Apple Q1 iPod *revenue* has not left the building

Dan Frommer from alleyinsider.com posted a really ugly chart that makes it look as if the iPod is at the end of it's lifespan.

With all due respect, the numbers beg to differ. Mr Frommer uses iPods shipped as his metric of failure. Frankly "number of iPods shipped" has never been the number to look at, it's just not the right metric to measure a line of devices that include price points that range from $79.00 to $399.00. Under Mr. Frommers model, Apple could release a $1.00 iPod product, sell them to everyone in America and become wildly successful while still generating far less total revenue than they did last year.

Let's change perspective from "numbers of ipods shipped" to "Dollars of revenue generated", which I think we can all agree is a better measure.

If you account for the massive shift over the last year from selling shuffles at $79.99 to pushing the Nano/iPhone/iPod touch at $149.00-$499.00 you can begin to see why pure numbers shipped might not be as important as you would think it should be. It's a whole lot easier to sell x-millions of 79.99 than it is to sell half that at a price more than four times as high.

Instead, let's take a look at "revenue Generated" from iPods. Please keep in mind, this only includes iPod revenue, no iPhone revenue or sales, which would have added to the FY08 numbers, In effect, stripping out the most heavily promoted "iPod", the iPhone, because Apple also places that in a separate category in terms of revenue.



Taking a look at this chart, you can see that the revenue from iPods is still significant and while units shipped may be flattening, the revenue is still climbing quite a bit. In fact, iPods sold this last quarter generated a 17% revenue growth over last year's quarter.

Additionally, Apple has been successfully converting buyers of iPods to an ongoing revenue streams from the iTunes store, Apple store accessories purchases and also to computer buyers. Look at the revenue Apple generated from "other music" in the chart above, do you find it amazing that Apple is now generating more revenue from "other music" than it did from all iPod revenue only a couple years ago?

I think where Apple haters fail is that they think that once everyone has an iPod, they never need another one. iPods are like crack combined with fashion. You have to have at least one, and the first one can cost as little as $79.99, but you will have to get more as they wear out or "become uncool". The shuffle is not as cool as the nano or the touch. Last years models are not nearly as sexy-cool as today's. Girls need to replace last years neon green with one in blue, pink and red to match all their new outfits. Everyone needs cases and other accessories that all must pay a "compatible with iPod" tax to Apple in order to sport the claim.

iPod growth dead? Nope.

Let me know what you think.

-Don

All data for this post was gathered directly from Apple financial press releases.

By the way, as you may already know, I own Apple stock, and have for a very long time. - :-)

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