Holiday sales for MP3 players went flat, and music is down (is there an opportunity here?) - Orbitcast

Holiday sales for MP3 players went flat, and music is down (is there an opportunity here?)

| 12 Comments

MP3 Player SalesEarly reports of holiday sales this year indicate that sales of MP3 players went flat, while overall music sales were down at a dramatic rate. I wonder if this spells an opportunity for satellite radio.

Dollar sales of MP3 players between November 18th to December 9th were down 16% from the same period last year, while unit sales declined 9%, according to NPD. These numbers, sadly, do not include the iPod - which likely contributed to the decline in other MP3 player sales.

The sales plateau is likely the result of a saturated market. "The market is in a position where most of the people who want an MP3 player have one," NPD analyst Stephen Baker told InformationWeek.

"The iPod is not exactly a blistering growth segment," Baker said. "It's a good segment, and you'll still make money on it, but it's not growing 75% a year."

Shoppers were choosing cheaper - and smaller capacity - flash versions of MP3 players, rather than the more expensive hard-disk-drive versions. Most people don't have enough music and video files to justify paying more for a device with 80-plus gigabytes of storage, Baker said.

Meanwhile, overall music sales during the Christmas shopping season were down an incredible 21% from last year, reports Variety.

From the week of Thanksgiving up through the day before Christmas Eve, 83.9 million albums were sold. That's a whopping decrease of 21.38 million units from 105.28 million in 2006.

All this could mean good news for satellite radio. A sharp decline in overall music sales, plus flattening sales of digital music players (with smaller capacities), means that many people will have less to listen to - especially during an arduous commute.

Marketing the message "hey, you with the teeny MP3 player and no CDs in your car, subscribe to satellite radio!" may be a bit more difficult to get across... but the opportunity is still there. Just need to find a way to seize it.

Garmin Nuvi 350
And speaking of opportunities, at the same time that MP3 and overall music sales are down, dollar sales of GPS devices were up more than 214% and unit sales soared 488%. Kind of makes you think there was a missed opportunity there.

[InformationWeek, Variety]

12 Comments

Any indication on the overall performance of the 2007 Christmas spending season? All the recession fear mongering may be leading people to spend less this year overall. If that's the case, on top of the merger uncertanity I don't think there is much retail opportunity for Sirius/XM in 2007.

I think this year the GPS units hit the affordability mark. They are the newest trinket.

I think history shows the same for all the other recording devices of the past.
Recording will never stop but so many people do not want to bother and others tire of doing it.

This is precisely as anticipated. All these people signaling the death of sat radio due to mp3 players were (are) jumping the gun. MP3 players are something everyone must have, no doubt about it.

But the ASSUMPTION that it is going to eliminate the market for sat radio is nothing more than a speculative assumption. It does CHANGE the market -- to one that is based on OEM installs of sat radio, and probably supplants the retail segment of sat radio to a significant degree. But OEMs are, and always have been, where sat radio will find its market.

I saw one article that claimed the drop in CD sales was due to stormy weather. That one made my LMAO! They're desperate. They're in denial. There's are essentially two reasons for the decline:
1. There weren't a lot of new albums to buy
2. iTunes.

I don't know how you can sit here and say that this is "precisely as anticipated" without even knowing what sat-rad's numbers are looking like yet. I would venture a guess that the retail numbers are still plummeting and I'd really be interested to see how many people buying these new cars with the trial subscriptions to sat-rad are keeping them past the end of their trials. Don't forget, that these new cars are coming with more and more MP3 integrations also now and that's going to (if it's not already) cut into those final sat-rad subscription numbers as well.

I feel that by omitting the Ipod, the research is worthless. Apple launched the Iphone in june, with the must have UI, a product that sold incredibly well. then right before the holidays they release the ipod touch, same UI goodness + a lower price for people that didn't want to commit to an AT&T contract.

I read an article, I wish I could remember where, it stated that Apple was going to exceed their forecasts for the touch. if you look at the mp3 segment you have to include everyone, or else the data is useless.

The government has really hurt XM and SIRIUS by not making a desicion on the merger. The sooner an answer is made, the sooner these companies and start marketing to consumers again. That is when the real opportunity will start.


>>>> I don't know how you can sit here and say that this is "precisely as anticipated" without even knowing what sat-rad's numbers are looking like yet. I would venture a guess that the retail numbers are still plummeting

Exactly -- the numbers are still plummeting and they are going to continue to do so. That's what was "precisely anticipated". Many of us, those who were paying attention years ago, realized from day one that OEM is what drives subscribers -- while the Stern Effect was real, it was a flash in the pan and it has been clear that it would not drive subscriber growth in the long-term.

So, whether the retail numbers continue to collapse in Q4 or not is (sort of) unknown, but it is largely immaterial because retail is inherently "early-adopter" and "Stern effect" territory -- neither of which provide the basis for sound, long-term subscriber growth.

The argument that overpaying for content (as MUSCLE and others maintain) will drive subscriber growth long-term is just not supported by the empirical results to date.

The biggest, most attractive single content item in existence was Howard Stern. And we now see that his "effect" was very much short-lived (and will never pay for itself). Limbaugh is in the same category, but he's not moving to satellite radio.

When it comes to big-name content the only real question is, "What have you done for me, LATELY?". There are no more Howard Sterns. Sat radio is going to have to rely on OEMs giving the consumers a trial of the full array of programming on sat radio, and hope that 50% of them will continue to become subscribers. Retail is pretty much dead. Forever.

If retail is "dead forever", then Sirius and XM are already monopolies in every car they are packaged with, right Stack? (As long as you ignore the AM/FM button and the Aux jack.)

>>> If retail is "dead forever", then Sirius and XM are already monopolies in every car they are packaged with, right Stack?

Absolutely not. If retail receivers were not available from one company or the other I suppose one could make that argument. Some have expressed this philosophy, as well as the related "isn't Howard Stern (or O&A) already a monopoly?".

It is all about being reasonable in the definition of the market, which pro-merger forces simply don't want to do.

What the current retail debacle shows is that people don't prefer one service over the other sufficiently to replace their OEM unit with a retail receiver. Most people simply would not do that; they would rather have an OEM installed receiver getting the service they don't prefer over installing an extra box on the dashboard to get the other service. They do, however, have that choice.

2. iTunes.

But you cannot account for the drop in increase sales via iTunes.

I just finished reading Clapton's autobiography, and in the Epilogue he claims that the record companies will be history within 10 years. I believe this, and they deserve it. As the collapse continues, it will pick up speed -- as alternatives for purchasing music become the norm.

But right now, I don't think iTunes can account for the difference.

There are tons of other places, on the internet especially, to discover new music, and the majority of population still think that XM and Sirius are just like their local Clear Channel stations with limited playlists and mindless DJ chatter (in some cases their right).

If people aren't going to pay for radio, as the notion as been mentioned in the past, they especially aren't going to do it with the perception that were about to be sacked by a recession in this country. You can't pay $13 a month if you are in credit card debt up to your eyeballs, and your house is being foreclosed on.

This will not just be true with Satellite radio. iPods and other technology will suffer similar fates (although I still think iPods will hit around 115-120 million sold). And with the possibility of a recession, that means car sales are likely to slow down, in an area where satellite radio needs to be in a position of strength. That doesn't bode well for either company, merger or not.

Something to think about is that the ipod has a less than 2 year battery.
Are people sending them back or are they mad that they cannot just buy a new battery.
Will many of them end up in a drawer to be forgotten?