This article argues that the age of the iPod may be over. For the last two quarters, iPod sales have fallen slightly, if you can call selling more than 8 million of the devices in each quarter "slow sales." The theory is that because so many people have iPods that youth no longer see them as cool. I guess it is pretty horrifying to discover that your grandfather has the same music player that you do.
Another theory, and a more likely one, I think, is that phones with music players are beginning to eat into iPod sales. It's what I call the "one too many gadgets" problem. If you can buy something that eliminates a gadget and charger, you may be motivated to get it and drop the other gadget. But there was much wailing and gnashing of teeth a couple of years ago when most cellphones began adding camera features. After a while, most people figured out that the cellphone cameras took really crummy pictures and kept buying digital cameras.
The most likely explanation is that nearly everyone who wants an iPod has one. There is no market that can continually sustain double digit growth. Eventually you have sold your widget to everyone. At that point, the market matures and sales are primarily replacement units. Tomorrow, Apple is supposed to announce movies for sale on the iTunes store. Recall that when the iTunes store opened, few thought it would amount to anything. Since then, nearly every record company has had to begrudgingly admit the world has changed. There are dozens of competitors to Apple selling online music, and the there are already several other online movie stores in the wings.
Downloadable movies may spur sales of the bigger iPods with hard drives, because they have the storage space for movies. Apple may have the last laugh yet.