iPods reaching the saturation point? Not so fast

Piper Jaffray's just completed its 17th bi-annual teen survey and the results show that iPod sales are reaching a plateau with teens and that the market may be saturated.

A whopping 92 percent of students said they currently own a digital media player which is up from 87 percent a year ago. However:

...when asked about their interest in buying a new digital media player in the next 12 months, only 19 percent said they planned to do so, representing a "dramatic" decline from 28 percent a year ago, and suggesting the market is near saturated.

The problem with the Piper survey is its small sample size, only 600 students with an average age of 16, were polled. Lots of media outlets are running with the "saturation" headline and predicting that sales of the venerable media player will continue to slow. Piper's Gene Munster said that consumers change in habits will force Apple to focus more attention on what he called "secondary iPods" like the entry-level shuffle and the high-end touch.

One thing that the survey discounts are the impact of upgrades. 92 percent of the teens surveyed already had an iPod, but that doesn't mean that they aren't going to buy another one. Although there was a 9-point decline in teens' interest in buying a new media player in the next 12 months (from 28 percent to 19 percent) that's knowing what they know now.

Apple is masterful at creating excitement and demand for new products (especially iPods) and could easily tempt many current iPod owners into buying a model with more capacity or new features like they did with VoiceOver or the App Store.

Many of the respondents who said they wouldn't buy another iPod in the next year could quickly change their tune if Apple announced some new fancy whiz-bang feature. What if Apple released a 4GB iPod touch for $99? It's a long shot ($150 is more like it) but you can't tell me that many of the surveyed teens wouldn't be all over that.

When people upgrade their iPod, one of three things usually happens to the previous model:

1. It gets handed down (or gasp! sold) to a silbling, cousin or other relative.
2. It goes into speaker dock, car's glove box, or even a drawer to be used as an "extra." I'd like to see a survey on how many iPods are in the average home. We have five if you count two iPhones -- and that's with zero kid iPods.
3. As a last resort a used iPod will end up on eBay, where the devices retain much of their value and can sometimes fetch close to the original price when bundled with various accessories. There are over 10,000 iPods are for sale on eBay currently.

So while teens already have a lot of iPods, that doesn't mean they're not looking at another one. There's a huge market for iPod upgrades, provided that Apple provides a compelling feature set at the right price.

Chart: Wikimedia Commons