Seeing the End of iPod's Hegemony

Kevin Maney explores an idea: While everyone is watching Google's Chrome, Apple today invited media to an event on September 9 in San Francisco entitled "Let's Rock." Since Apple, as usual, didn't reveal what it will announce at the event, rumors and speculation are flying. The most prominent gossip says that Apple will bring out new iPods, probably with some lower price points.

Now, there's a lot going on in this portable music space. Just a few years ago, iPods sold like candy and claimed up to 90% of the digital player market. Since iPods only work with iTunes, this funneled consumers to iTunes' music store, which in turn helped Apple get content for the store and build the most successful music download retailer. And since the iTunes downloads were all encoded with Apple's DRM, which could only play on iPods, conumers who bought a lot of stuff from iTunes have wound up stuck in the iPod universe, whether or not something better comes along.

But in technology, more than any market, no dominance lasts long. Microsoft has been hammering at Apple's door with Zune, and you can bet Microsoft won't give up anytime soon. Dell this month said it will make an MP3 player (again!), and analyst Rob Enderle outlines how Dell could do better than previous competitors. Sandisk bought MusicGremlin and has been chasing the idea of a Wi-Fi music player that never needs to go through your laptop to download songs.

Amid all this, iPod sales have essentially leveled out. For the past couple of years, Apple has sold about 10 million to 11 million iPods per quarter, with a boost to about 22 million around Christmas. Make no mistake -- the iPod/iTunes combo still dominates, and it dominates because right now it is the best, most complete solution for most consumers. But iPod's growth has stalled, and competitors aren't banging at the door because they're stupid -- they're banging because they think they can have an impact on the market.

Will the competitors succeed? Eventually, one will -- because that's the way the tech world works. How? My guess -- and Enderle's -- is that it will have something to do with the cloud and subscription music. Apple is all about owning your music on your hard drive. At some point, that model won't make sense anymore. When wireless broadband (Wi-Max, 3G, satellite, whatever) covers the earth (and is in planes and trains), you could carry around a player hooked to a subscription service like Rhapsody and listen to anything you want at any time. Doesn't that ultimately seem better than listening to a music library limited by what you've bought song by song?

Yes, true, if that's the way music shifts, Apple may in fact get there first. The iPhone is already completely capable of becoming a cloud music player -- just look at the success of Pandora on the iPhone. But chances are Apple will try to protect its closed iPod/iTunes model, leaving an opening for a competitor -- perhaps a start-up still in someone's garage -- to do things a whole new way and give Apple something to worry about.

Unless Apple's announcement next week is that it's coming out with an iTunes cloud subscription service for the Wi-Fi enabled iTouch. That's one of the rumors. Then all bets are off.