Apple has replaced its market-leading digital music player with a new product, the iPod nano. This bold move represents a major shift in the market.
On 7 September 2005, Apple introduced the iPod nano, which replaces its iPod mini, the best-selling digital music player on the market. The nano comes in two-gigabyte (500-song) and four-gigabyte (1,000-song) capacities, priced at $199 and $249 respectively.
A company is rarely confident enough to stop making the best-selling product in its market, but that is exactly what Apple has done. Apple is replacing the iPod mini at the height of its popularity, with a revolutionary new design that merits a new brand name.
Most of Apple's competitors in this market had targeted the iPod mini, both because it has been the highest-volume product from Apple — which controls 74 percent of the digital-music-player market, according to NPD Group research — and because it has some perceived weaknesses compared to higher-end offerings. The iPod mini has a monochrome screen and does not display photos as the higher-end iPods do, so competitors targeted it with products that offered color displays and the ability to display photos and album art from the songs. These same competitors added features such as voice recording and FM radio tuners, which proved to be less compelling than they hoped.
With every manufacturer in the market targeting the iPod mini, Apple has moved the target by redefining the midrange product category. The flash-based iPod nano offers all the features of the high-end iPods and adds some more, while bringing a truly impressive form factor to market. The player is thinner than a No. 2 pencil and is tiny — 1.6 by 3.5 inches — yet it requires no tradeoffs in functionality.
Apple has made the rest of the midrange products look clunky just in time for the holiday buying season by making the product available worldwide immediately. With the surprising move to replace a top-selling product, Apple continues to stay several steps ahead of its competitors by innovating in the market and taking a step that most manufacturers would avoid. Digital-music-player manufacturers should clearly expect the unexpected from Apple. This move was not anticipated by the market, and competitors will need to respond quickly if they want to remain competitive
Recommendations for manufacturers of digital music players
Invest in both R&D and operations. Focus some of your R&D dollars on industrial design, because Apple has proved that this is valued by consumers.
Assume that Apple will remain a moving target. The iPod nano is a revolutionary product in the Apple line and shows that Apple will not be content to enjoy its success.
Analytical Source: Van Baker, Gartner Research
Recommended Reading and Related Research
"Apple Expands iPod Offering and Consolidates Its Strong Position" — Apple already owns 65 percent of the MP3 market, and will strengthen this position with a new broad range of price points and portability features. By Van Baker and Mike McGuire
"iTunes Proves Its Point One Year and 70 Million Downloads Later" — Apple's iTunes service has proved the validity of its per-song download business model. By Mike McGuire
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