Shulou(Shulou.com)05/31 Report--

More than six years after entering the iPod era, Apple is still at the top of the music player field. But what happens next?

Apple is at a crossroads, and the development of this product can be said to have saved its survival. Without iPod to boost Apple's profits and investments, we might not be talking about Apple's growing Mac business or iPhone, which has changed the rules of the game over the past year.

After years of double-digit growth, iPod growth is finally starting to slow. The market can be said to be saturated. Do you know anyone who wants to bring music but doesn't buy MP3? But at the same time, iPod is going through a revolution. It is changing from a simple music player to a fully functional computer.

Apple sent a clear signal that iPod Touch and iPhone are the future of the iPod business. Greg Joswiak, Apple's vice president of global iPod and iPhone marketing, said that when Apple released a larger iPod Touch in February, they thought the wi-fi-enabled iPod Touch was "a new device".

But that doesn't mean the whole world is ready to upgrade to more sophisticated devices, such as iPod Touch: many people just want to play their own music and watch their own shows on the road, and don't want to lose their own money. While Apple is taking practical steps to gradually upgrade the high end of its iPod product line, how can it keep the iPod cash cow up and running for the next decade?

Look at those clouds. Thankfully, IaaS (iPod as a service) will never be popular, but once Moore's Law is implemented, Apple may bridge the gap between today and the future by regularly bundling iPod and services, adding wireless services as quickly as possible, and lowering OS X to a new generation of iPod.

Back to reality, iPod growth began to slow sometime last year. The year-on-year growth rate fell from 50% in 2006 to 5% in 2007. However, income growth remained stable, at 18 per cent in the 2006 holiday season and 17 per cent in the same period in 2007.

This shows that people are moving from the old iPod to the new iPod, a trend supported by our recent iPod survey. Thirty-one percent of respondents regard iPod Classic (defined as any generation of video player) as a daily music player. 52% of respondents who owned one or two iPod,34% bought the first iPod in 2003 or 2004.

But 60 per cent of respondents said the iPod Touch would be their next iPod product. Sixty-eight per cent said that if they chose a combination of a music player and a mobile phone, what they wanted most was iPhone. The price of this "transaction" is $299 or $499 for 8 gb iPod Touch--. The 32 gb model, which helps Apple's iPod offset slow economic growth and stronger iPod Touch revenue and profits, adds a whole new source of cash to the iPhone.

IPod Touch and iPhone are more than just music and video players: they can surf the Internet, send email, and soon run a large number of officially approved games and apps.

As chips get smaller, more powerful, and cheaper, Apple has reason to add more features and features to other versions of iPod, Shuffle and Nano. Of course, it will be able to continue to increase the available storage space on each device, which is the biggest demand for MP3 player buyers in our survey. Wi-Fi is the second most popular feature of iPod in the future.

To some extent, the MP3 player market seems to have spread to at least three companies: low-end merchandise, small stand-alone audio and video players with very specific tastes, high-end portable computing, and iPod Touch's third-class packages with a variety of computing functions, which were in the price range of $50 to $199 at the time.

This "three-headed monster" seems a little unreliable. At present, no competitor seems to make meaningful gains at the expense of Apple, even at the low end of the market. This shows that people still buy MP3 players based on their design, brand identity and the need for more storage space.

However, if things change, Apple may not want to put too much effort into its low-margin commodities business. IPod is undoubtedly the most powerful brand in portable music players, but as the low end of the market expands into niche markets such as USB drives, Apple will have no real advantage over other consumer electronics companies that know how to mass-produce small parts.

Ross Rubin, an analyst at NPD Group, says basic phones are increasingly able to handle simple music playback. To some extent, he says, manufacturers' capacity growth will outpace the growth of personal music libraries.

IPhone and iPod Touch are both innovative and highly profitable products that Apple likes. In a crowded market, you need to find ways to make yourself different. Apple has traditionally focused on making high-end products that are well designed and easy to use.

In your service, you may buy a commercial MP3 player in Walgreens or 7-Eleven, while in your iPod Touch, you may find something in between. Rubin said Apple is waiting for advances in chip technology to introduce larger screens, larger capacity and wireless capabilities into devices with limited power. At the same time, it can start offering services to increase the attractiveness of low-cost ipod.

Only 13% of the respondents

Said they were considering buying iPod Shuffle or iPod Nano next time. A lot of people want an iPod Touch, which is a good thing for Apple, but there are also a lot of people who want a music player but don't know why they spend $299. One thing Apple can do, Rubin said, is to eventually abandon its long-standing opposition to the subscription model and start selling ipod that comes with such services.

Apple has long believed that people want to buy music, not rent it. However, this may not always be the case, because people are getting used to the concept of "cloud computing", where most of your data is stored by third parties.

As more and more people buy ipod to play videos and music, this subscription service becomes more and more meaningful. Apple now offers TV and movie rental services through iTunes, and can expand similar packaging services to music if needed. I think most of us have hastily bought enough music, but a week later we got tired of that song or album and started thinking about trying out Apple's service before buying it.

Apple has a bit of luxury in this area, which it doesn't have in the Mac or iPhone market, because it dominates the next move. Apple seems to be in a similar situation to when it launched the iPod Nano, killing its most popular product in the launch process. It had a killer design on Nano, but had to make a tough decision to give up its best-selling product.

Now, with iPod Touch and iPhone, Apple has a very attractive set of products that threaten its best-selling product category. When asked recently whether the iPod Touch would affect iPhone sales, Apple COO Tim Cook said he would rather let Apple influence Apple's sales than others.

More powerful phones may opt for lower-end products with lower margins, but Apple needs to make sure it doesn't dabble in areas that are rich in content. The combination of service-oriented iPod and palmtop PCs may be the best way to keep iPod fat.

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