Will iPhone be an iPod Killer?

Pretend for a moment that you run a company that makes a really kick-ass product; a product that has been hailed in your industry has groundbreaking and has had all your competitors jostling to regain market share for years.

 

Now suppose you develop another product similar to the first one, but with other features, that looks like it will be an even bigger hit than the first one. You’d like to dominate the market in all areas possible, but you’re concerned that the second product may cut into profits from the first one.

 

That’s precisely the situation Apple may soon find itself in. A recent Pike & Fischer Broadband Advisory report noted that Wall Street analysts are somewhat concerned that, when it hits store shelves in June, iPhone (or whatever it will be called by then) could cut into sales of iPod.

 

That’s hardly surprising, considering that iPhone includes a built-in iPod; anyone who buys one probably won’t see the need to buy a separate music player. After all, who wants to carry around two devices that both do the same thing, when one of them also does other cool stuff?

 

Wait, it gets worse (or better): “Some analysts worry that consumers may delay purchasing new iPods as they wait for the June release of the iPhone, which will have the same functions and much more,” Pike & Fischer said in its report.

 

Could be, I suppose. But I would guess the impact won’t be much more than a period leading up to any new iPod release—anytime, really, when its been six months to a year since Apple last introduced a new version of its venerable music player. It’s no different than any other tech purchase: if you know or believe that something better is just around the corner, you may wait until it arrives to buy.

 

Pike & Fischer quells some of the concern by pointing out that iPhone, at least initially, is priced so high ($499-$599 depending on model) that plenty of people will still shell out money for stand-alone iPods.

 

Yet, Pike & Fischer also points out “there is still a risk that the multi-functional aspects of the iPhone may in time divert customer demand from existing iPod products and thus cause a reduction in iPod unit volume, revenue and market share.”

 

Well, I guess only time will tell. Personally, I think I’d be more worried that the upcoming release of iPhone will dampen sales of many smartphones rather than a single music player. But that’s just me.