Macenstein

Posted by Lab Rat
Opinion

When Apple announced its earnings earlier this week, the company posted some great numbers for its latest financial quarter. However, right after the results came in, Apple’s stock tumbled almost 10% after the bell. Why? It seems that while Apple showed amazing profits and growth, the iPods did not sell quite as well analysts wanted. Apple is now (in the eyes of Wall Street, at least) primarily a music player manufacturer. Apple sells a staggering amount of iPods each quarter, yet Wall Street wants more.

So how can Apple move more iPods than it is already?

Will releasing a video iPod spur sales? Should they add an FM receiver? Add satellite radio capabilities?

Oddly enough, I feel the best way to move more iPods is to leave the iPod alone, and work on the iTunes Music store. How? I feel Apple should add a subscription-based music option to the iTunes music store.

Yes, I realize Steve Jobs has in the past said the subscription model is not where the future of online music lies. Consumers want to “own” their music, Steve tells us. But Steve has been known to change his mind. In fact, just one year ago he also said there was no market for a video iPod. Well, today we saw the unveiling of Apple’s first video iPod.

Whether or not there is an actual market for such a device, or this particular implementation of such a device is a topic for another post. What I would like to put forth here is that embracing a subscription-based music model is the best way for Apple to ensure a continuos stream of revenue from its iPod music players.

Let me be clear, I do not mean that Apple would gain a viable source of income from the profits generated from the subscription service. So far, none of the online music services that go the subscription route have posted profits.

My point is there is not really much else Apple can do with the iPod now that will cause people to run out to the stores and buy new ones.
Apple can increase the size of the iPod’s hard drives, but why? How many people have more than 30 GB of music in their iPod right now? Why would I run out to get a 60, 80, or 100GB iPod that has nothing over what the 30 GB video iPod now offers, except storage? I suppose if Apple produces enough video content, SOMEONE may fill that up, but to be honest, the type of content Apple is selling is not the type of stuff you need to keep on your iPod for extended period of time.

Sure, there could be someone who want’s to watch the last episode of LOST on a 2.5 inch screen (wearing headphones), but he doesn’t want to watch it 50 times. He will watch it, then delete it, then load up the next episode the following week. A few people will put a couple clips of their kids on it to bore coworkers with, but not many.

The iPod is never going to be used primarily as a video player by the masses. People will not be filling up their iPod’s hard drives with video. The future of the iPod is rooted in its past. Music. How am I so sure? Look down at your current iPod’s screen right now. Now, imagine it slightly bigger. Now imagine Lord of the Rings or something playing on it. It might sound great on your headphones, but how does it look? Music, not video, is the one thing the average iPod user wants with him wherever he goes.

So, assuming I am right (and of course I think I am right) then what will it take to make people rush out to buy new iPods?

The answer is, of course, for Apple to increase the size of its customer’s music collections to the point where buying a larger iPod becomes necessary. I have friends who have the old 15 GB model of the iPod, and have not filled half of it. These people are the rule, not the exception. But, what if suddenly those people now had 40,000 songs?

By adding the option of using a subscription-based plan to iTunes, suddenly Apple would be moving iPods left and right. (Well, they already ARE moving iPods left and right, but they would also be moving them up, down, and diagonally). I see a very bright future where the pay-per-download model and the subscription model can peacefully coexist in the iTunes store.

Now, if only Steve could see it…