New iPods Flying Off Shelves

Apple Inc.'s latest crop of iPod portable media players is finding favor with buyers, as retailers and industry watchers report that both the video-capable iPod and diminutive Nano are moving off the shelves at an impressive clip.

Cupertino, Calif.-based Apple's recent announcement that it had sold one million video downloads via its iTunes service in less than 20 days of offering the content illustrated that demand for the new feature has been strong.

While most experts agree that it's too early to tell if the added video capability will increase overall iPod sales, or whether the smaller, more powerful Nano music player will outpace Apple's own ability to ship the devices, the early consensus is that both of the new products are delivering resoundingly positive sales results.

In a report distributed on Thursday, market watchers American Technology Research said that early returns from industry and channel sources indicated that sales of both the video-capable iPod and Nano are beating expectations.

Shaw Wu, analyst with Greenwich, Conn.-based ATR, said in the report that the video iPod, introduced in mid-October, is making a stronger-than-expected showing and already outselling the Nano at some retailers.

However, Wu reported that sales of the Nano continue to lead the way at some of Apple's largest resellers, including Amazon.com and Best Buy Inc.

The new iPods with video come in 30GB and 60GB models, which are retailing for $300 and $400 respectively. A 2GB version of the iPod Nano starts at $180, while a more powerful 4GB model can run over $300.

Apple has yet to detail any sales results for the new iPod with video, but reported that it sold one million Nanos in just the first 17 days after it shipped in early September.

Company representatives said that Apple wouldn't be releasing sales numbers for the individual products, as is its longstanding practice. But according to at least one regional retailer, demand for both devices remains strong.

Fred Evans, product manager at Apple specialists First Tech Computer in Minneapolis, Minn., said that the Nano and new iPod have been beating the store's projections, despite the fact that the retailer ordered larger numbers of the devices than earlier models.

He called sales of the video iPod "brisk" and said that the Nano continues to do well with first time iPod buyers looking for a music-specific device.

As some analysts had also predicted, Evans said that the video-capable device is being purchased largely by existing iPod users looking to replace or upgrade their machines.

"Having the new video capabilities appears to be a big deal to iPod owners," said Evans. "I don't think the photo-viewing capabilities of the Nano swayed as many people to trade in their iPods and purchase a new one, but the video is — especially for watching TV.

"The Nano is selling really well to first time iPod customers, people who are looking for a smaller, less-expensive music player."

The one major downside Evans cited with the new devices was Apple's decision to eliminate an accessory input jack included in its older iPods, making most of the peripherals sold for the devices, including his store's five top-selling add-ons, incapable of working with the latest models.

Evans said that he has not fielded complaints from any Nano buyers regarding the reported scratching issue affecting some of the device's displays, for which some consumers have filed for a class action suit against Apple.

According to enthusiast Web site iPod Garage, the black-cased version of the iPod video is selling in greater numbers than the white model, with the 30GB version outselling its more expensive 60GB counterpart.

According to the site's reports from one retailer, the Nano is still outselling both of the new iPods.

The one new handheld product related to Apple that appears to be underwhelming the market is Motorola Inc.'s iTunes-ready ROKR mobile phone, which most sources say was "overshadowed" by the simultaneous release of the Nano.

Neither Motorola nor Apple have released sales results for the Rokr devices, but at least one market watcher said that demand for such music-capable phones remains "in its infancy" at the moment.

Industry analysts said that all the iPod sales results should be considered preliminary, and pointed out that demand for such devices would almost always be strongest shortly after the machines were introduced.

Most also cautioned that Apple's video download sales don't necessarily mean that the company is selling huge amounts of the new iPods, pointing out that the results only prove that the service is being used a lot by people who already bought the new model.

"It looks like iPod video is doing really well comparatively, which is a little surprising, because the Nano is such a slick small device, while the video is still a lot larger in size," said Sam Bhavnani, analyst with Sterling, Va.-based Current Analysis.

"Apple was really smart, because video iPod came out at the same price as its predecessor, with a larger hard drive and the video capabilities for the same price. So, if anyone was looking at buying one before, that's pretty attractive."

Bhavnani said that while it is too early to estimate how many people are using the video download features, he believes that Apple will be able to convince many of its existing iTunes users to begin adopting the content as they get their hands on newer devices that support it.

He said that Apple may also use promotions such as the one it offered for free iTunes music download to Pepsi drinkers in 2003 to get people to try out the service.

Bhavnani said that part of the key to Apple's success in expanding the video capabilities will be in finding more sources of content for the download service, but he doesn't see that as a major obstacle.

"They've been able to convince music studios that they could profitably sell music online and made it very popular with 200 million downloads" the analyst said.

"The video studios are scared to death of illegal applications for stealing video, and now Apple is saying, 'Skip all that and let people pay for it,' which is a pretty strong message."

Steve Baker, analyst with NPD Group, Port Washington, N.Y., cautioned that it is too early to consider either the new iPod or the Nano a "massive success," but said that the early signs are surely positive.

In particular, he said that the addition of video would inspire many existing iPod users to replace their machines. Baker believes it will then be easier to measure how much impact the feature has on generating sales after the initial wave of adoption.

"The people who are going to run out and buy the video iPod first are the kind of people who want to use the service right away. They will be the ones who can tolerate the download characteristics, or need video for some reason, so it's tough to make long term judgments," said Baker.

"Clearly everybody who buys one of the new iPods is buying it for the video, as it's hard to imagine there were many people who were waiting to buy one before who rushed out over video. But there will be a lot of people trading up and looking to upgrade."

Despite the large number of iTunes video sales, Baker said there was "no way" that the opportunity to offer such multimedia content outweighs current demand for music downloads, and he does not believe that the addition of video to iPod and other manufacturers' products will inspire as many device sales as the mobile audio market is generating.

"Will video be as big as music, I don't think so," said Baker. "At least, not anytime soon."

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