Ever since the iPod's runaway success earlier this decade helped Apple to turn itself around and launch its successful retail efforts, iPod sales have defined the company's success. Now however, the iPod segment which Apple refers to internally as its 'traditional MP3 players,' including the iPod shuffle, nano, and classic, is seeing a decline that has made the iPhone and Mac segments bigger earners in comparison.
Apple is even promoting the shift, making entry level iPhones a tempting alternative for new iPod buyers and positioning the iPhone-derived iPod touch as a high end alternative. Despite the global economy, sales of the pricier iPod touch are up 130% year over year, indicating Apple isn't at all stuck with a star product that has nowhere to go.
Even so, Apple isn't giving up its lead in the traditional MP3 player market. Despite experiencing less growth than in previous years, the company is holding on to its majority market share in MP3 players and is "gaining share in every country" outside the US as well.
Assisting the company's strength in music players is the phenomenal success of iTunes, which Apple just announced has passed the 8 billion milestone in song downloads. The popularity of iTunes attracts new users to the iPod, creating a situation where half of new iPod buyers are new customers, not just previous buyers upgrading to the latest model.
"Despite the decline in our sales, our research shows that about 50 percent of our recent traditional iPod purchasers are buying their first iPod," Apple stated in its earnings conference call.