AirPods Were a $6 Billion Goldmine for Apple in 2019Rob Stumpf
The introduction to the world of audio comes in very different forms. For many, their introduction was simply the Apple AirPods, an easy-to-use solution for their existing iOS devices. According to a recent report by CNBC, this was a goldmine for Apple over the past year and will easily continue that trend into 2020.
According to Toni Sacconaghi of the Bernstein investment group, this popularity translated into $6 billion of revenue for Apple in 2019.
Analysts believe that this trend shows no signs of letting up. In fact, investors believe that if the same rise happens again in 2020, Apple could sell as many as 85 million pairs of its wireless earphones. This could be interpreted as nearly $15 billion in revenue. And should it continue into 2021, it could become Apple’s third largest business (behind phones and services).
Introduction of AirPod Pro
Apple’s AirPods were first sold in stores in December 2016. Customers flocked to the thought of better audio through an easy to use and ultra portable form factor. There’s no setup other than opening the lid, and that simplicity brought with it a sense of usability. At $159, they were an affordable status symbol that many people bought into.
With slumping sales, Apple revised the internals of the AirPod Pros and released its second generation in March 2019. While the price remained the same, customers were also offered a wireless charging case for an additional $40.
In October 2019, however, that changed. Apple released the premium AirPod Pros which less “earbud” and more “earphone”. Since the release, Apple has had a difficult time keeping the Pros stocked in their brick and mortar stores, even at the $249 price tag.
Is growth sustainable?
One downfall of being an AirPod owner is knowing that your earphones are disposable. Batteries are small and have a short lifespan compared to other consumer electronics. Frequent use can often lead to early battery failures, which, if happens outside of warranty, can cost customers around $69 per Pod. Perhaps this is why Apple’s services remain its second-highest grossing business.
Eventually, as customers find themselves with old or lost AirPods, they may seek out other options and stunt growth.
“Given AirPods’ extraordinarily steep adoption curve and rapid saturation of the iPhone installed base, we see a dramatic deceleration in AirPods revenue growth by 2021 or 22, to single digit growth rates or possibly lower.” wrote Sacconaghi.