iPod sales used to grow sequentially from 2Q to 3Q - which was evident both in 2004 and 2005.
But in 2006, there is a sequential decline from 2Q to 3Q - for the first time in the history of this product.
This type of change in the seasonal sales pattern often augurs a transition from high-growth track to a period of slower growth.
There is reason to worry about decelerating iPod sales - particularly as Apple is now forced to attempt risky gambits like adding video and phone functionality to maintain momentum. There is a reason why iPods did not add these features in 2004 or 2005 - Jobs realized they are risky moves.
EA really neeeds to get serious about PSP and DS. The latest North American console numbers show rough unit parity for XBOX360, DS and PSP in February. In Japan, PSP & DS combined are now hitting 170 K weekly sales, towering over PS2 around 25 K and XBOX360 at 1 K.
The Japanese portable mania means that local software companies are about to pour huge R&D resources into PSP and DS development - this in turn will drive further sales in Europe and USA. If PS3 gets delayed to 4Q 2006, the Xmas sales of this year will be dominated by portable titles. EA shouldn't concede this market to Japanese houses - low development costs mean that portable hits are wildy profitable.
In Europe, the same phone works with nearly all major vendors - Telecom Italia Mobile, Telefonica, Orange, Vodafone, etc. Production ramp-ups of hot new models are geared for the GSM-900/1800 markets in Europe and Asia.
In North America, the same CDMA phone does not work with Verizon and Sprint - the technologies are slightly different. GSM operators T-Mobile and AT&T have less than half of the overall market - and a GSM variation operating on different bandwidths than the global 900/1800 combo. There are several CDMA flavors plus an idiosyncratic GSM variation.
With minor tweaks, the European GSM luxury phone designed for T-Mobile or Vodafone can be also sold to China Mobile or Indian GSM operators - the economies of scale outside the North America are vast. When you create a high-end phone, tapping into a billion sub user base of regular GSM 900/1800 subs is a big help - and the same is starting to apply to GSM-900/1800 plus GPRS plus EDGE plus W-CDMA phones.
Coverage is a big challenge. W-CDMA networks are complemented by GSM/GPRS/EDGE networks that have been built up over the past decade. Consumers need coverage in highways and beaches and parks - not just in cities and suburbs.
WiMAX is going to be hard pressed to handle high populations densities of major cities - mobile networks now flavors to handle both rural areas (GSM, CDMA) and cities (W-CDMA, CDMA-2000).
This is the crunch time for operators. Roughly half of mobile phone calls originate or end in homes. Most markets in North America, Europe and Asia have now 4-6 rival operators offering mobile call services if you count the MVNO's. The first wave of mobile/WiFi hybrid phones is arriving.
Will operators truly start offering seamlessly swithcing mobile/WiFi models to consumers? As long as the operators refuse to subsidize hybrid models they can prevent rapid pick-up of these models. But when the first major operator (or a cluster of smaller challenger operators) gets serious about offering hybrid phones, the ARPU pressure could suddenly spike in a brutal manner.
WiFi telephony is kind of unreliable and weird for most consumers - but as a supplementary feature in a GSM/GPRS/EDGE/W-CDMA phone it's lethally appealing. How about cutting your mobile minutes roughly in half by seamlessly swithching to WiFi every time you are at home?
It's a great marketing angle for the first operator latching onto it. Once you get 4-6 operators embracing the concept, the whole sector ARPU outlook is going to crater.
The US consumer electronics market is notoriously tough on price premiums; mobile phones have higher ASP's in China than they do in USA. For years, the handset market has been forced to deal with the fact that American consumers refuse to pay as much for phones as their European or Chinese peers. That Apple was able to go against grain and demand a hefty premium for iPods was a miracle of product design and marketing. But now the iPod sales volumes in North America have reached a level that is so high that maintaining volume growth will be a big challenge.
So Apple is trying to morph into Gucci/Bose. I don't think this is going to be smooth sailing. Fendi may be able to ask $99 for a slip of leather. Bang % Olufsen may be able to ask for $350 for some meagerly specced gadget. The halo effect that enables Fendi or B&O to ask high prices for some tertiary products is dependent on their super-premium products. It's the $10'000 mojo trickling down to trinkets. The Apple brand is not associated with super premium stuff. The halo around iPod is not strong enough to support a hundred buck chunk of dead cow.
Slashdot Mirror
iPod sales used to grow sequentially from 2Q to 3Q - which was evident both in 2004 and 2005. But in 2006, there is a sequential decline from 2Q to 3Q - for the first time in the history of this product. This type of change in the seasonal sales pattern often augurs a transition from high-growth track to a period of slower growth. There is reason to worry about decelerating iPod sales - particularly as Apple is now forced to attempt risky gambits like adding video and phone functionality to maintain momentum. There is a reason why iPods did not add these features in 2004 or 2005 - Jobs realized they are risky moves.
The Japanese portable mania means that local software companies are about to pour huge R&D resources into PSP and DS development - this in turn will drive further sales in Europe and USA. If PS3 gets delayed to 4Q 2006, the Xmas sales of this year will be dominated by portable titles. EA shouldn't concede this market to Japanese houses - low development costs mean that portable hits are wildy profitable.
In North America, the same CDMA phone does not work with Verizon and Sprint - the technologies are slightly different. GSM operators T-Mobile and AT&T have less than half of the overall market - and a GSM variation operating on different bandwidths than the global 900/1800 combo. There are several CDMA flavors plus an idiosyncratic GSM variation.
With minor tweaks, the European GSM luxury phone designed for T-Mobile or Vodafone can be also sold to China Mobile or Indian GSM operators - the economies of scale outside the North America are vast. When you create a high-end phone, tapping into a billion sub user base of regular GSM 900/1800 subs is a big help - and the same is starting to apply to GSM-900/1800 plus GPRS plus EDGE plus W-CDMA phones.
WiMAX is going to be hard pressed to handle high populations densities of major cities - mobile networks now flavors to handle both rural areas (GSM, CDMA) and cities (W-CDMA, CDMA-2000).
Will operators truly start offering seamlessly swithcing mobile/WiFi models to consumers? As long as the operators refuse to subsidize hybrid models they can prevent rapid pick-up of these models. But when the first major operator (or a cluster of smaller challenger operators) gets serious about offering hybrid phones, the ARPU pressure could suddenly spike in a brutal manner.
WiFi telephony is kind of unreliable and weird for most consumers - but as a supplementary feature in a GSM/GPRS/EDGE/W-CDMA phone it's lethally appealing. How about cutting your mobile minutes roughly in half by seamlessly swithching to WiFi every time you are at home?
It's a great marketing angle for the first operator latching onto it. Once you get 4-6 operators embracing the concept, the whole sector ARPU outlook is going to crater.
Will T-Mobile play the Judas goat?
So Apple is trying to morph into Gucci/Bose. I don't think this is going to be smooth sailing. Fendi may be able to ask $99 for a slip of leather. Bang % Olufsen may be able to ask for $350 for some meagerly specced gadget. The halo effect that enables Fendi or B&O to ask high prices for some tertiary products is dependent on their super-premium products. It's the $10'000 mojo trickling down to trinkets. The Apple brand is not associated with super premium stuff. The halo around iPod is not strong enough to support a hundred buck chunk of dead cow.