The sound of success

Apple’s iPod has become one of the world’s biggest ever success stories, with 42 million units already sold world-wide. And as Alicia Buller reports, the Middle East is about to get its slice of the action.

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By  Alicia Buller Published  January 22, 2006

|~|iPods-White-family-200.jpg|~|Growing family: In 2005, Apple launched the fifth-generation iPod, which can play videos, the iPod nano, which has a colour screen, and the iPod shuffle.|~|The figures speak for themselves. Every sixty seconds, 100 iPods are sold globally. In the last three months alone, 14 million consumers have chosen to fill their ears with the sounds of Apple. What’s more, these astonishing figures were not the only success for the company in 2005 — the IT giant also found time to successfully launch the fifth-generation iPod which can play videos, the iPod nano which has a colour screen, and the iPod shuffle. With 42 million units sold to date, it’s clear that iPod is currently the world’s favourite digital audio player — and it’s also clear that Apple must be very much in the black. US-based market research company, iSuppli, estimates that the new 30GB iPod model, which retails at US $299, costs just US$151 to manufacture — representing a handsome 50% gross profit margin. Let’s do the maths: 150 x 42,000,000 totals up at a cool US$6.3 billion. Steve Jobs, the visionary CEO of Apple, once notoriously claimed that he would not accept less than 20% final profit margin on any product — and all the signs show that his personal philosophy is coming up a treat. But while the white iPod headphones are ever-ubiquitious in the the US market — Apple has a 69% share of the digital music player market in North America — it remains to be seen just how much of Apple’s worldwide success is attributable to the Middle East region. Evidently, while Jobs was happy to disclose the number of units sold worldwide at the MacWorld Expo 2006, he remained tightlipped about the exact geographical sources of the company’s revenue. Either way, there is no doubt that one of Jobs’ next areas of focus will be the Middle East. Currently, Apple has ten dedicated retail centres spread across Saudi Arabia, Egypt, Lebanon, Kuwait, Jordan and the UAE. Apple ‘concept stores’ are owned by the company, while Apple ‘retail centres’ are run by the firm’s trusted local marketing and distribution partner, Arab Business Machines (ABM). The first Apple concept store was unveiled in Dubai’s Ibn Battuta Mall in 2005 — while two more retail centres are in the pipeline: Abu Dhabi Mall, this year, and Dubai Mall in 2007. ABM’s general manager, Elias Abou-Rustom, says his firm goes to go to great lengths to simulate the authentic Apple experience in its retail centres. “We create the same ambience, the same space, and offer in-store demonstrations,” he says. Abou-Rustom is clearly a happy man — he passes over a piece of paper: “Here, look at this,” he says. It’s a print out from the New York Times, referring to the famous rivalry between Apple and Dell. It reveals that Jobs sent an email congratulating his team for putting paid to Michael Dell’s theory that Apple should be ‘shut down and forgotten about’. “Team, it turned out that Michael Dell wasn’t perfect at predicting the future. Based on today’s stock market close, Apple is worth more than Dell. Stocks go up and down, and things may be different tomorrow, but I thought it was worth a moment of reflection today, Steve.” But — gossip aside — Abou-Rustom is excited about Apple’s future in the Middle East. “The Middle East is definitely mirroring the growth of the rest of the world in terms of iPods. They are literally flying off the shelves and we have had difficulty keeping up with the demand. But, because we’re not a public company, we can’t disclose actual figures,” the GM says. He adds, in response to claims on online user forums that Apple hasn’t paid enough attention to the region, that the firm is about to announce major Arabisation targets for the year. “It’s all set to change,” he insists. “We are about to unveil major Arabic changes to the iPod. Within the next month, you’ll see the first iPods with an Arabic interface — a first in the region.” What’s more, the ABM office in Deira, Dubai, is set to become the base station for the Arabisation of the Mac Operating System, which will also happen this year. Big changes, indeed. “This is an extremely important announcement for the likes of Saudi Arabia and Egypt. It is our duty to support Arabisation and lately we’ve found that the powers-that-be at Apple have been much more supportive,” he explains. “iPods are already selling like hotcakes, but once Arabisation comes in, sales will explode.” The iPod buyer demographic in the Middle East tends to fall between the ages of 15 — 33 years and is split evenly between male and female. Currently, the bulk of products are sold to Western and Arab ex-pats, but Abou-Rustom notes that interest from UAE nationals and other Gulf Arabs is markedly on the increase. The most popular models in the UAE are the top-end 60GB video iPod (largely bought by men) and the sleeker, Flash-memory based 2KB iPod nano. However, iPod shuffle 512 MB, the family baby, is a hit with pre-teen kids as it only costs AED 400 (US$120). The device is also popular with corporations looking to provide their employees with a useful, but relatively inexpensive, gift. Interestingly, consumer tastes in colours seem to say a lot about a nation. “The Saudis love gold iPods,” says the ABM general manager, “while no-one else does!” And while lime green iPods were a sell-out in the West, the Saudis simply snubbed them… except when there were no other colour choices left: “Oh, go on then, give me the green,” mimics Abou-Rustom. Whatever everyone says about iPod (and everyone says a lot), it’s obvious that the world is dealing with much more than just a digital music player. iPod and Apple Mac is a lifestyle. An icon. That is why the company has enjoyed such a resurgence since the 1990s. When Steve Jobs returned to his firm, after helping to set it up in 1976, he laid the foundations for an Apple following that, today, verges on cult-like. And while, in the past, the company was criticised for designing technically-respected but outlandishly-priced items, the late 1990s saw Jobs introduce the ultra-friendly Unix-based operating system and awesomely-designed PCs. It is just this type of savvy innovation that may save iPod from the gaggle of competitors currently snapping at its heels — Creative, Samsung, iRiver and Samsung, to name but a few. “People have a special attachment to their iPods. In fact, the players often exude the halo effect. This means that having grown used to the Apple Mac software on their iPods, people then go out and purchase an Apple Mac,” claims Abou-Rustom. “In Q405 alone we saw a 44% annual increase in the sale of our computers. Our aim is to keep doubling our growth compared to the competition," he adds. Charles Wolf, a leading Wall Street analyst, expects 100 million Windows users to own iPods worldwide by 2008. “Mac sales could surge if only a nominal fraction of this group make a purchase,” he predicts. “Our analysis indicates that the installed base of portable music players could approach 500 million by 2010, equivalent to a 7% penetration rate of the world’s population.” Meanwhile, closer to home, Abou-Rustom has no doubt that the years ahead are going to be busy ones. He believes in the power of the iPod and its ability to seduce the Middle East, “110%,” he insists. And — after extolling the virtues of his personal iPod nano — he says, “Apple is ahead of the pack — and, yes, that’s down to iPod. It’s a cult — it’s almost like if you don’t own an iPod, then you’re just not cool,” Abou-Rustom grins.||**||

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