Competition in the MP3 Player Industry
How will Apple fare after its fantastic success with the iPod?
Case Analysts
Robert Carter
Mike D'Attoma
Introduction
The Apple iPod has changed the face of the portable music player industry over the last few years. It has been so successful that it is thought to be as influential as the Sony Walkman was in the 1980's.1 In fact, over one-hundred ten million iPods (110,000,000) have been sold over the last six years.2 The highly popular digital music store and library, iTunes, also plays a big role in iPod's success by making digital music cheap and easy-to-access. The big question is: How will Apple continue to be an industry leader in the increasingly competitive MP3 player market? In this paper we will analyze Apple's financial position, current strategies, strengths, weaknesses, and competition in the MP3 player industry. We will then use this analysis to recommend a strategic plan for Apple to follow for the next five to ten years.
Financial Analysis
We will be looking at financial ratios for Apple as a company to rate their overall financial health. First, however, let's look at how much iPod sales accounted for total sales at Apple. In 2005, the iPod accounted for 32.3% ($4.5 billion) of Apple's total sales.3 On October 22, 2007, Apple reported quarterly earnings of $6.22 billion, of which 26% ($1.61 billion) came from iPod sales. In comparison, big-name competitors Dell and Sony only receive around 5-8% of their total sales from MP3 players. This has a lot to do with Apple's market share in the MP3 industry as well. iPod accounts for a whopping 70% market share in the MP3 player industry, while its closest competitor, Microsoft's Zune, hovers around 8-10 ...