid alternative for people who don’t have a dedicated smartphone but want the ability to take photos, use the web, and maybe make some WiFi calls. Clearly, this audience is much smaller than the market for the iPhone but Apple knows it still appeals to a relatively broad audience so they brought out these new models with that in mind.
But, if you look closely at these new iPods, they are basically an iPhone without the 4G cellular radio in it. This makes me think there may be more to these new iPods than one sees on the surface. One key thing is it costs much less than an iPhone and you buy it at a fixed price. No contracts or other costs are associated with owning it beyond what you might buy in terms of apps, music, and videos. Another interesting thing is, in the US and many places in Europe, WiFi is available in almost all public places, hotels, and even stores — with this type of connection, the new iPods can function as an iPhone.
But the reason I am keeping my eye on the iPod is that, with this design and WiFi-based functionality, it could be the forerunner of a product Apple takes to the mid-to-lower end of the mobile handset market. We all know Apple owns the premium market for smartphones and that won’t change. But in terms of unit shares, the premium market for smartphones represent less than 15% of the overall smartphone market that will sell close to 2.1 billion smartphones this year. Yes, Apple gets most of the revenue of all smartphones sold but keep in mind, Apple’s apps and services could be used well beyond those who buy iPhones in the future. More importantly, the market for premium smartphones is not actually growing. Most of Apple’s sales are from those who can afford the pricier models and update them on a semi-annual basis.
There is an emerging middle class who aspires to own an Apple product. But, at the lower end of this audience, they still can’t afford an iPhone. Also what people often forget is that, in most of the world, they are still on 2G and 3G networks and the cost of a 2G or 3G modem is very cheap these days.
What if Apple is able to leverage this new iPod design that is much less expensive than any iPhone they have today and eventually put in a low cost 2G or 3G cellular modem and target it at what is a large and growing lower middle class market? They could use this to get customers into the Apple ecosystem which could be a gift for Apple that keeps on giving. Its design is very Apple but well under the premium cost of an iPhone. It would have the Apple cachet without the high price.
For many years, I thought Apple would never go after a lower end audience. I still don’t think they will go after the sub $100-$125 smartphone market that dominates the really low-end smartphones today. But I have a hard time believing Apple is willing to give up on this emerging middle class, even at the low end, one they could win with a less expensive product and still give them the great Apple experience the company delivers on more expensive iPhones. More importantly, as the low-end of this middle class rises in earning potential, this would assure Apple a built-in audience for more expensive iPhones in the future.
That is why I am keeping my eyes on the new iPod. I think there is more than meets the eye.
Funny, I think the exact opposite: they key feature of the iPod is that it is NOT a phone, so
– no iPhone cannibalization. Apparently Apple are delaying a “6C” (plasticier) or “6-” (smaller) to avoid hurting the 6.
– no contract, so a lot cheaper than any phone. Of course you can get a full Android phone at the iPod’s price, but if you don’t intend to get a contract, that’s immaterial.
– probably a good older kid/young teen product especially, with a natural upgrade to dad’s/mom’s old phone later on.
I am actually much more interested in an iPod device (Shuffle, Nano) that would connect directly to your iPad, iPhone or even Android device and download music from there. Going forward, we can expect less people to own PCs and more people to only own mobile devices, and this trend is more pronounced in emerging markets. Requiring a PC connection is very, very old-fashioned in this day and age and stinks more of negligence than the inherent limitations of a dedicated music device.
If an iPod can connect to Apple Music on Android and download music from there, then you immediately have a product that can appeal to the emerging middle class. Remember Apple Music is only $2 per month in India. There’s a lot that can be done around music that can enforce the Apple brand in developing countries.
Naofumi , with regards to india – is piracy/free strongly rooted in the culture there ? i know it is so here in Israel, so i don’t think Pay -per-music will be a success here, so maybe the same goes for india ?
I would never say that piracy is rooted into any culture. My view is that any emerging country *has* to start with a disrespect of IP because they have to copy. As countries grow and catch up with developed countries, then and only then should they start respecting IP. I honestly don’t see how an emerging country could rapidly grow without rampantly copying developed countries. I’m a bit surprised that Israel, which is as far as I know a very developed country, does disrespect IP, but that’s another issue. My view is that piracy is not a cultural issue, but a development/wealth issue.
Anyway coming back to India, from what I have heard, piracy of apps is the norm and I would expect the same to be true for music, video, etc. However, I’ve also learnt that there are local music streaming startups in India that charge $2 per month. Apple has priced Apple Music at the exact same price. Now if local music startups, which should know the local market, are pricing at $2 per month, I would expect that it is the price point at which many Indians would consider paying instead of pirating.
This, I think is the rationale for differential pricing of entertainment media around the world. If labels simply charge the same price that they do in developed countries, all they do is encourage piracy. Instead, if they price it at a level at which customers can act honestly without breaking the bank, then they will do so.
So in conclusion, I think paying for music can succeed in India and other developed countries if the local marketing organisations have the autonomy to decide the local price for themselves. It will not succeed if the global headquarters tries to apply a single price to every country, irrespective of the disposable income of the citizens.
https://twitter.com/narenbalaji/status/621920806671507456
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Personal Experiences: Personal experiences, including life events and interactions, are another influential factor. Experiences, whether positive or negative, can shape values by influencing perspectives, priorities, and beliefs.
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