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« Demise of a Darling: iPod market share crashes to 14% amid management denials | Main | Book endorsements links have been restored »

July 21, 2006


Short Bus Rider

Congratulations on driving people to your site. Clever. Doubt it will sell your book, but very clever ploy. Shame it is based on a nice interpretation of statistics that would make Enron executives proud. I believe every statistic on your page, it is the combinations and assumptions underlying them that are broken. But arguing on the internet is like running in the special olympics - even if you win, you're still retarded.


You have too much time on your hands. But I do agree with the thoughts of others. You are an idiot.


I'm curious why you didn't answer my questions:

1. Who are these alleged endorsers on the right side of your book page?

2. When you say "bestselling", how many books have you sold?

charles hansrote

i do not see where you are coming from, these devices are meant for different things. I own a nice cell phone with, camera (optical zoom), web, music function, im, blue tooth. and for along time i honestly considered using the music function on it to supplement my ipod (i primarily use the ipod while running driving, my laptop and desktop the other times). however the phone companies (in my case sprint) must stop crippling their phones first, if it had full blue tooth functionality i would have been able to get my songs on there and occasionally listen to them. so i considered downloading them.... that was a nightmare, and still cant not do it, not after spending 2 hours trying to get help from sprint and in-store help later. i did manage to get the live video working nice little gimmick, though ungodly expensive, and yes i do find the phone convenient for times when i am with out other media capturing devices. however, besides the blue tooth for my head set, really the others could go away without loss to me. (and if your going to spell the demise of mp3 players by lumping mp3 playing phones in, why not tvs to, we have the ability on phone and on computers, they must really be hurting). the camera thing, you said Konica Minolta gave up and closed, thats not quite right, they sold themselves to sony who opened a new SLR family with the mount and body system from Konica Minolta. Konica Minolta had no where near 50% of the market. Konica Minolta, closed shop because the partnership with sony and its brand name were better among less professional consumers, and the onslaught of gains by Nikon, Canon (whom i use), and olympus. and the market overall among traditional makers is growing, even with film makers kodak and fuji film. why would they enter the fray if it was doomed. the main problem with your argument has been assumption that large numbers of people use the tech (many do not know they have the ability), and also quality of the product. the mp3 player as an independent will be around until the quality of the built in mp3 player and the convince of it are equivalent or better than that of stand alone. this isn't going to happen soon. also the multifunctionality of most mp3 players on their own helps their survival, making them mobile hard drives (considering the average pc still sells with under 100gb storage a 60 gb mp3 player makes an excellent portable back up). also for the most part ease of use, the cell phone music to call is difficult on most phones, and endusers on average would give up rather than try to learn it. if your argument was truly sound i would not own a desktop nor any of the 4 cameras i own, or a cell phone, as my laptop can do all of that and make calls wirelessly thanks to sprint. really my laptop does all of those things better than the individual components except for my slr camera. so i would have to say for ease of use and the consistent existence of tech that is obsolete due to convergence i must say your argument is horribly flawed (it would be nice to tell your readers your a big cell phone proponent, and your livelihood lies there). just so you know i sell general electronics and work as a free lance designer until i finish college, and have spent much time in the orient, china korea, where mp3 players are still used more than cell phones for music, and illegal down loading is the number 1 music source. if you want i can get some first hand accounts of people living there, and given time ill get market data from the camera buss, and mp3 buss for you

charles hansrote

side note i do not agree with the use of ipod to denote mp3 players, or the difference between pc and mac as such since the mac is a pc. but thats just me being picky...

Paul Morriss

I don't think I've ever seen such a detailed reply to so many comments! Good work.


"The company shifted 8.1 million iPods during the period, a 32 percent jump over the same quarter last year"

is not a drop in any respect. You might argue that it is not a growth as fast as mp3 capable phones are growing. But it is not a drop.


Well done on answering the comments and putting alot of effort/background into your argument but I still think, iPod sales will rebound over Christmas. I also beleive there are some inherent problems.

1. If I want to transfer my music stored on my Phone to a different phone provider. Its never going to happen. They wont even let you migrate with your own number.
2. I dont know of any UK phone providers who will transfer my currently stored songs to a new device.
3. If I am listening to my iPod, i can turn off my mobile. Can I turn off the voice function of my music phone while i listen to music on it.
4. iPhone, anyone.



i think you made a huge mistake in the title of your post

you are comparing apples to oranges. You say: ipod share crashes to 14% from 80%. However, you are taking Apple's numbers as marketshare for mp3 players as your only guide. So, according to your post, absolutely no mp3 playing phones were sold in any quarter before this one? Not One? in the whole world? If you compared the real numbers, and if you had done your research, you would have seen that mp3 capable phone sales were being sold in several quarters before, and what their units were. take what percentage of sales the ipods were back then, and you may have a number that looks closer to 15-16% ipod marketshare, maybe a bit higher, and then 'crashing to 14%'.

It is like Mercedes saying we have 30% of the high luxury car market. And you compare that to the number of total vehicles that have wheels....and yes, that 30% marketshare would not hold true

Ian Betteridge

Shortbus rider: Show us where Tomi gets it wrong. Oh, you can't? Shame.

Warmonster: You have no argument, and yet you're calling people idiots. I think that speaks for itself.

Tim: Your questions are irrelevant to the matter at hand.

Charles Hansrote: Please, for the love of God, learn to use paragraphs.

Tomi, you're doing a good job. Carry on.

Johnny Appleseed

Lies, damned lies and statistics! So there are six music phones sold for every iPod, but only twice as many people listen to music on their phone as on iPods? So adjusting for actual usage, that gives the iPod 33% market share.

No wonder Apple doesn't feel the need to rush an iPhone to market. Maybe music phones will be the way of the future, but I have a feeling Apple is going to reinvent the market in its own image with another category killer.

(BTW thanks for your comprehensive reply to everyone's feedback)

Martin Geddes

Loved the article and response, sorry to the Mac-addicts, but connectivity is king. Storage tech improves faster than Moore's Law, won't be a barrier for long (if it still is at all).

I've seen several people listening to music on their phones recently -- and that's just because I recognise the Nokia N series headphone cable tie.

Have been using my Nokia N91. Find that battery life is an issue, but not a terminal one -- but this is partly a product of being a smartphone with wifi, not an MP3 player. Storage capacity is plenty at 4Gb for anything but a round-the-world trip. Some rough edges to the Nokia s/w on the phone -- little silly things that'll be sorted easily. I also have a 30Gb, 30 hour, Cowon X5L media player. Love it still, have continued to use it on longer trips and because I prefer the better audio quality. It's the SLR of media players though -- not the mainstream item.

Suspect that there's a device space that the Sony PSP addresses that will continue to be viable for a long time to come. iPod needs to evolve in this direction to survive. There's a space just ahead of the handset technology curve which demands faster GPU, bigger battery, better screen, contextual h/w UIs, etc.

Feel that the software that goes with the phone has some way to go to match iTunes; not quite ready for mass-mass market yet, requires some techno-awareness (e.g. difference between DRM-enabled media transfer mode and file transfer mode). Again, 12 months and it'll be fixed. Just like Nokia Lifeblog 1.0 was nice proof-of-concept, 2.0 changed my photo habits forever.

Phone companies aren't doing the best job on accessories, and desperately need to standardise on one headphone plug standard. $2 earbuds aren't good enough for a lot of people (poor noise isolation in urban environments), and rip-off proprietary accessory rates aren't going to go down well. Again, another 12 months to fix.

I agree with you, but 2007 is the year that matches the provocative headline. My N90/N91 have totally killed all my other camera usage from 2005 on. The next iteration of the N91 would kill all other media player use. But as you say, the debate is "when", not "if".

Apple made the same mistake with the iPod as with the Mac: failed to license the technology widely. Every phone could have been "iPod inside". Too late, too greedy, too bad.

There's a BIGGIE in favour of the phone-as-music-player: if you're zoned out listening to your iPod, you might miss a call. That alone determines who will win this convergence battle.

If Apple want to build an iPhone, they've got a massive problem in getting distribution and support sorted. Only thing I can think of is team up with a new network entrant like Clearwire, vertically integrate for the ultimate user experience ('cos standard telephony sucks in many ways), and bet the whole show. Doubt they can raise the capital to enter at the scale needed to compete. Anyhow, the RAZR stomped all over the differentiated industrial design opportunity space already.

iPod? Content device. Phone? Communication device. Odlyzko is right, content is not king, Phone eats iPod. Next, please.


I didn't see a source for the "48 million MP3 playing musicphones". Could you please provide one?

Second, on the "A catastrophic earth-shattering crash of 40% drop in sales", see this:

You'll note a Christmas 05 steep increase in sales, and other than that, iPod sales follow a typical logistic curve. It looks like the saturation level is between 8 and 10 million per quarter.

MP3 phones aren't going to "crush pretenders, from PDAs to digital cameras and yes, stand-alone MP3 players like the iPod". I would guess that many of the 48 million phones (still want a reference, please) have "cameras". Of course, they're utter crap compared with real cameras, and haven't had the slightest effect on sales of digital cameras. The same will be true with music players.

I guess my point here is that as phones acquire more functionality it is tempting to lump them together and talk about "marketshare" as they compete with other single purpose devices that provide the same functionality. On some level that makes sense, but in other ways it does not. Cars have radios (and TV's and DVD players) and I haven't noticed that there is a decline in standalone devices for that functonality.

Two final points. First, the ipod is as much about the ITMS as it is about the player. Phones don't have anything similar. So far, the main problem is that the wireless companies want to charge a LOT to download a song over the cell network. They need to drop this to the $0.99 or less that internet downloads cost. The current premium surcharge is far too high. Second, I'll repeat that this is a separate market, where I don't believe common marketshare numbers make much sense. That said, apple is about to enter the cell phone market, and I wish them every success. It will be interesting to see how they integrate the whole digital life style with a phone.

Joel Burslem

I feel compelled to speak up for Tomi, if for no other reason than to counter all the mindless "you're an idiot" comments.

I'm a Mac user and I have an iPod. I love both of them. But Tomi's points are right on the money. The mass market doesn't care about the iPod or Apple as a brand, like I might - they just want an easy way to listen to digital music. Apple was just the first company to do this properly for them.

It's not a question of IF the cellphone supplants the iPod (or other mobile MP3 players) but WHEN.

But the real guys to blame here are the US carriers. Crippling bluetooth, exhorbitant download rates, slow roll out of 3G networks, limited handset selection - these are the real issues here. That's what's stalled adoption rates of musicphones to date, IMO.

Travel outside the US (I spent 3 years in South Korea) and you realize how truly far behind the US is in mobile technology. In 2002, when I first moved to Korea to teach English, my students were already all listening to MP3s on their phones. When I left in 2005, they were all watching live TV on their phones.

Those phones are only now just starting to appear on US shores. The 3G networks to support those phones properly are live only in a handful of US cities. That's the real problem here.

I guess the good news is that the situation is changing, albeit slowly. New handset models are launching (slowly) in the US, new MVNOs are popping up (Helio) with mobile media in mind.

Tomi's right. The need for a single use device to consume digital music is ultimately numbered. I believe the cellphone will one day be that all-in-one device we've been waiting for.

Jeff Boice

Certainly the numbers don't lie. The sales figures are what they are. The spin here comes from your choosing to classify cell phones as portable MP3 players and then compare those sales figures to that of iPods. It's a choice that's not totally without merit, but it's also a choice that's not totally honest.

Following this same logic we could also classify all automobiles that have CD players as "portable CD players" and then compare their sales statistics (sales revenue perhaps?) to other "portable CD players" on the market. I'm sure such a market share as percentage of sales revenue discussion would be interesting, but would it really mean anything?

Surely people who buy automobiles care whether or not they can play CD's in them, but most people would likely agree that it's not the reason they are buying the automobile. They are buying the automobile to drive.

Now if there were a way to determine which people were buying their cell phones truly as MP3 players and then choosing not to buy an iPod or some other MP3 player because they bought their cell phone/MP3 player, now that would be a comparison really worth making.

But to ignore all the other features of a cell phone and simply classify it as an MP3 player muddies the waters too much for any meaningful comparison of apples to apples.

And that fact doesn't change regardless of how absolute or extreme the language you use to stake your claims. The extreme position does though have the advantage of stirring up strong reactions. Rhetoric is a powerful tool. Congrats!

Ian Betteridge

Jeff, you're missing the point: twice as many people worldwide are using phones to listen to music than dedicated portable music players. There's nothing rhetorical about the results of that survey. And that's USAGE, not just people buying the phone to make calls. Please, don't ignore the figures that aren't convenient to your perspective.

Short Bus Rider

Ian - you can't pull together the unrelated results of three surveys of differing populations and call it a corollary. What you need is a definite survey which asks "What do you use to listen to music on the go?" and poll that result. You'll find a hell of a lot of people use both. Some people who use their phone on the bus to listen to music might use an iPod while jogging. There are so many of these cases which make the conclusions above so much more coincidental. This is not coming from an iPod loving person, but a statistics respecter. And this is drawing really rank conclusions, which I guess is the perogative of all bloggers. Especially those trying to sell a crappy wanky marketing book.

Tomi T Ahonen


Thank you all. I am very happy that the discussion is moving a bit beyond the simply "you are an idiot" level. I find many very good arguments - on both sides definitely - and again am struck by yet another new observation myself, triggered by these comments.

THANK YOU for writing. I will come back here and reply to you all. Give me a moment to get some food and catch up a bit on my e-mails ha-ha. I'll be back still tonight London time for you all here.

Tomi :-)


You are right on for the Nano and the general music consumer - the person with ~100 CDs in their collection who listens to pop music. I think the iPod (higher capacity disk based ones) will settle into the niche for more serious music fans such as myself. I WANT BOTH - a phone for casual listening and carrying around one thing (Ideally and Apple Phone with best of breed synching) AND my high capacity iPod for carrying around as much of my music collection as I can for the car and for trips - that is something where a stand alone device will always trump the phone, just like a stand alone camera will always trump a cameraphone. I have been out of space on my 60 GB for a while, and an 80 will not do - I want a 160, or larger. You will never have a cell phone equaling the capacity of a larger iPod with that kind of durability until there is a massive shift in technology (TB Flash storage may change that).
Good analysis overall.

Ian Betteridge

SBR: "What you need is a definite survey which asks 'What do you use to listen to music on the go?" and poll that result'"

Tomi links to exactly this kind of survey: ""

You claim to respect statistics, and yet you have no figures to back up the claim you're making. Provide some, and I'll believe you. But meanwhile, all you have is a desire - exihibited by your closing comments - to slate Tomi's points because you want to believe in something: that the iPod is the One True Solution for listening to audio on the move.

Ian Betteridge

Eytan hits the nail totally on the head: I don't expect to stop buying a large iPod every now and then (currently using a 60Gb model) because I also use my phone for music. The two things do different jobs. However, I do expect Apple's market at the low end - the nano's and shuffle's - to get hit hard. Those are the products that are vulnerable from mobile phones.


This is a silly little article that amply demonstrates the wisdom of that old saw-- Lies, Damned Lies and Statistics.

By defining the mp3 market to include all mobile phones capable of playing digital music, of course you'll come up with market share statistics that "prove" your contention that mobile phones will swallow up the stand-alone mp3 player market. I would expect that within a couple years virtually all but the cheapest phones will have some sort of mp3 playing capability. And that according to your definition of the mp3 player market, Apple's "market share" will continue to erode disasterously. I am just as certain, however, that Apple will sell more iPods this year than last, and more next year than this, and so on and on until the market for portable music players is fully mature.

The real thrust of your prediction / argument is that, at some point, iPod will become a niche product; that most people who listen to mp3s will do so primarily on their phones, and that the rate of growth of iPod sales will therefore begin to slow faster than would be expected (because rates of growth will always slow as markets become mature). You might be right, but redefining the denominator in your Apple market share fraction to include any mobile phone with mp3 capabilities simply doesn't service that argument. All it tells you is that we live in a digital world where mobile devices can quickly be adapted to do most anything.

I'll close with an observation-- the list of things that pundits tell us will be replaced by mobile phones keeps growing (credit cards, money, cameras, blackberries, pdas, mobile gaming devices, home phones, keys / combinations, etc.), but the only thing that today's state of the art mobile phones have thus far supplanted are older mobile phones.

Tomi T Ahonen


Hi Short Bus Rider (twice), Warmonster, Tim, charles hansrote, Paul Morriss, Numbers, Mike, amade1974, Ian Betteridge (four times!), Johnny Appleseed, Martin Geddes, Chuck, Joel Burslem, Jeff Boice, and Eytan

First overall. I want to thank you all, and sincerely from the bottom of my heart, we do love discussion and dialogue here at this blogsite. I was a bit uncomfortable earlier, not so much with the ad hominem attacks on my person, but more the few who stated they didn't bother to read the blog, and were in only to enjoy the nasty comments. That did seem like a perversion of this medium. But nonetheless, with all the replies and comments, I have learned again more and have had to re-examine some issues and discovered again new angles to the matter. It is my pleasure to discuss with you.

So lets go to the replies. Who's first ha-ha...

Short Bus Rider. Thanks but when you take a look at our site you'll notice - no advertising! It kind of totally defeats the purpose of driving up traffic (and no, we are NOT plotting a cunning plan to launch advertising next week and thus inflate our stats) So we don't gain from the sudden surge in visitors for a few days. And clearly like you point out, if those visitors come here in anger, they definitely won't buy our book. And I doubt angry visitors would even bother ever to revisit this site so no long-term customer benefit.

On my stats being crooked to make Enron proud. Sure. And which stats are those? The actual global iPod sales figures from Apple? The actual global cellphone figures from IDC and Ovum? The only known study on the topic of customer preferences iPod vs musicphones, by TNS? The actual sales of online numbers from IFPI? Could you point me to ANY source you think is MORE trustworthy than those I have used? I do give my sources, you can go check on all my data. Nice joke on special olympics.

Warmonster. Yeah, I do have too much time on my hands. And I have already admitted to all that I'm an idiot. Thats why at 2 AM in London I'm here replying to Mr Clever and well argued Warmonster, rather than watching the late night movie on TV.

Tim. Now I have answered your questions (it is at the original posting where you first asked) I am sorry it took so long that you had time to make the request twice. And thank you once more for telling me about the broken links.

charles hansrote. A long comment with many issues. I hope I will cover each appropriately.

You say you don't see where I am coming from (in combining the music player market with the musicphone market). But charles you then admit that you have tried to achieve just that. Only that currently the devices and carriers are not good enough. If YOU can imagine this market as one - and are disappointed you can't get that functionality - surely many others can imagine it too? That is where I am coming from. Your lengthy reply suggests considerable insights in many areas of the industry. I would like to assume you believe in the long run of course phones (and carriers) will achieve comparable performance to lower end iPods (and iTunes)?

On phone companies crippling phones. I totally agree. That is criminal. Bluetooth, come on, that is one of the best features in a converged world, we all have all kinds of files to move around - and share, our images, music, messages, clips, etc.

Ha ha, you mention why not TVs. Well, guess what. You've lived in Korea. Then you know already about Tu Media etc. We blog about Korean developments regularly. Yes, of course VERY ADVANCED phones are starting already to take viewerships from traditional TV. In fact the best solutions are something called Network PVR plus IPTV plus 3G phones plus digital set top box in the cellphone. Reality today for example in Korea and Italy. Will come to a (small) screen near you ha-ha. But that is a different blog and discussion. If anyone is honestly interested, just put the word TV or television onto our search window and see how much we've recently blogged about the evolution of TV...

computers vs phones? ha ha. Didn't you notice Nokia is not calling its N-Series mobile PHONES. Nokia calls those phones mobile COMPUTERS. They are already preparing for that transition when the majority of internet access happens on mobile phones (also a topic I often blog about - in China, Korea and Japan already more than half of all web surfing happens from mobile phones)

Konika-Minolta etc. Good point. But correct me if I'm wrong. Isn't that Sony the same electronics giant already into videogaming, cellphones, musicplayers and all kinds of content ownership? To me it sounds not like aiming for the shrinking relevance of stand-alone digital cameras; it sounds like a brilliant ploy to get a big step up for the newer generation of cameraphones! (and camcorders etc) Clever them Sony guys. They will be around for a long while - not unlike Apple. Clever guys..

memory sticks, multiple uses, I agree. Ease of use is important, I agree.

But the "if your argument was right I'd now own a laptop" I don't agree. A laptop is NOT convenient as a camera for example. It is also not nearly as convenient - even with a skype phone - as a cellphone. So yes some things do converge but not all. But I do acknowledge that you've well spotted that I am a "convergionista" as opposed to a "separatista". I believe in both under different situations, but more in convergence, for the mass market..

I did think my mobile phone loyalties are perfectly clear with my three telecoms books on the front page of the blogsite. I wouldn't really want to push my bio "more" than the publicity-hog that I already am, ha-ha...

Korea - you don't need to thank you. I have very strong contacts for example advising the KIPA Korean IT Promotion Agency and visit Korea at least once every year.

Paul - thank you very much. I really felt like I'd worked hard....

Numbers. You are wrong. Growth (or decline) of sales is measured primarily from one period to the immediate next. From one week to the next. From one month to the next. From one quarter to the next. From one year to the next. That is EXACTLY what growth or decline in sales is as a MEASURE. What you talked about was a performance analysis. It can give further insights to compare this quarter's sales to that from last year. Accountants like to use it as a gimmick to hide disappointing actual growth or decline.

The third quarter 2005 sales for Apple iPod sales were 6.5 million units. For the next quarter (Christmas 2005) it was 14.1 million units. That is a growth of 7.4 million or a growth rate of 117%. The next quarter (Q1 2006) Apple sold
8.5 million iPods. That is a DECLINE in sales. A decline of 5.5 million units or 40%. Then this latest quarter a further decline in sales to 8.1 million iPods. That is a decline of 400,000 units, or 5%

This is basic accounting. ALWAYS you measure actual growth or decline in sales to the immediate previous period. And YES you can ALSO do other analysis such as seasonally adjusted sales. Sales performance versus the market performance (competitors), performance compared to the same period last year, etc.

You cannot say that from the Christmas period of 14.1 million iPods, somehow iPod sales GREW to 8.5 million? Listen to yourself. It is a decline. That is what I report (and Apple does of course admit this, the COO on the 40% on April 19 and the CFO on the 5% - actually he said 6% - on July 19.

It is in Apple's interests to try to shift focus away from the DECLINE in sales of the iPod for two straight quarters, and misdirect analysts to the fact that from last year, this quarter is still better. But no, from December and March, both quarters this year, iPod sales have NOT grown, they have declined.

Mike. Thanks. Now if you think iPods will rebound for Christmas, how much do you think they'll do? Last Christmas they sold 14.1 million. We are now at 8.1 million. If we double from the current level - a big jump - it only brings us to 16.2 M. What if we have two quarters of ENORMOUS growth - doubling in both. So last quarter iPods sell 32.4 M. That incredible performance - against the increasing competition from all phone guys - gives Apple 65.2 M for the year. Well guess what. Ovum last week said this year the phone makers will ship 245 million musicphones. EVEN at this dramatic turn in performance, Apple's market share would be 20% for the year. Too little too late, says this consultant....

On your problems. I agree these are the kinds of issues we have to fix. They CAN be fixed. And on the iPhone? I'd want one...

amade. You think I didn't include any sales previous to this quarter? No, I have actually tracked the matter to the beginning of the iPod in the fourth quarter of 2001. But in the two previous postings on this topic in September 2005 and April 2006. This time the point was not to analyze the turn of the trend (that was last time). Now it was to see if Apple could recover. It couldn't. That is why this time I refer to the previous catastrophic drop of 40% but focus on the smaller - but much more relevant 5%. More relevant because it is the second CONSECUTIVE drop in sales. Now no sane person anymore assumes this is seasonal. For one quarter it is still possible that there was a seasonal variation in the trend.

Since you posted your question I have posted the two graphs to illustrate the point. You'll see there that musicphones became relevant from the first quarter of 2005 - six quarters (and yes, before that there was small amounts of musicphone sales)

Ian. THANKS !!

Johnny Appleseed. I really liked your analysis of the market share by users. 33% vs 67%. I think it is quite valid that there are actually three "versions". From the "most phone positive" to the "most iPod positive" they are:

devices. At the end of 2005 phones 80% iPods 20%. Definitely there will be some who have musicphones but don't use the musicplayer.

Then users. 67% use phones, 33% use iPods. Understandable as almost all iPod users will want to use it for music - there is little else they COULD do with it ha-ha...

and finally songs. Here the IFPI numbers with the Apple iTunes figures give us sales of 440 million musicphones and 400 million iPods. Market share 52% to 48%. iTunes big reason for this, plus bigger storage of iPods plus lack of carriers into the proposition in all markets.

Nice thought. I'll use it. And on "another category killer" - I REALLY hope so. Apple has a wonderful history of incredible creativity in technology. I am looking eagerly forward to their next major offering.

Martin Geddes. Great to read your posting! Thanks for stopping by. The moment I started to read it I knew this is an expert from the telecoms side...

I totally agree. I had wanted to discuss "connectivity is king" in the original blog but it was so hideously long that I just had to cut it out. Thanks for mentioning it.

Great observation on the zoned out, listening. I'll borrow that if you don't mind :-)

And I so deeply agree with the sentiment, that this was Apple's market to lose. They held all the cards last year, and could have selected the big winners for this year by who they would have partnered with. Apple must have had a lot of research about music and its importance and then the convergence with the most addictive gadget of all time - mobile phone. But like you say, they blew it...

Chuck. Sorry. IDC and Ovum. I have them but probably not everywhere.

On the curve. The beauty is in the eye of the beholder. For all others reading this posting - if you go to the first of the two graphs that I've posted - Apple's last 12 quarters of iPod sales - you can follow our "graphic" argument.

You say typical logistic curve. I assume you see a "linear" stage for the first 9 quarters, the exception for period 10, and the original linear continues - with the smooting out towards the end? Cool. I can understand why you'd see that. And by your view, we can safely ignore the exceptionally strong Christmas sales, and the last two quarters are well within the deviances of the curve?

But this is how I see it. I see clear "stairs". Always leading up to the Christmas period every time there is a stonger growth and then only slight growth after Christmas. By that pattern the Christmas period 2005 is consistent with the pattern, but the first two quarters 2006 are NOT.

In the eye of the beholder... We see it differently.

The 48 million is not cameraphones. I don't know where you might have got that misunderstanding. The 48 M was musicphones. The latest estimate I have is only "over half" of all phones sold are cameraphones (am awaiting better data for 2006). By that, cameraphone sales were 89 million this quarter (but in reality they are more, probably around 95 million)

You say as phones get more functionality it makes sense to compare to single purpose devices on some level but in others not. I totally agree. My concern is that currently for iPods it has been only the "not". I am totally certain that when a non-technical person goes shopping for a gadget - imagine your mother - they are assuming that a "digital camera" on a phone is equivalent to a "digital camera" without the phone. We know there are big differences. But we're in the IT/telecoms industry. For the layman the assumption is that the functionality is equivalent. THUS the CUSTOMER thinks the market is the same. Who said it many replies ago that we should start from the customer?

On ITMS, actually many markets now have very similar offerings. Sweden is one of the most advanced on their 3G network provider 3/Hutchison (Tre in Swedish). A very advanced and user-friendly service, they have for example a 15 dollar (99 SEK) per month all-you-can-eat plan of unlimited downloads of music. 3's music service sells 35% of all of Sweden's downloads, more than iTunes in Sweden (and Swedish broadband ahead of USA, internet penetration about the same, cellphone penetration 115%, 3G penetration 8%)

Joel Burslem. THANKS !!! Very nice additional insightful and relevant facts. I didn't want to create more confusion with the TV argument, but yes, South Korea is the world's most advanced digital country, highest broadband penetration, highest 3G penetration, etc etc etc. in the first year, over a million Koreans already have the new TV phones, with built in "cable set top box" built in digital broadcast tuners and the most amazing displays you've ever seen.

Once you look at those phones you do undestand that it is quite comfortable to view a two hour movie on a pocketable device. Don't take my word on it. Wait until you see a "DMB" or a "DVB-H" handset. Don't ever ever think the mobile TV experience can be understood with a conventional 3G phone, no matter how expensive. Wait until you see your first DVB-H or DMB phone, THEN make up your mind on TV. But yes, totally agree with all you write. Thank you!

Jeff Boyce. I hear you. But consider this. There are some people who actually do - occasionally - go to their car JUST to listen to the radio (or CD player etc). Even though they own the car to drive, they may need to get away from the home for a while - go for a cigarette and step away from the rain, sneak into the privacy of the car eg escape parents to go kissing with girl friend, whatever. I don't mean this is typical. But we all know some people who've done it. Doesn't this now mean that actually we SHOULD count that car stereo as one of the radios (CD players) that we DO listen to. Even though MOSTLY the car is used for driving? And note, this might only happen twice per year, when we visit the mother-in-law, and just NEED to escape her house for a few minutes...

Yes, a manufactured argument, but I think we should not say its that absolute. Same with musicphones. Many may use phones VERY INFREQUENTLY for music, with ONLY a few tracks. Even then, IF they use the phone for music, it really is a rival to an iPod. Not often used, but still is a rival. Then factor in the 18 month replacement cycle, and the new Nokia or Walkman phone in 2007 is suddenly MUCH better than the iPod Nano from 2005...

However, on the specific point you made "if it was possible to know who buys a phone for its music" lets assume first that iPods are bought for music ok? to simplify things (some are not, by far the most are). Ok, today, Nokia, Motorola, Ericsson and LG all report that their musicphones are not keeping up with demand. Samsung has not explicitly mentioned this point, so I don't know if its true for them. But the other four definitely. So if you walk into an average store, and want a given phone, if that happens to be the SonyEricsson Walkman phone, odds are very high it is not in stock. But if you are willing to take a non-music phone by SonyEricsson you can get it right away.

Make sense? This means, that as long as the phone industry reports excess demand for musicphones, it means that most who want one, have to wait for them, order them, pay extra for them, not get discounts for them etc. If you are serious about photography or videogaming or texting, and music is not important to you (for example because you recently bought your iPod), you don't want to wait for the musicphone. You buy the cameraphone, gaming phone, blackberry, whatever you needed. Only those who REALLY do want the music feature, will be getting the early music phones, until the demand is met. Then there will be no lack of inventory for musicphones.

So today four out of five phone makers report that their musicphones have the biggest demand. I would argue this means that ALMOST all (but not all) musicphones are actually going to people who hope to use them as music players.

In reality some won't for whatever reasons. But most will. Does this help? So if for every iPod sold in the second quarter 2006, the phone industry sold six musicphones, I am rather certain that 5 out of those will be used for at least some music consumption. BUT we will reach saturation "soon" within a few quarters definitely. Then an increasing proportion of musicphones go either to replacements or to people not particularly wanting the MP3 player.

By this logic, of the 58 million pocketable MP3 players sold last quarter - 8 M are ipods (music). 2 M are non-iPod MP3 players (music). 40 M are musicphones used for music. And 8 M are musicphones that end up not being used for music. Sounds reasonable to me. And you are right, we need actual usage data to get the real numbers. Don't expect those surveys to report anytime soon, ha-ha, this is too new an area. Maybe next year if we're lucky.

Short Bus Rider (second time). Wait a moment. We have JUST seen the emergence of a radical new market. That only was discovered last year, and us at this blogsite are among the first 1000 people on the planet to discuss it, and now you say the few studies we have are NOT valid? Come on. We use what we have and do the best with them for now. You cannot dismiss them simply because in a perfect world some day in the future a better instrument can be designed.

At this point we have to accept the massive global survey as "closest to the truth" as it reveals twice as many people listen to music on phones than iPods. You cannot dismiss the ONLY guidance to the customers on this topic. We can analyse its limitations, but not eliminate the study !! (unless for some reason we find it an invalid/unreliable/biased study)

Eytan. Thank you

That should be all. Thank you for commenting at our site.

Tomi :-)

Paul Morriss

As I said in a private email to you, repeated here, so everyone can join in:
How much you can expect iPod sales to rise anyway, because once everyone's got one, then sales will drop away? (Apart from replacing broken ones, and teenagers starting to earn money and so afford one.)

Phones seem to be locked into a replacement cycle - the market is built on the fact that everyone changes theirs sometimes.

With iPods, particularly as they get new features, like video, there are going to be those who get replacements, but I wonder how long it will be before there is a replacement cycle like there is with phones, or if the phones will take over by then.

Tomi T Ahonen

Hi Paul

Thanks for writing (both privately and now posting this question here openly)

Its a very good question, and the kind of discussion I was hoping to raise with the issue about what happens when one supplier goes through that change, one day owning the market with 80% market share and in 18 months finding itself with only 14% of the market and suddenly five globally powerful competitors fighting for the same market. How do you transition from controlling a market to making profits in a niche of the market.

And yes, like we discussed in e-mail, I do think Apple is a very strong design company, who have a vastly superior ability to understand the IT customer (arguably also the mass market residential customer, with the Apple/Macintosh appeal as a home computer).

Nobody doubts that the iPod is by far the superior music playing device. Any musicphone will be a compromise, and for the serious music professional (say a DJ) or any serious music fan (the kinds who own hundreds of CDs) it is the player of choice. For those people who own iPods, I would suggest many will refuse musicplayers almost however good they may be, simply because they are not the best. And for many other iPod users there will also be a disappointment factor in using musicphones. By this I mean that over time many iPod users will get a good musicphone (imagine next year's evolution of the Walkman phone or Razr V3i or LG Chocolate or Nokia N-91 etc), but that will still be a compromise and the iPod user will use both.

Many iPod users today admit they've tried using an early musicphone and found it totally unacceptable as a replacement. I don't doubt that at all. But some Apple iPod users - in fact 18% of the TUAW readers (The Unofficial Apple Weblog) in an online survey of 5,800 - admitted to listening to music on phones rather than on iPods.

So even among iPod users there is a shift going on.

But to your point. Yes, mobile phones are replaced every 18 months. PCs are replaced every 3 and a half years. Stats from the Seminconductor Industry Association from this spring. Where will iPod fall? I am sure Apple is clever enough to keep an upgrade evolution path going for its iPod users. Apple wants to keep on making money on its user base, and to sell replacement iPods to them.

If and when Apple releases an official iPhone, I would suggest most iPod users are targets to that phone. There will be serious doubts about converting those customers now, as Apple would need the full support of the mobile operator community, not to mention the issues with iTunes etc. Most operators have their own music stores and would prefer all music sales to go through their stores, not via iTunes. And so forth.

But for any that may get an iPhone, Apple would then tap into the 18 month replacement cycle for phones.

Where is the rest of the iPod? I would guess - and I honestly have no numbers, it is purely a guess from my gut - that the average iPod replacement cycle falls between that of the phone (18 months) and the PC (42 months). Maybe two and a half years, which is the exact half-way point?

I think Apple will be able to "mine" this customer base for a long time. They have a well-established history of keeping the (Apple 2 and) Macintosh customers more satisfied with their PCs than contemporary rivals from other
manufacturers. Apple's strengths have always been the user interface, which is even more important for pocketable devices than PCs, because of the small form-factor.

So yes, I think somewhere in the 2-3 year replacement cycle. And my strong conviction is that Apple will hold on to a vast majority of these customers. BUT there will be erosion. Read the comments at the various Mac/Apple/iPod sites and they all already have "deserters" or people who have found a new musicphone "good enough" and have left the iPod home.

That will also happen. Apple can't hold onto all existing iPod users. And in the future they will gain ever less of the total musicplaying market because - a) the other musicphone devices are closing in on Apple (so says Apple CFO Oppenheimer 19 July) cutting into Apple's design lead; b) mobile phones are addictive while iPods are not; c) phones are vastly more capable in OTHER THINGS than ipods (eg videos, the 3G phone is a vastly superior video consumption device than an iPod which needs to acquire its video content from another digital device like a PC); d) phones are replaced faster; e) the clinching argument: phones are subsidised. The (stand-alone ie non-phone) iPods are not.

Thanks for writing. You'll notice I've had time to sleep on it a bit since you wrote about it in e-mail. What do you think Paul? Make sense?

Tomi :-)

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