Product Life Cycle

Development of the iPod: The iPod is a portable digital music player that holds up to ten thousand songs in a small, hand-held device that is lighter and thinner than two CD cases. iPod features a touch-sensitive navigational wheel and buttons, and an intuitive interface designed for one-handed operation. Songs are stored in several digital audio formats, delivering the highest sound quality. The iPod was born out of the idea dreamed up by Tony Fadell, an independent contractor and hardware expert, to take an MP3 player, build a Napster music sale service to complement it, and build a company around it. Fadell shopped the idea around to several companies and was turned away by all of them, except Apple. Apple hired Fadell in early 2001 and assigned him a team of about 30 people to develop the iPod. Fadell predicted that the iPod would remold Apple and that 10 years from now it would be a music business, rather than a computer business.

Introduction of the iPod: The iPod was introduced into the market just in time for Christmas, 2001. The first iPod was priced at $399. Apple relied on a hard disk for storage instead of flash memory or interchangeable CD-Roms and focused on promoting the uniqueness of the small size, power, and ease of use of the device. This first iPod had a 5 GB storage capacity--which is enough to hold over 1,000 songs--and it worked only on Macs, using iTunes as a music organization and CD-to-iPod conversion tool. iTunes, digital jukebox software that let Mac users import songs from CDs by converting audio files to the MP3 format and storing them on the computer's hard drive, was introduced in January of 2001. Along with the iPod, Apple announced an enhanced version of iTunes that included a 10-band equalizer with presets, as well as a cross fading feature for smoother transitions from one song to another. An Auto Sync capability facilitated the downloading of music from a Mac to the new portable media device. Once the music was downloaded, Apple promised 10 hours of continuous play from the iPod's rechargeable lithium battery. The device supported MP3, with bit rates of up to 320kbits/s, as well as AIFF and WAV file formats. Its amplifier could deliver 20-20,000-Hz frequency response. Apple sold 125,000 iPods by the end of December 2001.

During this introduction stage, the quality level of the iPod was established, due to the Apple/Mac brand. The $399 price tag was higher than most of the competing players. During this phase, the device was only compatible with Mac computers, and therefore limited to selective consumers--those who owned Mac computers. The introduction phase of the iPod only lasted from December 2001 through about March 2002. In March 2002, Apple introduced a 10-Gbyte iPod, which was enough for 2000 songs. This new development moved the iPod into the growth stage.

Growth of the iPod: In the summer of 2002, Apple began to develop the second-generation iPod line, which differed only slightly from the first generation. Apple introduced a 5-Gbyte iPod for $299, a 10Gbyte unit for $399 and a 20-Gbyte unit for $499. The new units had new navigational wheels--solid-state touch wheel, in place of the mechanical scroll wheel. In July, 2002, Apple introduced the first PC version of the iPod. At the same time, Apple introduced a 20Gbyte iPod, and the prices were lowered for the first time. These are all characteristics of the growth stage as the product maintained quality and added additional features to the original product. There were also added distribution channels as the product gained acceptance from the customers and so Apple targeted a larger consumer market by adding the PC compatibility feature.

In April of 2003, Apple unveiled the updated third-generation iPod and introduced the iTunes Music Store, offering songs at $.99/track and albums at $9.99 with a library of 200,000 songs available for PC users. The new iPod was thinner and smaller, and it featured a bottom rather than a top-mounted FireWire port, and it had entirely touch-sensitive navigation buttons. This new generation had a higher song capacity and it worked on either Macs or PCs. In May, 2003, one week after launching the iTunes Music Store, Apple sold 1,000,000 songs and in June of 2003, Apple sold its one millionth iPod.

In January, 2004 Apple introduced the iPod mini, a 4GB version of the iPod, which was priced at $199. New with this version of the iPod was the availability to get it in four different colors. The new mini model had an increased battery life of up to 18 hours, which increased the standard play time by about 6 hours. This version offered ear bud headphones, a CD with iTunes 4.7.1 for Mac and Windows, and a USB 2.0 cable. Sales continue to skyrocket for the iPod--in January, 2004 Apple sold its two millionth iPod and in March of the same year it sold its three millionth iPod. In addition, the iTunes Music Store sold its 100,000,000th downloaded song on July 11, 2004.

The fourth generation iPod was announced by Apple in July, 2004. Apple began to drop prices. However, the drop in prices is not due to new competition. The analysts reported in October, 2004 that iPod sales were 82% of all digital music players and that the nearest hard drive competitor was at a mere 3.7% of the overall sales.

In addition, Apple has expanded the iPod and introduced a new version for storing digital photographs and album art. It also developed a special edition iPod with a carrying case, red Click Wheel, and U2-engraved rear metal casing. Given these added distribution channels and special promotions, it appears that the iPod is still in the growth stage, especially since sales of the iPod continue to increase.

During the maturity stage product features may be enhanced to differentiate the product from its competitors, pricing may be lowered because of new competition, distribution becomes more intensive and incentives may be offered to encourage preference over competing products and promotion emphasizes product differentiation.