July 08, 2014, 7:44 PM — Seeking Alpha finally asked out loud what many people have only asked in passing: is it time for Apple to end production of the iPod, given the continued and accelerated decline in sales.
The numbers speak for themselves. iPod sales in Q2 of 2014 were 2.7 million units for $461 million, a 51% drop from the 5.6 million units and $962 million in revenue. iPod sales have been on a constant decline since 2009, which coincides with the advent of the iPhone. Apple TV is also included in the iPod group.
Now, no one throws out $461 million in revenue. The question is the cost. iPod development is pretty much done. The Classic has been unchanged for years. The Nano and Shuffle are also pretty much mature products with no real development either. The iPod Touch is the only product getting any real R&D and most of that comes from the iPhone because the Touch is basically an iPhone minus the ability to make phone calls.
When Apple introduced the iPhone back in 2007, the iPod was still huge. But thanks to iPod integration into the iPhone and increasing capacity, the iPod became redundant. The iPod Touch is sustained because of apps at this point. The only advantage left is the extreme portability of the Shuffle and Nano or the mass capacity for the price in the Classic.
In the end, the rumored iWatch could be the end of the line for the iPod Shuffle and Nano. It will be as small as those devices, if the rumors are true, along with several days of battery life and biometric sensors. The rumor mill puts the iWatch at an October release, but then again, it's also been rumored for years.
So, should Apple axe the iPod? The company has shown no fear of cannibalizing itself. There's no question the iPhone and iPad obsoleted the iPod, but the company has stuck with its abject loser Apple TV, too. Then again, that was a Jobs baby, and Tim Cook has made it rather clear he is in charge now.
Apple obviously isn't investing a lot of R&D in the iPod and it is bringing in easy money with next to no R&D money. Then Apple has to make a decision: easy money vs low ROI. It all depends on the margins, and they don't talk about that. I suspect once iPod sales drop below a certain level, sales simply won't pay for itself. Where that is is anyone's guess.