Katie MarsalApple Computer's massive iPod shipment volume is allowing it to produce digital music players at a cost far below its competitors, and thus will remain atop the digital music player market for years, says one analyst.
The study looked at 20GB and 30GB players from device makers: Creative, iRiver, Samsung, and Sony. "Apple's 30GB iPod provides the lowest cost per gigabyte at $10, followed by Creative's Zen Vision:M at $11," Munster wrote in a research note. "It should be noted though that the Zen Vision:M has a few more features (i.e., personal organizer, recorder, more song storage, more hours of video, and an FM tuner) than the iPod."
The analyst al.so noted that the only other video capable devices were from Samsung and iRiver, and cost between $15-$25 per gigabyte, while those without video capabilities cost at least $11 per gigabyte.
Looking closer at device maker Creative, Munster said he was impressed by the features of its new Zen Vision:M, a knock-off of Apple's 30GB video iPod. However, the analyst believes the key question was: "Will Creative be able to pack these features into a 30GB device and price it below an iPod?"
"The answer is no," Munster said, noting that the device is $329.99, $30 (10%) higher than the price of Apple's 30GB iPod. Although, the iPod's competitors often have similar, if not broader, feature sets than the iPod, none have proven they compete in the two key areas of user interface and "cool" factor," he said.
"We believe that non-iPod devices must compete on price to gain adoption, but Apple has such massive relative shipment volume with the iPod that other MP3 player manufacturers are not able to replicate the economies of scale achieved by Apple," Munster added. "We believe this reality will allow Apple to sell iPods at the lowest prices in the market, thus retaining the iPod's pole position for years."
PiperJaffray maintains an "Outperform" rating on Apple shares with a target price of $79.
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45 Comments
HELLO?!?! the creative zen vision:m thing is twice the thickness of the iPod. I think that's kind of a major factor here.
Creative ...the gluttons for punishment.
early to market with a great product means economies of scale, and further dominance. The question is how to you continue to innovate? Do you design 30 different kinds of ipods, throw them at the market and see what "sticks" like sony does? Although this might be the way to make sure that "I thought of it first," ultimately i don't think this is how apple functions, nor should function. They offer a couple of options and thats it. stopping the ipod mini for the introduction of the nano was fascnating. (Of course they're reworking the mini... people loved that thing. And when it's back it will be better.)
I do think, though, that you can't leave gaping approaches for your competitor, though. The playstation portable, with its superior screen size, is problematic. Would you rather watch "Lost" on an ipod or a PSP?
How do you bring something like that to market and compete with the hardware subsidy sony recoups on game sales? Well, how about movie downloads, music, and other media integration.
you could argue sony is building a similar empire with the psp, was merely my point. It didn't get much press behind the xbox 360 and the ipod, but I think that thing is going to be huge.
All this article did was point out blatantly obvious business ethics of tons of companies, not just apple. This happens all the time and in every market place, not just mp3 players. This is just how companies make a successful product, I don't get why when apple does it's suddenly different or in creative's eyes "unfair." Any of the other companies that were mentioned in this article would have done the same thing if they were in apple's position it's just common sense. Hell, some of the ones listed do do just that, just in other markets.
you could argue sony is building a similar empire with the psp, was merely my point. It didn't get much press behind the xbox 360 and the ipod, but I think that thing is going to be huge.
I hear that the Nintendo DS is doing very well, certainly far better than any of the iPod's competitors in its market. The reasons being a "coolness factor" like the columnist mentioned, coupled with - surprise - superior human interface! Games like Nintendogs and that Brain Trainer thing doing so well in Japan of late, keep the Nintendo portable a better platform for those who like games that aren't the Playstation 2's poor brother but actually have creativity and design to them.
Nintendo and Apple have much in common in their respective niches (Windows pc vs. Mac) and portable leads (Game Boy, DS vs. iPod). They outperform their competition based on design more than anything else. Though of course volume pricing helps when you can get it. Not that I am a Nintendo player myself (I've bored of games overall) but the similarities between the two companies are quite strong and I expect they'll both do well in the years to come.