Apple iPod nanos are shown after a company event in San Francisco in October 2009. The question now is: What will become of the 'traditional' iPods in a changing digital media landscape? (Jeff Chiu/Associated Press)

The attention of gadget aficionados is fixed on Apple's new iPad tablet at the moment, but as the company expands its hardware lineup, some are starting to wonder what the future holds for one its core products, the iPod music player.

For about a decade, Apple's iPod has been a dominant force in the digital music revolution.

A user tries out an Apple iPad after it was unveiled in January 2010 at the Moscone Center in San Francisco. (Marcio Jose Sanchez/Associated Press)

The original iPod launched in October 2001 to little fanfare. It wasn't the first portable MP3 player by a long shot — the Saehan MPMan hit the market more than three years earlier, and other companies such as Diamond Multimedia joined the game before the iPod showed up.

Being first isn't everything, however. To date, Apple's iconic player has sold about a quarter of a billion units worldwide, helping to turn around a company that was deemed a has-been by competitors in the 1990s.

Then came the launch of the iPhone in 2007. It changed much about what was possible with a smartphone, but its success was helped by the fact that it was essentially an improved iPod with the ability to communicate as a phone and be used as a portable internet device.

Some have compared the new iPad (U.S. launch April 3) to a lap-sized iPod Touch. As with MP3 players and smartphones, Apple is by no means a pioneer in the tablet market, but the iPad is drawing lots of attention for its sleek design and wide range of capabilities. The iPad is being touted as a handy gadget for everything from reading digital books and surfing the web to playing back multimedia.

Looking ahead

In effect, Apple's iPod has evolved into a line that now ranges from tiny multimedia-playback-only devices, to multimedia-rich smartphones, to full-sized media tablets. And competitors are bringing heavier competition to bear in all these areas.

So what's the outlook, for Apple's hold on the multimedia market and for the future of the iPod line itself?

Apple's line of iPods currently has four iterations: the Touch, Nano, Classic and Shuffle. In a conference call last fall, Apple's chief operating officer, Tim Cook, told reporters and analysts that the company expected "traditional" iPod sales, meaning the Nano, Classic and Shuffle, to decline because of cannibalization from the iPhone and Wi-Fi-enabled iPod Touch, two devices that are similar to each other in design and function.

Apple CEO Steve Jobs introduces the iPod Touch in San Francisco in September 2007. (Paul Sakuma/Associated Press)

The latest sales numbers seem to support his prediction. The portable media player market accounted for $545 million in sales in Canada in 2009, which was a four per cent decline overall, based on data compiled by the NPD Group. The firm doesn't break down sales numbers based on individual brands, but it did indicate that the iPod represented almost three-quarters of that $545 million pie.

Meanwhile, Amit Kaminer, an analyst with the SeaBoard Group in Toronto, says iPod sales may have slowed, but revenue derived from the line has generally not fallen. Customers are just replacing one iPod with a more expensive one like the Touch.

"In the last couple of quarters, Apple has shifted how it brands the iPod Touch," says Kaminer. "When it first launched, it was the best media player device out there. But since the iPhone has taken a bite out of that market, they've looked to create a differentiation between the two products by rebranding the Touch as a gaming device."

He adds that the Touch changed the iPod's designation from just a media device to a small, powerful, mobile computing platform. Kaminer says Apple will try to differentiate the iPod Touch from the iPhone (although it should also be noted that the Touch has an attractive extra revenue generator compared to the other iPods in the form of the App Store, which provides Apple with a portion of each application's sale price).

Future cloudy, or in the cloud?

Where does that leave the other iPods in the line?

The Classic is the one in the group that bears the most resemblance to the original design of the first iPod, and it offers the most storage capacity. The Shuffle is the smallest music player available, and is fairly inexpensive by Apple standards. The latest version of the Nano is the first to offer a video camera, though that feature has been generally panned by critics.

"To understand how Apple does things with its product lines, you only really need to look at the example of the iPod Mini," says Mike Maguire, a leading researcher with Gartner in California. "The Mini came out in 2004 and became the most popular SKU in the product line, and the de facto target for competitors. Apple killed it at the height of its popularity less than two years later, because they had something better in the Nano."

Except the circumstances are a little bit different now, and Apple is likely going to have to be innovative to stay ahead of competitors. Many are betting that we can expect iPods to start becoming a lot more like iPhones, with wireless data capabilities.

Maguire suggests that the "increased connectivity" of music-based services could pose an interesting change in the iPod's features, for example. Music discovery applications have grown in popularity on the web and in applications available in the App Store. These applications usually allow users to either find out the name and artist for a song they're listening to at that moment, or to have songs recommended based on preference by genre, mood or other criteria.

A customer checks out an iPod product at an Apple store in Tokyo in August 2006. (Kiyoshi Ota/Reuters)

The connection between the iPod and the iTunes software and store has also been touted as a key reason why the line became so successful. There have been persistent rumours dating back to last year that Apple is poised to bring iTunes to "the cloud," which means that iPod owners with internet access could log in to their iTunes account and manage their media online — and even stream it directly to the iPod, instead of storing everything locally on the device itself. Of the iPods currently available, only the Touch has any online capability, albeit only through Wi-Fi.

"The question is whether consumers feel like they have a wireless connection that's always available and sufficient enough to stream music and media from the cloud," Maguire says. "It's not really there yet, at least not consistently. For a cloud music service, you have to be able to listen to music on your portable device just as seamlessly as you would with music stored on it."

Maguire adds that "caching" content might be a way to do this with minimal connectivity required, because the data is stored transparently on the device for easier access. If an iTunes account could be accessed via a simple web browser, then it should be possible to just physically plug in the iPod and synchronize the content that way from any computer with Internet access.

"It could also be possible to cache content from third-party sites that would allow you to play them on your iPod but not to actually own the content," he says.

One such site that offers this type of service is MOG.com through its "All Access" service. Though not yet available in Canada, the $5 US monthly subscription allows users to discover music at their leisure, and then cache interactive playlists on an iPod touch through a MOG app.

"You can listen without the need to be connected, because [MOG] secures it and embeds it in the app," Maguire says. That's going to be the default with connected cloud services, because a connection may not always be available, he adds.

Other services such as Slacker (which recently became accessible in Canada), Last.FM, FlyCast and Grooveshark have increased in popularity as well. But the Touch is the only iPod with access to these services. Maguire wonders whether Apple could apply the same functionality to the Nano, though he feels it's unlikely given how much the company is pushing the Touch.

Kaminer tends to agree that if the Nano is ultimately put to rest, or merges with the Shuffle, it will be because it just didn't make sense for Apple to attempt to do much more with it.

"The Touch will offer interesting options if things like dual cameras for video calls, higher storage capacities, better battery life, and gaming peripherals are incorporated into it," he says. "Most of that isn't really worth doing with the Nano. But Apple will only terminate a member of the iPod line once it feels it should — not before or after."