It’s Monday lunchtime at the world’s largest Apple Store: London’s Covent Garden.
At tables, as in any of Apple’s 300-plus stores worldwide, tourists check their emails and update their Facebook pages. Like everything else Apple does, its store layouts are ruthlessly designed. Pricey laptops and desktops by the door to lure you in, then iPads, then iPhones, then iPod Touches. The only table not occupied by a small cluster of people prodding, touching and fondling the technology is right at the back, in the store’s depths. It’s the table with the iPods on it.
The iPod Classic, as the famous scroll-wheel design is now known, hasn’t been updated since September 2009. On the Apple Online Store, shipping times have slipped from 24 hours to one to three days. Across the United States several major retailers have reported short supplies, leading to speculation that the device may soon be discontinued.
It didn’t even warrant a mention at Apple’s annual Developers’ Conference last year. “The iPod’s essentially finished, give or take,” said Dr Alice Enders, a former senior economist at the World Trade Organisation who now reports on global music markets for media consultancy Enders Analysis. “Sales have been in decline for some time. The converged media device is the way forward.”
In other words: the iPhone, the iPod Touch and the iPad — devices that the iPod paved the way for, devices that have helped push Apple’s latest profits to a record-breaking $20-billion. If the iPod now finds itself as the least-loved of the company’s shiny portable devices, you get the sense Apple is probably okay with that.
A breakthrough device
The iPod is 10 this year. Developed during early 2001 and brought to market in just eight months, the circumstances surrounding its launch were hardly auspicious. For a start it debuted days after 9/11. The press launch promised “the unveiling of a breakthrough device”; the only other information on the invitations from Apple’s Silicon Valley headquarters was some small print along the bottom: “Hint: It’s Not a Mac.”
The assembled media probably figured that was just as well. Apple’s most recent computer, the G4 Cube, had failed to match the success of its iMac — the candy-coloured, egg-shaped machine that transformed the desktop computer from functional grey workstation to translucent object of desire. And even its appeal was dwindling.
Apple’s chief executive, Steve Jobs, who had recently returned to the company after being dismissed as the head of the Mac division in 1985, had failed to appreciate quite how important downloading would become to the online generation. The “i” in iMac was supposed to stand for “internet”, but the first models had no slot drives — users had no way of burning their own CDs or DVDs. Given that almost 30-million PCs were sold with this capability during 2000, Apple had missed a trick. With other companies associated with the dotcom bubble, its stock was on the slide.
“When I joined Apple, the company was in decline,” Jonathan Ive, senior vice-president of industrial design and the man who would help revolutionise the business, has said. “It seemed to have lost what would become a very clear sense of identity and purpose.”
Nevertheless, the launch saw Jobs making great play of Apple’s “digital hub” strategy. He envisaged the Mac as the centre of a new digital ecosystem, a place where we would soon come to plug in all manner of wonderful new devices. The first of these turned out to be something of a surprise. With no previous experience in music, Apple announced it was launching an MP3 player. “Why music?” Jobs asked. “Well, we love music and it’s always good to do something you love.” He suggested music was something that touched everyone. “It’s a large target market. It knows no boundaries. And there is no market leader. No one had really found the recipe yet for digital music.”
Number-one music provider in the world
Apple’s iPod would hold 1 000 songs, could be recharged within an hour and would cost $399. “Do you remember what it was like when you got your first Walkman?” asked the singer Seal, who alongside other musicians appeared behind Jobs on a giant video screen.
Within five years, through its iTunes Store, Apple would go on to become the number-one music provider in the world — all but taking over the music business.
After the introduction of iTunes video in 2007, it would quickly become the world’s most popular video store. Now, in 2011, Apple is set to become the world’s most valuable company full stop, overtaking the current leader, oil multinational ExxonMobil.
Apple has changed the way we think about technology and design, the way we shop, the way we consume media and the way we interact with one another. With the iPod Touch, iPhone and iPad, it has opened up doors for other methods of technology to come into our lives. None of that would have happened without the iPod. “It was the first cultural icon of the 21st century,” said Dr Michael Bull, a lecturer in media and film at the University of Sussex, in southeast England.
“Apple got the consumer experience right from the start,” says Enders. “In 2004 they started introducing smaller iPod variants [the iPod Mini and the iPod Nano] that dramatically increased its penetration.” But the real key to Apple’s success wasn’t so much the iPod, but iTunes. Track the company’s share price and it starts heading skywards in 2003, right after the introduction of the iTunes Store. “They made life as simple as possible,” Enders says. “Payment issues are a major stumbling block with all e-commerce. Amazon has patented its so-called ‘one-click’ ordering, but iTunes does it so much better.”
It is usually assumed the iPod was dreamed up by Jobs and Ive. But this isn’t quite right. Before there were any MP3 players, there were MP3s: invented in 1987 by a group of German scientists looking for a way to shrink video files so that they would be easier to use on computers. To achieve this they stripped out as much “extraneous” data as possible, supposedly the stuff we wouldn’t miss. This loss of quality is at its least discernable when listening on headphones with the volume cranked up, so by 1998 the first portable digital music player had arrived: the MPMan F10, created by South Korean company SaeHan. (It wasn’t a hit; SaeHan now mostly manufactures textiles.)
A cool thing to do
In January 2001 Apple had added iTunes to its iMovie and iPhoto ‘digital hub” suite; a slick geometric window with a brushed metal effect that made something as mundane as organising music files seem like a cool thing to do. Other portable MP3 players had already joined the unfortunate MPMan F10 on the market: now Apple proposed to develop its own.
Jonathan Rubinstein, head of Apple’s hardware division, rang a 32-year-old engineer called Tony Fadell, who took the call on a chairlift above the ski-slopes of Vail, Colorado.
Rubinstein offered him an eight-week contract but refused to tell him what the project was. Fadell accepted. He had recently quit his post as an engineer at Philips to start his own gadget company. One of the ideas he was shopping around Silicon Valley was a portable music player. Everyone — including Sony, which presumably continues to kick itself daily — had passed. So Apple stuck Fadell in its special projects division and set him to work on project P-68, codenamed “Dulcime”. Fadell began mocking up designs using foam and cardboard.
Both Fadell and Rubinstein knew Jobs liked to be presented with prototypes in batches of three. Sure enough, he rejected their first two designs, but the third — a cigarette packet-sized box with a mobile phone-like screen and buttons on the base — he loved.
Another Apple executive, marketing vice-president Phil Schiller, came up with the idea of a scroll wheel in the middle. Jobs was adamant that every song needed to be accessible in three pushes of the button; any more and people would find it too much bother. According to one Apple insider, the iPod was louder than other MP3 players because Jobs is partially deaf, so they pushed up the volume for him.
Leander Kahney’s book, The Cult of iPod, posits that it was Fadell who envisaged a company built around an MP3 player, with a Napster-style shop to support it. In other words, that Apple’s future business model was his idea. “This is the project that’s going to remould Apple and 10 years from now it’s going to be a music business, not a computer business,” he’s alleged to have said. Ive set to work on the iPod’s case. It would have no battery door or on-off switch and would be a completely sealed unit. “From early on we wanted something that would seem so natural, so inevitable and so simple you almost wouldn’t think of it as having been designed,” Ive said.
The defining way we listen to music
Bolstered by the ‘silhouette” advertising campaign devised by New York ad agency TBWAChiatDay, iPod’s initial sales were good, but not great. For a new product launch, Apple’s ad spend was relatively small — $25-million. Instead it was able to rely on the best advertising model of all: word of mouth.
An independent accessories market mushroomed around it, flogging everything from leather Chanel pouches to iPod-enabled toilet roll holders and is now valued north of $1-billion. Playlists replaced albums as the defining way we listen to music; “shuffle” decimated artists’ entire recording careers.
With its iTunes Store Apple had succeeded in making the one-stop digital superstore that in-fighting and anti-trust competition laws had prevented the record labels from establishing for themselves. Instead, those labels had wasted a lot of time and money trying to set up subscription models: the idea that users would pay a monthly fee to access digital music as and when they liked.
Jobs, a Bob Dylan fan who once dated the singer’s ex, Joan Baez, insisted that people wanted to own their music, not rent it. They had collected vinyl, cassettes and CDs in the past and they would collect digital music in the future. One by one, Jobs managed to talk the big-five major labels into signing up to his vision.
“Jobs’s stock went from $8-billion to $80-billion,” said one music executive. “Ours went in reverse.” Sony, in particular, was hamstrung. On the one hand, its hardware division wanted to push a Walkman that would compete with the iPod. On the other, its record label, Sony Music, accounted for the majority of its revenues and was unwilling to push forward with something it thought would be filled with illegally downloaded music. Paralysed, Sony allowed Apple to clean up on both the digital device and the songs to play on it.
“As it turns out, iTunes has become much more important for Apple than simply being a music store,” says Roger Ames, former chairperson of Warner Music who brokered the iTunes deal with Jobs at the time.
“It’s been a place where their customers can very helpfully register their credit cards and Apple can stay in touch with them. Every record label had the opportunity to come to a business model like that.”
A rather poor return
On iTunes in the US Apple would take 22 cents out of every 99c track sold, leaving just 67c for the labels to split between the artists, the publishers and themselves, a rather poorer return than those labels had been used to, selling albums for $18. Apple itself wasn’t going to get rich on 22c a song. But it was going to sell a lot of iPods off the back of it. And the record companies get nothing from iPod sales. “The iPod makes money. The iTunes music store doesn’t,” Schiller has said.
Today the iPhone has effectively replaced the iPod. The day it launched Apple quietly dropped ‘Computer” from its corporate moniker. And it’s the ability to download applications and the connectivity of the device, not music, that’s now driving sales. “The US market for digital music appears to be flat,” says Enders. “It has flattened well before everyone, and certainly the music industry, hoped. At this point the real issue is that more than 75% of recorded music sales are still on CD.”
But that’s of little concern to Apple. Jobs may now be on a medical leave of absence and Ive is reportedly contemplating a return to the United Kingdom so he can educate his children over there, but the brushed-steel wheels are unlikely to fall off the Apple juggernaut any time soon.
Its next launch is rumoured to be the iPhone Nano. If that does what the iPod Nano did for the iPod — reducing entry point at the mid and lower ends of the market, sending sales through the roof — then ExxonMobil can start counting off its remaining days as the world’s most valuable company even more quickly.
“There are so many things competing for kids’ time now,” Jobs told Rolling Stone in 2003. “But, nonetheless, music is really being reinvented in this digital age, bringing it back into people’s lives. It’s a wonderful thing.
“And in our own small way,” he said, “that’s how we’re working to make the world a better place.” —