TMO Reports – Apple iPod Number One In Music Player Market

The iPod is the king of portable music players, according to new dollar market share numbers obtained by The Mac Observer. During the fourth quarter of 2002, Apple’s dollar market share reached 27 percent compared with 10 percent for second-ranked SONICBlue and its Rio players, according to market research firm NPDTechworld.

In terms of actual units sold, Apple placed third with an 11.2 percent market share, following closely behind Rio at 11.3 percent. RCA is first at 13 percent.

The latest market share numbers show the Windows version of the iPod is the most popular product, controlling 58 percent of the units sold, compared to 42 percent for the Mac version. Of the three iPod models, the 10GB model is the best seller, according to the NPDTechworld numbers.

Apple’s dominance of the portable music player market is impressive when you take into account that the iPod is one of the more expensive MP3 players on the market. At US$299 for the 5GB model, US$399 for the 10GB unit and US$499 for the 20GB product, Apple is competing in a space with both hard drive and non-hard drive products starting at US$99 up to US$250.

Making the market share numbers even more interesting is that they are based only on sales made by third-party retailers such as Best Buy and Target, and do not include iPods sold direct by Apple through its retail stores or online. Market share and unit share numbers of Apple’s competitors also do not include direct sales figures.

iPod holds its own vs. cheaper players

"The growth area in MP3 players is certainly the hard drive based models," NPDTechworld analyst Stephen Baker told The Mac Observer. "A big chunk of this business has moved away from cheaper players below US$200 towards hard-drive based models. You have to take your cap off to Apple for going into that higher-priced market and proving their was value."

Among Apple’s competitors to the iPod include the Flash Memory-based Lyra RD1070 at US$100, the Lyra RD1080 with 128MB Flash Memory for US$130, the Rio Riot with 20GB hard drive at US$200, and the memory-card equipped Rio Sport at US$180.

Price vs. value is key

The trend in MP3 players is more focused on price versus value, according to Baker. "What most people have decided is that they see more value in spending US$200 to US$400 on an audio player that is based on a hard drive instead of one based on Flash Memory. They are willing to spend more money." Part of that value, said Baker, is not just the device itself, but its ease of use in downloading music simply from a desktop PC interface. "People are associating ‘easy-to-use’ with the iPod when looking for a portable MP3 player," he said.

Looking back to when the iPod was released for Windows in July of last year, Baker believes Apple’s success in MP3 player dominance hinges a lot on the timing of when the company got into the market. "There’s no question the iPod would still be a leading product as a Mac-only device, but Apple’s expansion into Windows showed that they saw a gaping hole and took advantage of it. They made a strong position for themselves."

Rumored 40GB iPod: US$500 limit

Baker believes that if Apple were to come out with a 40GB iPod model, which has been highly rumored as of late, it must stay below US$500 to have a successful chance. "I don’t think they want to move the top-of-the-line price points any higher than they are," Baker said. "This might give them the opportunity to reduce pricing on the lower end models. That would be in Apple’s benefit to broaden the market and move down the price on the lower-end models. It would be tough to justify something priced higher than the 20Gb model, which is now at US$499….It’s hard to see a lot of volume being sold in something that’s above US$500. That turns into more of a niche product."