UPDATE JANUARY 2007 The final installment in our coverage of the decline in iPod's dominant market share was posted after Apple released its final numbers for 2006, in January 2007. iPod market share globally is now down to 12.9%, with musicphones outselling iPods 7 to 1, and yes, I have all the research data that people DO listen to music on their phones. See it here: Requiem for a Heavyweight: the Reign of the iPod is over.
THERE IS AN UPDATE TO THIS STORY. Please see Nails into the Coffin of the iPod from March 16, 2006
(Attention readers of the Carnival of the Mobilists. Please click on the welcoming message to you, either here, or to the top right hand corner of the screen, or click on the banner of the site to come to the front page. I have a welcoming message to specifically those interested in mobile telecoms matters.)
Alan and I are both big fans of the i-Pod and i-Tunes. We even have it as one of the case studies in our book Communities Dominate Brands. Certainly the i-Pod and i-Tunes were brave moves by Apple and succeeded against most early predictions in creating a new market space. By all means the i-Pod has been a great success for Apple, and quite rightly so, the IT industry likes to show off i-Pod success in what innovation is possible. Thats all good and well. And 2005 has been the year for i-Pod.
But 2006 will be the year when i-Pod is rather unceremoniously shifted into the dust bin of technology history. Why? Because in 2006 the mobile phone business will take over the MP3 music player market. The i-Pod will not die suddenly, and the fanatical music fans will hang onto their white earphones for years, but make no mistake, the signs are crystal-clear that the days of the i-Pod are numbered. And literally those numbers of days left are only in the hundreds, no longer in the thousands. During 2006 the shift will happen, and by the end of the year the majority of both MP3 players in use, and direct music sales to portables, will be to MP3 players integrated into mobile phones, rather than to stand-alone i-Pods (and similar stand-alone MP3 players such as those by Creative Labs).
Is this such a wild prediction? There are those who are passionate about i-Pods who will immediately protest, and say that mobile phones don't have the memory capacity to store tens of thousands of songs. And that the i-Pod user interface is intuitive while those on mobile phones are clumsy. The music sounds better on an i-Pod. The device is sexy and cool, and has much better controls than those on mobile phones. And the prices of i-Tunes are nowhere near as onerous as most music direct sales prices by mobile operators. The music consumption proposition is simply better on an i-Pod than on a mobile phone.
And I am not disputing that. I start by saying that back in 2001 the PDA makers looked at the early "smart phones" and pooh-poohed those as being toys. The screens were tiny, the applications weak, the interfaces clumsy (such as no stylus), the built-in memory laughable, and almost no independent software applications even existed. There is no doubt that stand-alone PDAs were (and still are) superior technically to smartphones. But mobile phones are the predominant digital device, the only universal gadget on the planet. What the mobile phone wants, it gets. By 2003 worlwide sales of smartphones had shot past those of stand-alone PDAs, and today smartphones outsell PDA's by a ratio of over 8 to 1 !
In 2002 the digital camera industry looked at the earliest cameraphones and dismissed those as toys. The picture quality of the first VGA standard cameraphones was horrendous. There were no abilities to make any significant adjustments. No flash, no zoom, no place to connect a tripod. The screens were tiny and grainy. Pictures that were printed would be horribly bad in print quality, nothing to compare to the prints by a decent quality stand-alone digital camera. There is no doubt that stand-alone digital cameras were (and still are) technically superior to cameraphones. Again, the mobile phone is the predominant digital device, the only universal gadget on the planet. What the mobile phone wants, it gets. By 2004 worlwide sales of smartphones had shot past those of stand-alone digital cameras, and this year 2005 more cameraphones are sold than all standalone digital cameras ever made...
So it is not a question of is the i-Pod better technically. Of course it is. If you want to buy a really good music player, you will start by considering the models by i-Pod and maybe some of its close rivals. You don't even start off by considering the mobile phone as a music player. But portable music players do not sell 750 million units every year. Mobile phones do. Portable music players are not replaced every two years on average. Mobile phones are. That means that whatever is the standard features of a mobile phone will be sold to us whether we really prefer that device or not. Because of the overall size of the market for mobile phones, and the speed by which they are replaced, this means that the music player will become a common feature next year. People will acquire MP3 player ability almost by accident, simply as they replace their phones.
For a part of the year, probably the Spring of 2006, there will be fierce debate about which model musicphone is nearly as good as any given i-Pod and what are the recommended models by the techology press, etc. Those technology stories will conclude almost universally every article, in saying something like "but this musicphone is not really a viable substitute for an i-Pod." The mass market will not care. The common customer walks into the mobile phone store and considers among a range of phones. If one of the candidates is a smartphone with business applications like word processing and spreadsheets, and another is a smartphone with advanced music features - I promise you the mass market will go for the music rather than the business applications.
Some will think this is a preposterous vision of the future. I want to remind that most of the integrated devices we have today, were separate at their inception. Look at the back of your computer, where the telephone wire (or network cable) connects to your modem (or LAN card). Still as recently as 1990, almost all modems were sold as stand-alone devices as "peripherals" and optional extras for personal computers; not built-in. How about that camcorder you use to tape your kids? Back in the early 1980s all video cameras had separate stand-alone videorecorder units. Connected by cable. The recorder with its battery was on a bag hanging on your shoulder, connected by cable to the videocamera you held in your hands. And that boom box that your kids use to play rap music? In the 1970s when the cassette recorder was introduced as a music device (the c-cassette was originally launched by Philips in the 1960s as a dictation machine media format) the cassette recorders/players were separate stand-alone devices that had to be connected via cables to the radios or record players if you wanted to record music. What now may seem like obvious integration, all started as separate stand-alone devices.
In some cases integration involves capabilities of almost no overlap. That is why most cappuchino makers are not also microwave ovens, even though we use both at our kitchen. There is little technical merit in attempting to combine the functions of a submarine with an airplane. But in the case of the i-Pod and similar MP3 players and the mobile phone, there is tremendous overlap. The phone is already a voice device (for speaking). It has both a built-in speaker and the outlet for a headset (not to mention many have built-in Bluetooth for wireless headsets). With video, internet and camera, the mobile phone has the screen - in fact often superior screens - to the i-Pod. Now with smartphone features the phones ship with considerable amount of built-in memory, and recently with the ability to add memory via separate memory chips. And the mobile phone is already a battery-operated device. We already carry the mobile phone with us every day. Even fanatical i-Pod users don't carry the player everywhere everyday, but they do carry their mobile phones.
What makes the mobile phones's global competitive advantage almost too good, is that mobile phones are subsidised in most markets. In other words we can have a new phone "for free" for example here in the UK, when we renew our contract (or sign a new one). That means that in most markets where buyers have to pay full price for the i-Pod, they can have the somewhat inferior music player "for free" with their next phone upgrade. The young employed population in Europe already carries two phones, so one of those will come up for renewal in the next 12 months. That alone is something like 100 million music-players sold during 2006.
When the statistics come in for 2006 - and the early forecasts of those start to trickle in around September and October of 2006, the big story will be the dramatic success of music players. You don't need to be surprised, you can recall that the Communities Dominate blogsite actually told you this a year earlier..
I do not mean that in 2006 the i-Pod literally dies. I recognise the title of this blog is provocative in that way. But I do mean that it is the year when it suddenly stops being the darling of the IT industry, and also stops being the "must-have" gadget by so many. Next year both in terms of MP3 players sold, and in terms of direct sales of music (like i-Tunes) will belong to the mobile phone.
Also you don't need to take my word for it. The recording industry itself sees the mobile phone - not the PC, PDA, i-Pod or stand-alone MP3 players - as the future for the industry. At the American CTIA trade show for mobile phones, Warner Music's Chairman and CEO, Edgar Bronfman, said "Wireless will become the most formidable music platform on the planet." And in last week's New Media Age, EMI Vice President of Digital Development Ted Cohen admitted that the mobile phone will win out over stand-alone music players.
Only I tell you it will happen sooner than they thought. 2006 is the year. Mark my words.