Apple Store
Elise Amendola  /  AP
Customers shop inside an Apple Store in Cambridge, Mass., earlier this year. Apple Inc. said Monday it has sold 100 million iPod media players.
Alison
By Allison Linn Senior writer
msnbc.com
updated 4/9/2007 4:27:13 PM ET 2007-04-09T20:27:13
ANALYSIS

Apple Inc.’s announcement Monday that it has sold 100 million of its iPod music players marks more than just a business milestone for the once-struggling computer company.

The remarkable sales figure also is evidence that Apple has, in just a few short years, played a major role in transforming a fringe technology into a mainstream phenomenon — spawning massive ripple effects in both the music and technology industries.

What’s more, analysts say, Apple’s more recent forays into selling movies and TV shows — and, soon, its own cell phone — could be poised to transform those industries as well.

“It’s pretty clear to me, as to most people who have watched it, that the record label business is just the canary in the coal mine,” said Phil Leigh, an analyst with Inside Digital Media who has followed the digital music business for years. “The Hollywood studios and the TV production companies — they need to pay attention because their businesses are going to change just as rapidly, and they need to adapt.”

Apple said Monday that it had sold 100 million iPods since the gadget was introduced in November 2001. The company also noted that it had sold more than 2.5 billion songs, 50 million TV shows and more than 1.3 million movies through its iTunes music and media store.

If there was any doubt, the numbers offer definitive proof that the iPod has crossed from being a gadget for music lovers and technology geeks to being a mainstream hit with everyone from kids riding the bus to grandparents out for an afternoon walk.

Of course, there were other companies before Apple that offered the ability to listen to music over the Internet, and to play back songs on small digital gadgets. But while most of those systems required a fair amount of technical prowess, experts credit Apple with making the technology easy enough to appeal to a mass audience.

“Apple took a totally different approach than most of the other companies,” said Roger Kay with Endpoint Technologies Associates.

While other companies saw digital music players as primarily for gadget geeks, Kay said Apple decided to “human engineer this so that people will like the experience. That was very, very key (to) setting the pace for everyone else in the industry.”

The understated device, with its clean look and easy click wheel, was mirrored by an iTunes music service that offered a simple way to buy songs at a relatively low price.

By contrast, companies such as RealNetworks Inc. offered a variety of services, including subscriptions that essentially let people rent songs. Other portable digital devices often required complex steps to program and use, and it was sometimes extremely difficult to transfer songs from computers to the devices.

Apple also had an advantage in that its music service and device were made to work together, whereas other music services and devices were built by different companies that tried to mesh them. The result could be frustrating and rife with glitches.

It didn’t take long for music lovers to see the convenience of not just listening to songs over a digital player, but also buying them via an online service. Experts credit Apple with helping to legitimize online music downloads, which was rife with piracy.

Now, thanks in large part to iPod’s popularity, many think it will just be a matter of time before the tried-and-true method of going to a store and buying a CD becomes a thing of the past.

“It’s high time the record labels realize that the CD is as dead as General Custer,” Leigh said.

The change has been dramatic for the music industry, which is now struggling to understand how to make its business work in a vastly different distribution model. Even now, not every label is allowing all their songs to be sold online.

As downloading television and movies becomes more popular, Leigh expects those industries to have to grapple with the same major changes. That could mean job cuts, changes in product lineups or any number of other moves.

Record labels and other digital music services aren’t the only ones who have been forced to adapt to an iPod world. The change also has affected companies such as Sony Corp., whose Walkman products had long been synonymous with portable music.

Sony, along with companies including Creative Technology Ltd. and even Microsoft Corp., have put out products meant to compete with the iPod juggernaut. But so far, none have been able to create a serious dent in Apple’s lead.

(MSNBC.com is a joint venture of Microsoft and NBC Universal.)

The iPod’s success also has marked a transformation of sorts for Apple, which has struggled over the years as a higher-end, niche competitor to the big players of the PC industry, most notably Microsoft.

Leigh said one concern Microsoft should have now is that people may love their iPod enough to consider also switching to an Apple computer, instead of a PC powered by Microsoft’s Windows operating system.

Still, Cupertino, Calif.-based Apple has its share of challenges ahead. Although the company is enjoying a commanding position right now, analysts caution that it never pays to get comfortable in a market as fickle as digital music.

“I don’t think any company in an industry that’s changing as rapidly as this one can ever declare victory,” Leigh said. “If that means, ‘We’re the winners and we don’t need to do anything more,’ you’ve just written the epitaph.”

Instead, he thinks Apple will have to keep doing what it has been doing — introducing new products and finding new customers — if it wants to keep its lead.

But expansion can lead to its own problems as well. For example, Kay thinks Apple’s move to offer its own cellular iPhone, due out later this year, could be risky. One big concern is that, while it’s only an inconvenience if your iPod doesn’t work, having a phone that isn’t always reliable would be much more problematic.

To succeed, Kay said, the company will need to be make sure that the iPhone’s battery is dependable, and that other offerings such as e-mail work reliably for business users.

“Why do people like the iPod? Well, they like the iPod because it plays their songs simply,” he said. “But if you say, well, why do people use phones? They use it for a totally different purpose.”

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