1. The iPod Story- 2001 to 2006 The story of the iPod is not just a review on the world’s most successful digital media playing device. It is the story of a product that defined the structure and limits of a whole market. It is a device that even largely managed to replace the name of the market it competes in (for example – the Xerox products and brands). It all begins in 2001, when digital music players had been either big and clunky or small and useless with equally terrible user interfaces. Apple saw the opportunity and announced the release of the iPod, their first portable music player on October 23, 2001. At first, the reactions were confused and hostile, critics accused the $500 price tag, the unconventional scroll wheel and the lack of Windows compatibility. Despite all this, the iPod sold beyond everyone's expectations, went on to revolutionize the entire music industry, and the rest is history. On October 23, 2001 Steve Jobs forever changed the course of media and entertainment distribution when he unveiled his creation, the Apple Ipod, which is the turning point for Apple’s history and success. - Apple’s position in the world of electronics before the iPod. Before 2001 Apple had been a company, operating in the computer market, producing hardware and software. While Apple devices and their OS were considered superior to their counterparts, the marketshare of the ,,Mac’’ had never exceeded 4%. Even though Apple had made considerable innovations and made incredible efforts in research and marketing for the past 2 decades, it never succeeded to gain an upper role in the computer market, which was 90 % dominated by Microsoft Windows devices. One of the key drawbacks of Apple computers and software system was the non-compatibility with other devices. Given the fact of Apple’s position on the computer market nobody found it’s profits and revenues interesting, nor promising. No significant growth possibilities were shown and there was little interest in it’s shares on the NASDAQ. -The Turning Point. Many people believe that the iPod + iTunes concept originated within Apple and praise Steve Jobs and the brains behind the company’s logo, but it was actually an outsider, a former Philips engineer, named Tony Fadell, who had initially proposed the idea to Microsoft. The executives declined his proposal, claiming that his idea had no potential. Apple however embraced his proposition, and soon later he was appointed by Steve Jobs with a crew of 30 people, who developed in less than a year the 1st Gen iPod. The idea was genius at the time – a small and portable sleek mp3 music player, and an online mp3 (aac) music store. The product’s name also did not originate within Apple. It was proposed by Vinnie Chieco, who was a copywriter and was called by the company to figure out how to introduce the new player to the public. The device itself was also not a product of futuristic technological development. Apple widely relied on outsourcing for the iPod. The controller chip was provided by PortalPlayer, the iconic iPod wheel – Synaptics, the lithium battery – Sony, Toshiba supplied the hard drive. Many other components like interface controllers and integrated circuits were supplied from various companies, which leaves only the assembly, based in China, and the design, based In California, a true Apple trademark. However, the iPod was not an immediate success. It was launched in October 2001, right after the September 11 events, and the subsequent Wall Street turmoil. It did not cause an impact on the market. For the first 3 years the sales had not even covered the research and development costs. Sales ranged between 50,000 – 150,000 devices per quarter up until 2004. iPod sales began to rise from late 2004, when sales broke 800,000 in a quarter, in 2006 – 20 million. Why was the iPod initially a flop is still discussed among marketing managers and analizers. Some would suggest, that it was a product ahead of its time, or that the internet and broadband connections were as fast and reliable in 2001, which made the iTunes store, the main source of songs for the iPod, terrible to use and navigate in the early periods. Others blame the iPod advertising and the insufficient investment. In fact the main factor on which Apple relied about the iPod was the buzz created by word of mouth. iPod’s positioning, specs and the factors which contributed to the success. From a marketing point of view the iPod was considered a Diversification, since Apple ventured into a new market with a new product, thereby not only extending the Brand, but also taking advantage of the early-bird. The product was indeed priced at a premium level ranging from $499 up to $599. Following years saw a decline in price, with smaller versions like the Shuffle ($69-99) or the mini ($199-249