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Why Apple Cannibalized The iPod
Remember the iPod? It just observed its 11th birthday Tuesday, though few noticed.
When Apple launched the iPhone in 2007, it wasn't trying to create a huge new business as much as it was looking to protect its vital iPod franchise.
In the last three months of 2007, Apple sold nearly $4 billion worth of iPods—42 percent of its total revenues. iPhones were 2.5 percent of the total.
Fast forward nearly five years, and iPod sales have shrunk below $1 billion for the first time—2.3 percent of Apple's revenues, two-thirds of which now come from iPhones and iPads.
In retrospect, the iPhone launched as Apple was achieving peak iPod sales—about 22 million units. It was exactly the right time for Apple to cannibalize its own business.
One might ask why Apple's still bothering. Well, for one, the iPod is still a multibillion-dollar business line.
For another, the iPod brings younger, poorer consumers into Apple's orbit, keeping them locked to their libraries of iTunes songs and App Store downloads.
And despite the name, the iPod Touch is the real miniature iPad, the iPhone minus the phone. For users, the lines between Apple's gadgets are not as clear as the company's financials would suggest.
May we suggest a new name: the iPad Nano?
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