The iPod was one of Apple’s most iconic and successful products. Making up almost 40% of the company’s revenue at its peak, and selling over 400 million units since its release in 2001. So with all this success, why did Apple discontinue the iPod? Well, it came down to one of Steve Job’s core principles. “If you don’t cannibalize yourself, someone else will.” In other words, Apple needed to create the next big thing that would replace the iPod, because if they didn’t, their competition would.
And that’s exactly what Apple did with the iPhone. Jobs even advertised iPhone on stage as a widescreen iPod with touch controls.” And, “the best iPod we’ve ever made.” Those phrases effectively made every iPod model obsolete. With the iPhone positioned to be its replacement. And slowly, one by one, every iPod was discontinued over an eight-year period.
The iPod classic in 2014, the shuffle and nano in 2017, and finally, the iPod touch in 2022. While it took almost fifteen years after the iPhone’s introduction, the iPod lineup was eventually cannibalized by iPhone. And if you’re wondering why Apple didn’t try to continue selling iPods along with smartphones in order to maximize revenue, you’d have to consider something called profit potential.
Or the potential for a product to generate revenue that leads to profit. Because at the end of the day, one million dollars may sound like a lot of money, but it’s not as impressive if all expenses amounted to $999,999. Leaving just one dollar in profits. Apple recognized the profit potential of a smartphone was much higher than an MP3 player, since it offered crucial capabilities that the general population needed.
Like communicating with family and friends, taking photos, answering work emails, and browsing the internet. These were extremely valuable features that customers would pay more for, especially compared to a device that simply played music. So it wasn’t a matter of Apple not being able to sell iPods alongside iPhone, but a matter of preventing customers from buying iPods instead of iPhones. Leading to more profit than ever before.
Just consider that despite the iPod’s sales success, it didn’t spike Apple’s revenue a significant amount. It wasn’t until 2007 with the original iPhone that Apple’s profits soared and catapulted them to becoming the richest company in the world by 2016. So even though the iPod was a huge success, it was best for Apple to discontinue the product. And we’ll likely see the same phenomenon again when Apple releases the next big thing to replace iPhone.