Rumor: Apple’s Killing the iPod Classic, iPod Shuffle

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With the launch of Apple’s iPhone 5 around the corner, it’s time to revisit the great annual tradition of predicting the iPod’s demise.

But this year, things are a bit different. Apple, which in the past has introduced new iPods in September, has skipped the iPod event entirely in 2011. The invitation for next Tuesday’s iPhone event simply says “Let’s talk iPhone,” suggesting that no iPod news is forthcoming.

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Meanwhile,  the folks at TUAW have published a rumor that Apple’s about to discontinue the iPod Classic and the iPod Shuffle. “Obviously we can’t divulge our source, but it is NOT an analyst,” TUAW’s Victor Agreda Jr. wrote. He also said the iPod Touch would see few changes this year, but echoed earlier rumors that a white iPod Touch is on the way.

You might argue that the iPod Classic still serves an important role in Apple’s lineup, because its 160 GB hard drive can store far more music and video than any other Apple portable. You might also argue that nixing the iPod Shuffle in favor of the similarly-sized iPod Nano isn’t feasible, because the latter is $100 more expensive.

But you can’t argue that Apple needs these products anymore. iPod sales have been in steady decline for nearly two years (see the chart below), and the iPod line now accounts for only 5% of Apple’s net quarterly earnings, compared to 10% a year ago.

If Apple kills the iPod Shuffle and iPod Classic, it can probably absorb the losses from people moving to the more expensive iPod Nano and iPod Touch. This has already been happening on its own; last fiscal year, Apple saw an increase in iPod earnings despite a decrease in iPod sales, as users migrated to the iPod Touch.

And with the upcoming launch of iCloud, which lets users download songs to their libraries over the air, Apple is addressing storage deficiencies on its iOS devices.

The case for killing the iPod Classic and iPod Shuffle is strong. The question is timing. Next month marks the 10th anniversary of the iPod. Will Apple send off its iconic music player with a proper eulogy, or simply discontinue its products in silence?

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