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TMO Reports - Lower iPod Pricing to Squeeze Competition, Analyst Believe

by , 11:10 AM EST, February 23rd, 2005

Wednesday's updates and lower pricing on the iPod mini and iPod photo are the latest moves by Apple Computer to stay one step ahead of their competition in the ever-growing market of digital media devices, analyst said Wednesday.

Apple announced 4 gigabyte (GB) and 6GB models of its iPod mini starting at US$199, a slimmer 30GB iPod photo for $349, and a 60GB model for $449.

Analysts see the announcements as Apple's way to retain its number one position in the digital music world.

"Pricing is the most significant of today's announcements," Joe Wilcox, an analyst with Jupiter Research told The Mac Observer. "There is only $50 now separating every iPod except the 30GB and 60GB iPod photo. That $50 difference is a great up sell opportunity. So, if someone is looking at a $149 iPod shuffle, they can add three more gigabytes of storage for $50 more."

"Today's announcement of lower pricing clearly shows Apple is looking at the iPod as a mass market product that they are going to drive as much volume sales into as they can," Steve Baker, an analyst with the NPD Group, told TMO. "This is a strategic move to say they are not going to give up their leadership in music players without a fight."

Mr. Wilcox also believes that the $50 difference between most models means Apple has covered the main price points where their competitors could try and fill niches.

"Apple is saying to its competitors, 'If you want to sell against us, it better be under $100 or over $500," Mr. Wilcox commented. "That's going to be tough to beat, given Apple's reputation, at present."

"Some might see these lower prices as a negative," said Gene Munster, an analyst with Piper Jaffray. "But it appears these changes are more offensive than defensive. They want to hold their leadership position and they can do that by lowering prices, increasing capacity and keeping the ease of use as a major competitive advantage."

Greg Joswiak, Apple's vice president of iPod products and worldwide product marketing, told MarketWatch the new iPod models are meant to "turn up the heat" on Apple's competitors.

"We are the leader, and we want to act like the leader," Mr. Joswiak said. "We want to stay ahead of the others."

Mr. Wilcox agrees with Mr. Joswiak's assesment.

"They've got the mind share among consumers and the iPod has this iconic status. Apple knows if they lower prices and increase capacity, their competitors have little else they can say they're better at. Apple has pretty much closed that gap now."

"It is not a typical Apple strategy to stay competitive in pricing," Mr. Munster said. "Now they are saying, 'we're going to lower prices if we have to to drive our sales.' One of the big sticks they have is price and they're using it."

For the third quarter of 2004, the iPod accounted for 92.1% of the market for hard drive-based music players, according to the NPD Group, up from 82.2% a year ago. Players from Creative Technology and Rio were a distant second and third, with 3.7% and 3.2% of the market, respectively. Market share numbers for the fourth quarter have yet to be released.

Apple has sold more than 10 million iPods since introducing the product nearly four years ago. iPod revenue grew to $1.21 billion in the fiscal first-quarter from $256 million a year before and accounted for almost 35% of Apple's $3.49 billion in revenue during the quarter.

Apple's press relations department turned down a request from The Mac Observer for comments by company executives for this story.

Observer Comments

Show: Subjects Only | Full Comments
Close Name:geoduck Posts: 1921 Joined: 30 Dec 2003
Wed Feb 23, 2005 1:03 pm Subject:

From the article
Apple is saying to its competitors, 'If you want to sell against us, it better be under $100 or over $500," Mr. Wilcox commented. "That's going to be tough to beat, given Apple's reputation, at present."

The iPod shuffle is under $100. OK I know that you can get little MP3 players for $50 but the difference is so small that I would think that the Shuffle has to be leaning on the low end fairly hard too.


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Close Name:jimothy Posts: 612 Joined: 04 Jun 2004
Wed Feb 23, 2005 1:09 pm Subject:

Quote
geoduck wrote:
The iPod shuffle is under $100.

Yeah, by a buck.



Last edited by jimothy on Wed Feb 23, 2005 1:17 pm; edited 1 time in total
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Close Name:Guest
Wed Feb 23, 2005 1:15 pm Subject: iPoo is crap, no gapless playback, crap EQ.

lemmings and pimps buy it.


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Close Name:Guest
Wed Feb 23, 2005 1:26 pm Subject: iPoo?

Quote
Guest wrote:
lemmings and pimps buy it.


Hate the game, not the playa


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Close Name:Guest
Wed Feb 23, 2005 1:29 pm Subject: Re: iPoo is crap...

Quote
Guest wrote:
lemmings and pimps buy it.


Hey, I'm a pimp and I like my iPod


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Close Name:Guest
Wed Feb 23, 2005 1:45 pm Subject: wheres the reality?

where's RC with his typical 'sky is falling' BS.

So predictable, so lame
"It's the beginning of the end. They are dropping prices because of the competition blah blah blah vomit."


All this will do is make more people want one, and after the get one they'll realize why people like them so much.


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Close Name:Billy K Posts: 297 Joined: 06 May 2004
Wed Feb 23, 2005 1:47 pm Subject: iPimpin'

Everybdy *knows* I'm a pimp. :O



P.S. yeah, the EQ sucks. Please, Apple, please...give us user-definable EQ settings.


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Close Name:Guest
Wed Feb 23, 2005 1:47 pm Subject: re: iPoo

Hell, I'm a _gimp_ and I can't wait to get my hands on one.

-FlashFranky


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Close Name:Guest
Wed Feb 23, 2005 1:55 pm Subject: iPoo..whatever

"iPoo is crap, no gapless playback, crap EQ."

Go buy your Creative WhateverItIs. People know the name iPod. I can't name one Creative product outside of a soundcard. (And I doubt many outside the compu-geek clan can either)


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Close Name:Biff Posts: 1479 Joined: 08 Apr 2004
Wed Feb 23, 2005 2:02 pm Subject:

I do not have gaps. How do I get gaps? Does the iPod updater introduce gapful playback for 3rd gen iPods?


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Close Name:Mace Posts: 9604 Joined: 07 Aug 2003
Wed Feb 23, 2005 2:49 pm Subject:

Just before Christmas or next year MacWorld. you will see a $79 shuffle and a $499 iPod video.


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Close Name:Small White Car Posts: 1960 Joined: 02 Jul 2004
Wed Feb 23, 2005 2:52 pm Subject:

Quote
Mace wrote:
Just before Christmas or next year MacWorld. you will see a $79 shuffle and a $499 iPod video.


Speaking of predictions, ThinkSecret said the new minis would have color screens, which of course didn't happen.

Does this mean Apple has found his contact and is making them pass on false information?


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Close Name:Mace Posts: 9604 Joined: 07 Aug 2003
Wed Feb 23, 2005 3:23 pm Subject:

Many of Apple moves can be guessed educationally based on competitive analysis and Apple's past practices. I was surprised with ThinkSecret's prediction about color and BlueTooth functionalities. It doesn't make business sense at all. Maybe end of this year or next year.


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Close Name:Guest
Wed Feb 23, 2005 3:32 pm Subject: iPoo is crap, no gapless playback, crap EQ.

Yup, you're right. When red pigs fly.

The "pod's" are so bad they own the market segment for mp3 music players.

my, my....


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Close Name:B-sabre Posts: 70 Joined: 18 Jan 2005
Wed Feb 23, 2005 4:20 pm Subject:

Quote
Small White Car wrote:
Quote
Mace wrote:
Just before Christmas or next year MacWorld. you will see a $79 shuffle and a $499 iPod video.


Speaking of predictions, ThinkSecret said the new minis would have color screens, which of course didn't happen.

Does this mean Apple has found his contact and is making them pass on false information?


Only if the Cupertino police report finding an "ex" Apple employee face down in an alley with "squealer" tattooed on his buttocks....


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Close Name:Guest
Thu Feb 24, 2005 12:20 am Subject:

Quote
Small White Car wrote:
Quote
Mace wrote:
Just before Christmas or next year MacWorld. you will see a $79 shuffle and a $499 iPod video.


Speaking of predictions, ThinkSecret said the new minis would have color screens, which of course didn't happen.

Does this mean Apple has found his contact and is making them pass on false information?


i like that conspiracy theory.. a few people have brought it up already... imagine also different 'threads' of disinformation seeded like (a)mini color screen (b)ipod photo bluetooth (c)etc...

that way they can trace the rumor-distribution pathway based on where (a) (b) and (c) appears...

iControl - the name for Apple's DEPARTMENT OF RUMOR CONTROL ha ha ha


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Close Name:Guest
Thu Feb 24, 2005 12:21 am Subject:

Quote
Guest wrote:
lemmings and pimps buy it.


whatever. are you just bitter that you're missing out on the iPod experience? creative can kiss my azz..


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Close Name:Guest
Thu Feb 24, 2005 12:51 am Subject:

Quote
Guest wrote:
Quote
Guest wrote:
lemmings and pimps buy it.


whatever. are you just bitter that you're missing out on the iPod experience? creative can kiss my azz..


I'm sorry for posting these comments. I'm a hopeless Mac zealot coming out hiding. My parents won't let me out of the house. What's a girlfriend when I've got my basement couch to make love to?


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Close Name:Guest
Thu Feb 24, 2005 5:22 am Subject:

"I'm sorry for posting these comments. I'm a hopeless Mac zealot coming out hiding. My parents won't let me out of the house. What's a girlfriend when I've got my basement couch to make love to?"

Quick, say that a few more times! You just might take away Apple's crushing dominance of the MP3 player market! Man, a couple more jabs like that, and you even could force them right out of business. Here's wishing you better luck than Rio.

http://www.extremeipod.com/article2/0,1759,1711754,00.asp


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Close Name:Guest
Wed Feb 20, 2008 9:27 pm Subject: IPod Lower Price

What a Joke. The Gouge Artists at Apple continue to screw the consumer ( and get away with it). Most Ipod products are outrageously overpriced. You can buy dozens of equivalent if not better clones or offshoots for prices around one half to one fourth. Come on guys quitting praising the outrageous gouge behaviour of Apple. They make lots of money but then so do drug dealers from Columbia.Give the Chinese credit. They are bringing the designs that were ripped off by the fat cat American Co's back to Americans at prices that are fair and reasonable. MArket will bear pricing just ain't going to get it much longer. Apple Fumbled the PC market and they seem to be positioning themselves for another market fumble as they watch the MP3 MP4 players go to the Chinese. Apple will end up where they surely belong.
ABE Said it Best " You can fool some of the people etc etc.


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