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The Era of the Apple iPod May Have Passed

Stocks in this article: AAPL

CUPERTINO, Calif. ( TheStreet) -- As white earbuds yellow, dancing silhouettes slow and playlists share space with phone contacts, consumers are tuning out Apple's (AAPL) iPod.

A bouncy Apple announced better-than-expected quarterly earnings last week, but missed a beat: iPod sales fell 14% from the quarter before and 4% from a year earlier. Though iPod revenue actually rose 4% from last year, it tumbled 17% from the previous quarter, when it dropped 19%. Yes, the iconic iPod that made media players a $4.8 billion industry, according to NPD Group, and is owned by one in every 26 people on the planet, is now an afterthought, a beloved grandparent whose stories are still treasured, but who doesn't know how to fix the newfangled TVs kids are watching today.

"It wasn't long ago that the iPod was the sign of the technological revolution, where you didn't have to have a big stack of CDs and you could carry around 10,000 hours of music on a little piece of technology," says Robert Thompson, a professor of television and pop culture at Syracuse University and founder of the university's Bleier Center for Television and Popular Culture. "Now you show an iPod to an 11-year-old and they turn their nose up at it -- 'You mean it only plays music?' "

The iPod Decade

After the iPhone 4 launch earlier this year, the iPod became even more of a misfit. When Apple made its last tweaks to the line in 2009, a new 4-gigabyte Shuffle, video camera and FM radio-enhanced Nano and 64-gigabyte Touch couldn't prevent iPod sales from slipping 12% from the product's peak of 9.15 million units in 2008. Net sales per unit also fell to $149 from $167, with the company blaming price reductions to get a surplus of older iPods off shelves before the launch of the new line. Though Apple usually launches a revamped iPod line every autumn, perhaps the best iPod die-hards can hope for is an iPhone 4 knockoff version of the Touch.

"What Apple has essentially done with the product is morphed it from a media playback device to a more general, broadly focused computing and Internet access device in the iPod Touch," says Ross Rubin, an analyst with NPD Group. "Apple has a strategic incentive to have iPod users upgrade to iPod Touches or iPhones so they can buy more from Apple."

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