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« Missed Church? No Worries, Download It to Your IPod | Main | Generation "C"ers growing up on digital technology »

October 07, 2005

Comments

Martin Geddes

I'd agree with the outcome, but I think it'll take a while longer (an extra 12 months, maybe). Two reasons: DRM will continue to delay product deployment and confuse end users. And iPod users tend to listen until the battery is flat, whereas cellular users will go to great lengths to conserve that last bit of battery power to ensure they stay in touch. Reconciling these different behaviours will take another cycle or two of battery technology.

I'd also add carrier stupidity to the list of things that will delay roll-out. They'll want to do over-the-air downloads of songs etc that put the network in the middle. Users will want tethered downloads at first, as they are cheap and quick, and match existing behaviour patterns.

Some of the iPods also fill specific niches. For instance the shuffle is truly wearable and suitable for going jogging with. Your cellphone generally isn't wearable in the same way.

Navigating the list of artists and albums doesn't lend itself well to the current 5-way clicker UI paradigm. Expect to see a string of product failures until handset makers understand the functional important of the scroll wheel, and innovate new handset UIs for navigating large information spaces. And then we'll see all sorts of unintended consequences as that UI enables a whole bunch of new applications!

Tomi Ahonen

Hi Martin

Good points and it may be that the truth lies somewhere in between. I am now steered by two recent phenomena. The first is how immensely rapidly the mobile phone actually took over the dominant position in PDAs and digital cameras. I was sure the mobile phone would win out eventually, but I was certainly amazed how rapidly that happened.

The second is the immense scale of mobile phone total sales. The i-Pod total sales are somewhere at 25 million or so sold over the four years they've been on the market. Nokia sells 25 million mobile phones every month. Its a bit like IBM originally when it looked at the nuisance of the "toy" personal computer market. Then when it spotted that is going to be relevant, they entered it and almost overnight dominated the market (until the idiots they were, gave away all of their market strength to Intel and Microsoft, but that's another story)

But we'll see. Yes, definitely it will happen, but will it be that fast as I now think :-)

Tomi Ahonen :-)

Oscar Merida

I'll be surprised if any carrier in the US doesn't go with a more restrictive, DRM laden file format for the music they sell and sync to their phones. There's potentially a lot of money to be made if they can make it so that the only music you can get on your cell phone can be bought from them and heard on their phones. Of course, the rest of us will try to steer our family and friends to non-encumbered phones.

ocasta

Another of the issues that will slow down the whole process is getting the music on to the phone in the first place. There are two options - copy from a PC or download direct to phone.

The bigger potential market (both from the number of potential customers and the preferred carrier revenue) is the direct download customer. Although the market for ringtones and wallpapers looks big, most people don't download more than one or two a year. Music isn't like this - you want lots of it. Lots of downloads means high bandwidth. Most people aren't on 3G and wont be in the next 12 months. You want to choose from a big library. Navigating around iTMS and the average carrier portal are not comparable experiences. I can't imagine having to struggle around a portal to buy lots of music - one ringtone or one game maybe. So the UI problem has as much impact on buying music as on listening.

So then the alternative is PC download and copy. Having a PC to download and install music takes away the revenue from the carrier and is not going to be the preferred option. Those people that do have their music on their PC then they probably have a favourite library tool. Manufacturers need to make it easy for these customers to download to their phone, not impose the use of their propritary software package.

So while there maybe many more music phones in circulation in 12 months time, I expect that music spend per customer will favour the iPod owner with the simple, large screen buying experience.

Tomi Ahonen

Hi Martin

Ok, fair points. But, again the big picture is changing incredibly rapidly due to the global economics of cellphones. Your point is becoming moot before you even know it..

We hit the global 50 million 3G subscriber point in September 2005 - thats about twice as many people worldwide have a 3G phone already than have an i-Pod. Yes, two thirds of that is in Korea and Japan, but the rest of the world is following their lead. Hutchison/Three just yesterday came out with 3G music sales - direct full-length MP3 track sales to their 10 million subscribers in nine countries. Its already up to 30 million songs sold in less than 18 months from launch. This transition is as inevitable as it is that the night follows day. But like you say, perhaps the exact timing is still unclear :-)

The 3G phone population will more than double in the next 12 months and double again from that in the next year. Putting it in context, there are about 75 million PDAs and about 250 million laptops in use. Excepting for the USA, the rest of the world will pretty much skip the i-Pod "download to a PC, buy an MP3 player, transfer songs to the player" mode, and just use their new 3G phones directly as music players.

PS "although the market for ringtones looks big" ??? I beg to differ. at 5.4 billion dollars worldwide in 2004 - thats 18% the size of the total worldwide music industry !!!! Out of a technology invented in 1998. This is not something that "just looks big" it is HUGE. The only growth for the music recording industry has been the royalties earned on ringing tones (a tiny fraction of the billions). Every hit-making recording artist from Robbie Williams to Kylie Minogue to 50 Cent earn more on their ringing tone sales than the sales of their singles on the hit parade.. I promise you, the record industry is kicking itself for not capturing more than a few hundred million of that huge cake, and they really REALLY don't want to miss out on the rest of this. And yes, to put the billions in context - the total revenues of i-Tunes were 300 million dollars, and obviously the record labels don't get all of that. A drop in the bucket compared to the huge ringing tone biz.

But yes, the mobile phone sales numbers are a steamroller. They simply dwarf all other devices on the planet...

I just love this business, as you can tell, ha-ha...

Tomi Ahonen :-)

Michael

For his upcoming book, Sound Moves: iPod Culture and Urban Experience, Michael Bull (sussex University) interviewed more than 1,000 iPod users, mostly in North America and Europe, and discovered that a good 25 per cent of them actually hated cellphones. They didnt want convergence.

They would not use their phone when listening (to their iPods). They would wait until they'd finished listening to their music. You would need to be able to turn off the phone while been able to listen to the MP3 function and that dont make sense for a convergence device.

When Im jogging, on a plane or listening to a favoutite album, I dont want to be interupted by a ring tone!

Michael

Tomi Ahonen

Hi Michael

Looking forward to your book ! How did you like ours? We obviously love the i-Pod as we have it as one of our case studies etc.

You know, of course, that the reverse of your argument is that if 25% hate the cellphone, then arguably 75% like it? But yes, I will happily grant you that the majority of those 25 - 30 million who have already bought i-Pods love them and some actually do hate cellphones.

But the i-Pod userbase is nowhere near a mass market. 750 million cellphones sold EVERY YEAR is a mass market. Already today more MP3 player-enabled cellphones are sold than i-Pods, and more direct full-track music is sold to cellphones than the total sales of i-Tunes. The tide has turned, and now the gap in the favor of cellphones is only increasing. By 2006 the lights will be out.

Yes, i-Pods will have their loyal fans for a long while, and those who are "serious" about music will have them. But the mass market will go for the "good enough" which is the MP3 player in the cellphone. Today already in Korea Samsung already sells cellphones with 5GB of storage space on music phones. Nokia is only now releasing its serious music player phones. The real comparison is not with the lame MP3 player cellphones from this year and last, but rather next year, the battle is between the giants.

And in sheer numbers, Apple cannot - physically cannot - match the size of the cellphone market.

But I'll happily grant you that the loyal dedicated i-Pod early buyers are very fanatical about the device - and very typical to Apple, its customers tend to be fiercely loyal. Excellent marketing there.

It never helped Apple crack the mass-market for PCs either. This is the same trend. i-Pod for a niche, cellphone based basic musicphones for the masses. Sorry...

But as I said, am greatly looking forward to your upcoming book. Please send us an e-mail Michael when it is released, ok?

Tomi Ahonen :-)

Paul Jardine

Here's another perspective on this argument. I agree with Tomi that the greatest number of MP3 players will be in mobile phones in 2006 (maybe in 2005 already??), but I don't think that the largest number of MP3 tunes bought will be delivered via the mobile networks. Many of the devices in 2006 will have wifi (including mobile phones) and downloads at home over broadband from iTunes (or P2P software) will be dominant.
So, while people may listen to their MP3s on their phones, they won't be buying many songs from the operators. Unless of course, the operators decided to price competitively and not charge for the data part, but I think they are too greedy for that, they want the walled garden and restrictive DRM. That will be their downfall.

Tomi Ahonen

Hi Paul

Good comment, and I kind of agree with it..

It may surprise you (or other readers of this posting) that already today full-track MP3 songs sold to mobile phones exceed the total sold to i-Pods via i-Tunes. In 2004 the numbers were less than 300 million dollars for i-Tunes, and over 400 million for direct sales to mobile phones. I'm not talking about ringing tones (a HUGE business, ring tones alone worth over 5 BILLION dollars in 2004) not do I mean other "inferior" music downloads to mobile phones, like real tunes and ringback/waiting tones etc. No, full track MP3 sales already exceed i-Tunes sales globally and the margin is growing dramatically in favour of the mobile phone. Will probably be twice that of i-Tunes by the end of this year.

But you pose a very interesting comment. That more actual songs would be loaded "free" than paid for, due to WiFi networks etc. I find that argument very compelling. The youth and young adults are very well versed in Napster, KaZaa, Grokster etc and immediately when they get their mobile phones capable of playing the MP3 tunes, they will attempt to connect via their bluetooth connections etc to nearby PCs, and yes, soon also as WiFi chipsets appear in more mainstream phones, will also use WiFi etc.

I do find your argument compelling. So in terms of orders of magnitude, probably i-Tunes sales will explode next year, dramatically more than now. But for the sheer numbers of handsets, the direct sales to mobile phones will be much more, by next year probably 3x maybe even 4x as much as i-Tunes. And then your argument, probably even more than those two, the biggest amount of MP3 files, will be the unpaid, shared, and often "illegal" downloads on free wireless networks.

Good point, Paul...

Tomi Ahonen :-)

Tomi T Ahonen

UPDATE - Apple released its iPod sales numbers for the second quarter ended June, on 19 July 2006. iPod sales crashing further from the first quarter, and down 45% from the peak at Christmas 2005.

At the same time each of the big 5 phone makers has reported huge increases in musicphone sales, ranging from 33% to 100% increases. The industry will ship 270 million musicphones this year (and perhaps 30 million iPods).

By the just released numbers, for this quarter, the iPod market share is down to 14% and falling fast.

See the full blog including all updated stats, industry analyst opinions, full quotes from music execs etc at this permalink:

http://communities-dominate.blogs.com/brands/2006/07/demise_of_a_dar.html

Thank you

Oni

It seems your predictions turned out to be a little off.

It's now coming towards Xmas season 2006 and the iPod is looking to be
in a very strong position to dominate the christmas tree this year.

Add to this the forever rumoured iPhone, which most of us are pretty
sure will come out next year is going to share the same success as the
iPod.

Tomi T Ahonen

Hi Oni

(First, thanks for posting again this comment. We were totally swamped with spam, had over 1900 ads splattered all over our blogsite during the past weekend.)

Thanks for writing. I would not be so fast, lets see how the numbers pan out. While Apple was in the doldrums this Spring, the phone makers have been issuing record quarters one after another. SonyEricsson just yesterday talked about its Walkman phones. These top-end music phones were released a year ago, and today account for a quarter of SonyEricsson's all phones shipped. This is very much in line with the various announcements from Motorola, Nokia, Samsung etc - Nokia for example says its musicphone shipments will "more than double" this year.

But yes, I will track the numbers and report on them. Honestly, I do expect an Apple iPod surge towards the end of the year, Christmas sales. But overall, I am totally convinced Apple will not double its iPod sales from 2005. If that is the case, and phone makers do double theirs - then Apple will go further back in its market share.

But it is too early to say. Lets wait until the numbers come out.

As to the rumoured iPhone. I would very strongly welcome it. Apple makes excellent user interfaces, and any iPhone would no doubt shake the phone industry - some of whom are horrible at user interfaces. It would be most welcome.

but also keep in mind, the phone business is brutal, with huge volumes and very slim margins. Former number 4, Siemens, was taken over by BenQ mobile a year ago. They announced they are quitting the business last week. Its a very rough game to be in...

Thanks for writing, we'll track the situation and report on it as the numbers come out

Tomi Ahonen :-)

Cameron


From ethnographic research I worked on with the leading 3G company, one of the biggest issues for service uptake was people losing their mobile headsets. The typical lifespan for these is about 14 days, after which the phone and all its lovely services are effectively useless. Unless you're an antisocial teenager looking to 'appropriate' public space as private space (as Timo Kopomaa would surely tell us)...

The 'killer app' for 3G and music mobile would be a simple 3.5mm headphone jack! That, plus of course a simple way of transferring your MP3 collection to your mobile, backed with longer format audio downloads (e.g. podcasts)

If you browse up on your old Andrew Odlyzko, you'll also note that people value content over connectivity, and hence the mobile phone element will always take precedence over content/music etc. The battery issue is going to be crucial, people aren't going to tolerate being out of touch because they've listened to a few tunes too many. Integrated digital cameras are maybe used for the tiniest fraction of the day, built-in games in interstitial moments, but i guess you could spend more of your day listening to music than being on the phone (pretty likely in fact). Which might make more of a case for a standalone device, albeit potentially mobile enabled.

Incidentally if, as written elsewhere on this site, European 'Generation-C' carry 2 phones as a matter of routine, might they not instead have one which is more phone-centric (small, long battery life) and one which is more entertainment/content focused with a bigger screen? A bit like businessfolk carry around a Blackberry and a mobile - the two perform quite different roles.

The key will be enabling some sort of wireless connectivity between the two (?) and/or giving the mobile opcos a way to monetise it, rather than being the leading subsidiser of mobile music players as well as digital cameras - the latter being recognised within the industry as a major own-goal, given the cameras are of such high quality that MMS is no longer a real/credible possibility.

Tomi T Ahonen

Hi Cameron

Very good points. Yes, I agree with the overall themes you present, and like the observation you make about 2nd phones in Europe (and Asia as well). I think you probably had a typo when you wrote about connectivity and content, am sure you meant from your context that we value connectivity more than content. Obviously it is why the phone is carried 24/7, but pocketable TVs, radios, CD players, iPods, gameboys, PSPs etc are not carried constantly. As we've reported 60% of all phone users take the phone physically to bed with them, and 73% use the phone as the alarm clock....

But yes, two phones (even 12% of Americans already are in this category, so its no longer an European Gen-C phenomenon ha-ha). Yes, I am pretty sure the users with two phones will differentiate. One to be the high-end smartphone optimized for whatever is the preference - very good camera with moderate other smartphone features; or very good music with moderate camera, web etc; or very good web surfing phone, or built-in digital TV tuners; or very good e-mail (eg Blackberry and clones) etc.

And then the other phone as a very slim, slight, cool, sexy 24 hour phone, a Razr or something like that, very slim and sexy, while compromising perhaps with some top-end features.

Thanks for writing Cameron, visit us again!

Tomi :-)

mc

iPhone for the win :)

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It seems your predictions turned out to be a little off.

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sure will come out next year is going to share the same success as the
iPod.

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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