Death of a cell phone, Death of the iPod

kinnon —  September 28, 2006 — 6 Comments

This post begins on a Sunday, in a canoe – on the Ottawa River. I’m hundreds of miles away. My eldest child, Liam, is in the canoe. He is an experienced canoeist. His classmate Dave joins him in the canoe. Dave is, perhaps, not quite as experienced. I don’t really know. But the canoe capsizes as Dave gets in. No huge problem. Except for the phone in Liam’s pocket. ‘Twould seem the LG phone (that eight months ago replaced the lost Motorola phone) wasn’t able to survive the Ottawa River. It drowned.

It’s now Monday. I hear the story. Liam is sans mobile telephony. He’s going to go searching for a used phone. But wait. I have a one year old Sony Ericsson S710a that I’d love to replace with the SE W810i. With the rebate I get from Rogers and the $100 Liam will pay for the S710a, I have a new phone for under $100. But it’s not just a new phone – it’s a very capable MusicPhone – and this is the story.

If you read my blog regularly, you know I’m an Apple fan. There are three Mac laptops in this household (four if you include Liam’s 12″ in Ottawa), a G4 tower, a soon to arrive Mac Pro and four iPods (five if you include Liam’s U2 iPod).

As an Apple aficionado, I watched Steve Jobs most recent Apple Special Event, and saw him boast of Apple’s MP3 player market share. “iPods have a 78% marketshare of the entire MP3 market, and we’re very proud of that.

But wait a minute Steve! The “entire MP3 market.” I don’t think so.

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What percentage?

Commenting on a Dave Winer assertion of iPod’s supposed market domination, Jackie Danicki states categorically,

…the iPod is by far not the market-leader in portable mp3-playing devices. Their global market share is under 19%.

Jackie links to Tomi Ahonen’s Engagement Alliance post from March, The iPod is dying and will die in 2006. (SEE UPDATE @ BOTTOM OF POST)

So Apple sold 22.5 million iPods. In 2005, the mobile phone industry sold more musicplayer phones.

How many? The telecoms industry analyst Informa reported that the total number of MP3 player equipped phones sold in 2005 were 90 Million.

Adding to the existing musicphones, the worlds musicphone sales in 2005 were:
22.5 million iPods
7 million other stand-alone MP3 players
90 million musicphones
…for a total of 119.5 million portable MP3 players.
Apples market share of devices sold in 2005 is not 78%, it is 18.8%

The blog world and telecoms commentary is alive with the long-rumored Apple phone and its six month exclusive with Cingular. Apple purportedly hopes to sell 25 million iPhones in 2007. According to Think Secret:

Apple’s phone will feature a candy-bar design with a 2.2-inch display and 3 megapixel camera. Robust iTunes and iSync support will also be delivered with the phone.

Steve Jobs knows that the only way to maintain the perception of MP3 player dominance is to attempt to dominate the musicphone market.

NokiamusicrangeBut there are a lot of other strong players in that market – with some very cool products out now or on the horizon. On Tuesday, Nokia announced that their N91 musicphone will now have 8GB of storage. And their August purchase of Loudeye suggests they want a chunk of the iTunes business. As Om Malik posts,

Hardware is only part of the equation, and senior Nokia executives acknowledge that the company has to build an enhanced experience around their devices. This involves a building better software, and more value added services such as its new music discovery and recommendation service that will be curated by David Bowie and will feature selections from independent music stores from around the world.

W810I-FrontWhich brings me back to my recent purchase of the Sony Ericsson W810i – a Walkman phone. I won’t bother to do a full review of the phone, as there are many in-depth reviews available online. But this phone does a lot to revive Sony’s Walkman™ brand.

On my recent flights to and from Vancouver, I used the phone in Music Only mode for most of the trip – with neglible impact on battery life. (Approximately 5 hour flights each way.) I’d loaded the music from my PowerBook’s iTunes library via the USB cable (granted, I did this manually). Although rather slow (more USB 1 than USB 2), the transfer was relatively painless – and it charged the phone while doing the transfer. (In the future, I’ll transfer to the phone using a card reader – and probably add a 2GB Memory Stick Pro Duo card in place of the 1GB. They are relatively cheap.)

iTunes Digital Rights Management issues are a bit of pain with the Sony Ericsson phone. I would have loved to listen to the new BNL album that I’d just downloaded from iTunes. (Had I bought the files from BNL’s own download store, I wouldn’t have been faced with the DRM issues. Oh, well.) And there are ways to circumvent the DRM…for personal use only, of course.

However, combine a good 2MP camera, great SMS device, easy iSync of contacts, Calendar, etc, EDGE modem and EDGE/GSM world phone, with an easy to use Walkman – all in a package a third the size of my 3G iPod and I have to ask the question, why would I bother to travel with my iPod. All my tunes are on my laptop, which is always with me – loading tunes is easy – and I have all the other productivity tools available in this tiny music phone device…including a radio, for heaven’s sake. (It would be great if there was a stereo-mini plug on the phone, rather than having to use the Handsfree cable – and a combination car-charger with stereo-mini plug would be a welcome accessory.)
Sonymds70I’d love it if the phone could sync with iTunes. I’d even pay Apple $50 to $75 for the privilege. But tune transfer is not that big a deal on the Mac – and Sony Ericsson provides software for the PC that makes syncing easy for that platform.

All of this to say, that as much as Steve Jobs’ Reality Distortion Field dominates news media coverage of iPods – calling them the MP3 player market leader – and as great as iPods are, the actual reality is – musicphones dominate the portable music player market – and their market share will only become greater.

Why carry multiple devices, when one multi-function device can do the job as well or even better. Which is why we can expect Apple to release a killer musicphone as soon as they possibly can. Steve Jobs knows the real numbers, knows what’s coming from Nokia, Motorola, Samsung, LG and Sony Ericsson – and knows full well Apple must be a force to reckon with in this market – if he’s to maintain the illusion of Apple’s dominance of the portable music player market.

The iPod is dead. Long live the iPhone!

UPDATE: From the comments section on Jackie Danicki’s blog post, from Tomi Ahonen, the writer of the quoted Engagement Alliance post:

The iPod market share (as of June 30, 2006, down to 14%) was my analysis, from official Apple numbers, official Nokia, Motorola, Samsung, SonyEricsson, LG numbers, Creative Labs; and some analyst numbers from Gartner and Informa.

Before I started to discuss this view point, all analysts kept the iPod and music phones as separate markets. Since I started to make noise about it, very many major sources have now come to the view that musicphones and the iPod are part of the same market, including the Financial Times, Business Week, Fortune, Economist etc. Apple’s own CFO Peter Oppenheimer says that Apple tracks musicphones and mentioned the SonyEricsson Walkman phone by name as a direct rival to the iPod, in Apple’s quarterly conference call in July. [emphasis added]

kinnon

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A television editor, writer & director since 1978. A Christian since 1982. More than a little frustrated with the Church in the West since late in the last millennium.

6 responses to Death of a cell phone, Death of the iPod

  1. I think the key thing is people are buying the phone because it’s a phone and it just happens to have the mp3 option. Until mp3 phones can hold 80gig’s of music and video, I think the iPod is safe. Unless it starts cutting people’s wrists like the macBook, then we’re in trouble.

    Also, isn’t Apple in the process of developing an ‘iPhone’? Could be dicey!

    Reply
  2. Did you read the entire post, J?

    It’s great that an iPod can hold 80gigs of video – but when the battery dies after 3 hours of video playback…

    The question still is, would you rather carry one device that communicates well – and delivers great music – or do you want to carry a phone, a PDA, an iPod, etc? I know I’d rather carry my W810i only.

    Reply
  3. I have the attention span of a monkey Bill, sorry. ha ha. I didn’t see the rest of the post.

    I’d be down with an iPhone, anything beats my gigantic nokia 6620, which has more stuff than I honestly need… ugh.

    Reply
  4. Phone companies need to add the simple audio plugs found everywhere – that is the only thing preventing me from using using my Nokia as an MP3 player, i don´t want to work with adapter alls the time. When my good old Creative muVo² dies I may not buy a new MP3 player, I may just buy a bigger memory card for my cell phone.

    Reply
  5. Bill, helpful commentary in this post. Like you I am a Mac fan and have been a long time – I’ve got an original 128k Mac in the next room.

    One device is the goal. Agreed.

    But to be truthful I have tried using an iPod and for me it’s use is limited to times when I am alone and not in public or in a setting where engaging others is not appropriate like a late night flight.

    I find that if I listen to the music in my ears I miss too much or ignor people (imago dei) – not good. Or if I half listen to the music I miss it’s beauty and diminish its beauty.

    So from my odd perspective. One device for a phone. And one for music works out just fine.

    Always learn something helpful from the conversations you offer up – thanks!

    Reply
  6. Hi Bill and readers of Achievable Ends

    Thanks for mentioning my posting and follow-up (via the Engagement Alliance blog). The picture is really turning very sour for Apple’s iPod market share. First, I want to point out that iPods are selling well, they are profitable, and most importantly for Apple, the iPod has revitalized the interest in Macintosh computers (and thus also raised the Mac profitability). So the iPod is very good news for Apple.

    But in terms of global market share, its very bad news indeed. iPod sales are stagnant now for three straight quarters. Since the Christmas quarter of last year (14.1 million iPods sold) they have sold 8.5M, 8.1M and 8.7M iPods in the last three quarters. The sales of iPods have hit a plateau. The slight recovery and 7% increase in quarter-on-quarter iPod sales this last quarter just ended, was achieved with severe price cuts and the release of the 79 dollar iPod shuffle – according to Apple CFO Oppenheimer.

    But consider this from the mobile phone side. Since I last discussed the issue in my widely quoted blog in July, the phone industry has dramatically revised upwards their shipment forecast for musicphones this year, from 270 million to 309 million units. If we are very generous and give Apple 50 million units this year (they’ve sold only 25 million so far in the first 9 months, so this is a VERY tall order) – that would leave Apple with an annual market share in 2006 of only 14%.

    So Apple is now resorting to dropping prices to maintain interest in the iPod. What is the phone industry saying? LG has said the Chocolate drives their sales. Motorola says the music variants of its phones are in highest demand. Samsung has pushed the ante and was first to release an 8 GB storage musicphone (and note, almost all top-end musicphones also have removable storage, which today means 4GB of removable storage, to “shuffle” your music collection further). Nokia says the musicphones drive its sales and it expects to double its shipments of musicphnones.

    What of the iconic SonyEricsson Walkman? The phone that Apple CFO singled out in July of this year as being specifically in the same market as the iPod? SonyEricsson says Walkmman branded (ie the top-end of SonyEricsson) musicphones account for 25% of all of SonyEricsson’s phones! Better yet, Ericsson CEO Carl-Eric Svanberg just was on CNN talking about Ericsson’s quarterly results. Ericsson said musicphones drive their sales, yes, but Svanberg said this mean that they are able to charge a premium for Walkman branded phones, and the demand is so high, that SonyEricsson now can demand a price premium even on its lowest-end (ie non-Walkman branded) musicphones!

    While iPod sales are stagnant, and Apple resorts to dramatic price cuts to revive some sales, the phone industry all echo the same theme, they cannot keep up with demand for the music playing variants of their new phones. And SonyEricsson very specifically said, this demand is so strong they are able to charge a premium for musicphones.

    Yes, the game is truly over. The iPod will not die, it will not disappear. It will become the niche product, just like a Porsche or Ferrari is a niche car for driving enthusiasts, or indeed the Macintosh is a niche PC for those who appreciate its user interface, design, utility, performance – and don’t mind the premium cost.

    Oh, and on some American numbers – The RIAA (Recording Industry Association of America) reports that direct sales of music to mobiles in America – which was only introduced a year ago – doubled in the first half of 2006. The IDC (the source quoted by Apple) says that by the end of 2006, the total of people downloading music to mobiles in America will reach half the size of people downloading iTunes. NPD reports that already 67 separate musicphones have been introduced to the American market and that by the third quarter 2006, 19% of all phones sold in America are musicphones (contrast with leading countries like 90% in South Korea, 60% in Sweden). And Instat reports that a third of American musicphones buyers want their musicphone to become their primary music consumption device.

    It seemed totally alien just last year (for American readers), but the tide has turned, very fast. It is totally commonplace in South Korea, Japan, Europe etc. In Japan 85% of all online music is sold directly to mobile phones, in Spain its 78% and in Italy 76%. In Sweden, the SMALLEST of the wireless carriers already outsells iTunes. Even in America, already 11% of all digital music is sold to phones.

    So yes, the tide has turned, and there is no going back. The numbers in the iPod vs musicphone picture are overwhelmingly in the favour of the phones. More at my blogsite – http://www.communities-dominate.blogs.com – obviously, and in my book of the same name (Communities Dominate Brands).

    Thanks for writing about this story

    Tomi Ahonen 🙂

    Reply

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