Yeah picking Q4 in my previous comment wasn't fair (Apple didn't seem to release FY revenue by segment which is a bit annoying and iPod sales were generally much higher in Q1
No argument about what happened after the iPhone (specifically 3G + App Store) came out, but I'm not sure I fully agree with:
> What I'm saying is that the strategic focus and resources was not really on Mac because Apple leadership did not see growth there by itself unless it was as an attachment to the iPod.
By 2007 iPod's market share was ~72% in the US. The MP3 player market was pretty saturated and there was very little growth left (especially with increasing competition from (feature)phones). On the other hand Apple only had < 5% of the PC market (in the US) by 2006 so there was a lot of space to grow especially in the laptop market if if they started released more competitive products (by ditching PowerPC).
If we look at iPod + iPhone revenue around those years
2007 :
Mac: $10,314 (42.94%)
iPod+iPhone : $8,428 (35.09%)
2008 :
Mac: $14,276 (43.92%)
iPod+iPhone: $10,997 (33.82%)
Mac sales were actually growing faster even if we combine iPhone and iPod sales (which probably meant that a lot of people switched to other phones/mp3 players instead of buying an iPhone at least initially)
I think that's mainly related to the the PowerPC to Intel transition. It's not clear if the iPod really had a huge impact on Mac sales since Mac's market share started growing much faster when iPod had already peaked. Then after iPhone sales started accelerating Mac sales growth rates began declining which would imply that handheld and PC segments aren't necessarily related that much.
If Apple hadn't released the iPhone, Mac probably would have done just fine on its own and iPod sales would have remained stagnant or declined significantly (e.g. worldwide they weren't doing that well compared to Sony Ericsson's phone sales in 2006-2007, who IIRC leaned heavily into MP3/media in those in those years). It was pretty obvious that phones/smartphones were the future regardless of what Apple did (the transition would have just been quite a bit slower without them).
Of course (compared to you) I really have no clue what the internal sentiment inside Apple was a at the time so I'm just commenting on the market as a whole.
My point about iPod sales was that Mac was fairly stagnant before and after in gross revenue. Once iPods were made compatible with windows, you see Mac sales start to grow again. The strategic story was that iPod was your gateway drug into the Apple ecosystem - whether they knew it would be that way I don’t know. I suspect it took them by surprise and they weren’t sure at first if Windows support was needed or growth would continue on its own.
As for iPod saturation, I don’t know if that’s actually true and I’m too lazy to look up the numbers as to when it happened. I’ll point out two things area important when thinking about things - you have market share and market size. You don’t have saturation until you have stopped growing. Owning a constant 70% of a market that’s growing consistently each year is not saturation - was the portable music market stagnant by 2007? Maybe. But you can’t tell that just from market share. According to ChatGPT growth started slowing down in 2008 but that’s already post Razr and iPhone when it became an obvious calculus of do I want and old tech iPod or a general purpose computer and cell phone in my pocket. Nanos and shuffles kept selling well because the cell phones didn’t have an appropriate answer for a very very long time (too much growth elsewhere to bother with that use case).
The transition to Intel was in 2006. I’m skeptical that’s a motivating reason for a lot of switchers and the numbers show more growth correlation with iPod windows support and iPhone which makes sense for the attachment theory whereas I don’t see in the numbers that making a big dent. It’s important to remember that consumers don’t make decisions on what CPU is in a machine; even technical people wouldn’t make that decision since even in the tech community today it’s framed as windows vs Linux vs Mac and not Intel vs AMD unless you are building a PC from parts (and Apple isn’t in that segment).
I’m not sure why you say iPod has peaked at the time of Windows transition which was in 2004. 2007 which is when growth had started slowing is when the iPhone kept up the growth. I agree that phones being the future was going to be obvious and the Razr was likely their first dip of a toe to estimate how big the market for an iPhone would be since they had a deal with Motorola for iTunes support.
As for Apple’s computer market share, the reason it’s so high is that the overall market is stagnant but Apple is managing to eke out growth here and there. Same as with smartphones where Apple has 30% of market share but 98% of the profit; they are much more streamlined than their competitors. Expect to see their market share grow one cell phones stagnate although the story there is more complicated since they play in a wider range of economic households whereas Mac products are (as they’ve always been) in more higher end segments (since the lower end would be dominated by chromebooks or no laptop). I see no indication of Mac growth stopping pre or post iPhone - it only started more recently which makes sense it would take so long because Apple is not immune to the reality in that space even though they’ve defied it for so long (and as for many companies COVID spiked sales since kids needed to do school remotely so the recent stagnation could just have been a temporary anomaly and reversion to pre pandemic numbers).
It’s genuinely hard to say what would have happened if Apple had not released the iPhone. Certainly Apple had stabilized as a company by 2001. But Mac sales had stagnated in the years prior to iPod and without iPhone as another engine it’s unclear what would have happened to Mac sales after that especially as the overall laptop and computer segments started collapsing (but this happened much much later after the smartphone revolution). Their music business may have helped a bit but a huge part of growth there itself was due to iPhone as well. These are reinforcing effects that are really hard to tease out. It’s likely it would have kept going since it was financially more stable but it would likely be at least a 10x smaller company.
Thank you for engaging factually and thoughtfully with the analysis.
> Owning a constant 70% of a market that’s growing consistently each year is not saturation - was the portable music market stagnant by 2007?
iPod sales grew by 18% in 2006 and 17% in 2007. It was 140% 2006 and 373% in 2005. So yeah they weren't technically really stagnant just slowed down significantly. Even if we look at combined iPod and iPhone sales they grew slower than Nokia and Sony phone in the same period (Motorola had peaked in 2006). That didn't change until the 3G came out in 2008 and "high-end feature phone" market collapsed by 2009.
> It’s important to remember that consumers don’t make decisions on what CPU is in a machine
Yes but IIRC G5 had pretty awful performance per watt and Apple never put it into any laptops. They were stuck with G4 which wasn't really competitive with x86 by 2006.
> 2007 which is when growth had started slowing is when the iPhone kept up the growth.
It didn't initially though, not until mid 2008 if we compare to how fast Mac sales grew in the same period. Between 2006 and 2009 Apple's laptop sales increased by almost 3x or so. While even if we add up iPod + iPhone sales they "only" grew by 2x. Especially 2007 to 2008 was relatively pretty bad since iPod + iPhone sales only went up by 1.3x. Macbooks were the fastest growing product/segment between mid 2006 and mid 2008.
To be fair I'm mostly nitpicking at this point since I do agree with your longterm analysis more or less, but since Mac sales grew at the fastest during the period when iPod sales were relatively stagnant and iPhone sales were still relatively very low (2007 to mid 2008 before the 3G, the original iPhone wasn't a particularly good smartphone it had a large multitouch screen and that's about it..) it's not that obvious to me that iPod/iPhone sales were driving Mac sales that much.
Of course that specific period was pretty unique. Laptop market was growing very fast and Apple finally was offering devices which were incredibly competitive with other laptops at the time. It doesn't change the big picture too much (most growth was coming from iPod sales before that and iPhone/iPad afterwards)
No argument about what happened after the iPhone (specifically 3G + App Store) came out, but I'm not sure I fully agree with:
> What I'm saying is that the strategic focus and resources was not really on Mac because Apple leadership did not see growth there by itself unless it was as an attachment to the iPod.
By 2007 iPod's market share was ~72% in the US. The MP3 player market was pretty saturated and there was very little growth left (especially with increasing competition from (feature)phones). On the other hand Apple only had < 5% of the PC market (in the US) by 2006 so there was a lot of space to grow especially in the laptop market if if they started released more competitive products (by ditching PowerPC).
If we look at iPod + iPhone revenue around those years
2007 :
Mac: $10,314 (42.94%)
iPod+iPhone : $8,428 (35.09%)
2008 :
Mac: $14,276 (43.92%)
iPod+iPhone: $10,997 (33.82%)
Mac sales were actually growing faster even if we combine iPhone and iPod sales (which probably meant that a lot of people switched to other phones/mp3 players instead of buying an iPhone at least initially)
I think that's mainly related to the the PowerPC to Intel transition. It's not clear if the iPod really had a huge impact on Mac sales since Mac's market share started growing much faster when iPod had already peaked. Then after iPhone sales started accelerating Mac sales growth rates began declining which would imply that handheld and PC segments aren't necessarily related that much.
If Apple hadn't released the iPhone, Mac probably would have done just fine on its own and iPod sales would have remained stagnant or declined significantly (e.g. worldwide they weren't doing that well compared to Sony Ericsson's phone sales in 2006-2007, who IIRC leaned heavily into MP3/media in those in those years). It was pretty obvious that phones/smartphones were the future regardless of what Apple did (the transition would have just been quite a bit slower without them).
Of course (compared to you) I really have no clue what the internal sentiment inside Apple was a at the time so I'm just commenting on the market as a whole.