Demise of a Darling: iPod market share crashes to 14% amid management denials

Apple has just released its April to June quarterly sales figures for the iPod. At 8.1 million units, this is the second consecutive drop in sales.

UPDATE JANUARY 2007 - we have just written the final chapter to this iPod saga as Apple reported its final numbers. The final market share of iPod is 12.9% for the year 2006 with musicphones outselling iPods by 7 to 1. Yes, the data is also in that owners of musicphones do listen to, and download music to their phones. Read it all here - Requiem for a Heavyweight: iPod reign is over

UPDATE SEPTEMBER - Welcoming Arstechnica discussion board visitors. We have a welcoming message for you to put this July posting in context. I suggest you read your welcoming message first at this link:  [Welcoming Arstechnica Visitors]

RELATED UPDATE JUNE 2007 - if you would like to see my projection of how the iPhone needs to sell regionally, and quarterly, to achieve 10 Million by Dec 2008, read this blog: Crunching Numbers for iPhone

UPDATE - please observe the two graphs I have posted that explain the matter very quickly for you. Then please return here for the full analysis. I think it helps to see the two graphs first. They are at this link: [Apple quarterly iPod sales, iPod and musicphone sales]

We wrote about the battle of the pocket in our book, Communities Dominate Brands, and in the book predicted the mobile phone would crush pretenders, from PDAs to digital cameras and yes, stand-alone MP3 players like the iPod. At this blogsite last October, when Apple was celebrating 16 consecutive quarters of growth and facing its greatest quarter ever - its 17th up to the record-breaking Christmas sales for 2005, we made that bold prediction that from 2006 the Apple iPod would face a total collapse of its market ("2006 the year when the iPod dies") . As Apple had not indicated any softness in iPod sales in its guidance at the time, and everybody - including us - believed the Christmas quarter would be record-breaking, this was quite a brave - and lonely - prediction. Just read through some of the intense critical comments we received back then by the iPod fanatics.

The first quarter of 2006, January to March, did in fact present Apple's first-ever downturn of iPod sales. Not a slow-down in growth or a "dip" in sales. A catastrophic earth-shattering crash of 40% drop in sales! Most companies would be devastated but Apple put up a brave face cunningly claiming that this was suddenly a "seasonal downturn" after the phenomenally successful Christmas sales of 2005 and misdirecting focus that compared with the previous year, iPod sales were still up.

We pointed out in our blog of April ("Nails into the Coffin of the iPod"), was that in Apple's previous four years there had never been any seasonal downturn of shipments. Every January-March quarter had been better than the previous October-December quarter. And again the April-June quarter again stronger than the first quarter of eachg calendar year. Where did this sudden "seasonal downturn" come from? In the first four years of the dramatic growth for the iPod there never was a seasonal downturn in January.

The whole MP3 player market worldwide for the second quarter of 2006 is not 10 million units, from which Apple could claim four out of five units. In reality the MP3 player market is about 56 million units (48 million MP3 playing musicphones, 8 million iPods, and 2 million non-Apple brand stand-alone MP3 players). So Apple's quarterly market share is not 77% like it was back in 2004 before musicphones. In this quarter Apple's market share is 14%

As we forecast in our book and on this blogsite, at the end of last year the battle for MP3 players shifted and is now fought in the pocket. And the undefeated world champion in that market share war is the mobile phone.

Was unavoidable

We've seen it all before. It was to be just like the brief massacre of the PDA markets - totally crushed by "smartphones" in only two years from 2000 to 2002. The world's bestselling PDA today, by a wide margin, is the Nokia Communicator - a smartphone and also by far the most expensive of all PDAs. As a result of the smartphone cannibalization of the PDA market, one of the world's largest PDA makers, Sony, totally pulled out of the PDA market in 2004. Most PDA makers rushed to bring converged devices in a defensive mode, with cellular phone capability added to the PDAs.

Then we witnessed the equally brief and lopsided market battle of the digital cameras where cameraphones emerged victorious also in just two short years. From 2004 the world's bestselling digital camera brand has not been a traditional camera brand like Nikon, Canon, Minolta or Kodak; the world's bestselling camera brand is been Nokia. Last year fourth-place phone manufacturer SonyEricsson alone shipped more digital cameras than all stand-alone digital cameramakers combined. And again the previous masters of this field admit defeat as the world's second largest camera manufacturer, Minolta-Konica announced in January 2006 they were quitting the camera business.

The writing was on the wall. We foresaw the brief but decisive battle where the iPod and other stand-alone MP3 players were predestined to emerge as the losers. I predicted the battle to last the full year of 2006, even I was not prepared for the total carnage that the phone makers reaped upon the iPods and other stand-alone MP3 players in only the first half of 2006. From a high of near 80% in 2004, the iPod's market share is now down to 14% - and still falling!

How could this happen?

Apple had the MP3 market mostly to itself until last year. Yes Creative Labs and a few others did make rival stand-alone MP3 players, but the big phone makers had ignored the musicplayer market as being too small (yes a market of 10 million per year is too small for the phone makers to even bother with). It wasn't until in 2005 that they decided the MP3 market was growing to be big enough to be worth going after.

Around year-end of 2005-2006 suddenly all major handset makers released their major music phones. Nokia's N-Series. Motorola's iconic Razr series has been upgraded and most Razr V3 phones now include MP3 players, as do all Motorola Pebl, Slvr and Rokr models. SonyEricsson finally capitalized on its global Walkman brand. Samsung pushed the technology boundaries by releasing the first phone with 50% more capacity than the iPod Nano. And not to be left outdone, LG released its Chocolate, another music phone.

During 2005 Apple sold 22.5 million iPods and had accumulated 40 million devices shipped since its launch in 2001. During 2005 alone, Nokia shipped 40 million musicphones. And this was before Nokia got "serious" about the musicphone market. Nokia did that this year with the launch of its N-series. In February Nokia musicphones were shipping so strongly, that Nokia said it would ship over 80 million musicphones this year.

Apple pleads mercy that the MP3 player market is in seasonal decline, while its biggest rival who already sells more than Apple, reporting DOUBLE growth in the same period. Keeping in mind that Apple sales were down 40% in the first quarter, and down a further 5% in the second quarter - since its peak of only six months ago, Apple is now selling only half as many MP3 players.

But Apple has every reason to be satisfied

We need to point out that iPod sales numbers of 8.1 million in a quarter are wonderfully good results within the IT industry accessories and gadgets market. For some contrast and magnitude, another IT industry technology-darling, RIM ships less than a million Blackberries per YEAR. The total global annual market for stand-alone PDAs is about 11-12 million - meaning that Apple ships more than twice as many iPods as all stand-alone PDA makers ship their pocketable gadgets combined. And these all are devices of roughly similar price.

So yes, for Apple the computer manufacturer, this level of sales of iPods is well in excess of what their business projections had for five years into the future; and if viewed only in context of the IT/PC industry, even with its market share crashing, for Apple the iPod is a huge success, even in 2006.

Only don't think of the iPod as a successful MP3 player in 2006. Just by Nokia's numbers alone, Apple has already lost the war. Nokia alone ships more than twice as many MP3 players as Apple does this year. Game over.

But it Its not iPod vs Nokia

Yet to end on Nokia would be totally unfair on the rest of the phone industry. Nokia is a relative late-comer into the MP3 player market which was invented and developed in Korea and Japan, by brands like Samsung, LG, Panasonic, NEC etc.

In the same time that Apple pleaded a decreased seasonal demand for iPods, the world's second largest phone maker, Motorola was proudly reporting that its Razr phones - and yes most Razr V3 models are musicphones - were their phones with the highest demand. For whatever early miscues there had been with the Rokr phones (the so-called "iPod phones"), now the Razr is a surefire hit. Yesterday Motorola reported it has shipped its 50 millionth Razr. So in a little over a year, only one phone model from Motorola's range has all but matched Apple's total iPod effort across all iPod models for five years. This is not a contest, it is a bloodbath.

Not to be outdone, the fourth largest phone maker, SonyEricsson reported on the Walkman branded high-end smartphones it released last year. In its first five months up to Christmas 2005 SonyEricsson shipped 2.5 million Walkman phones. In the first quarter of 2006 SonyEricsson shipped 3 million more Walkman phones. A growth of 100%. Bear in mind, this is that same quarter which Apple claims was a seasonal "downturn". Now, for its second quarter SonyEricsson says its overall sales are up 33% and that growth is led... by the Walkman series of musicphones.

Samsung kept on releasing ever more sophisticated musicphones and its local rival LG did the same. A fascinating statement came from Europe's largest phone retailer, Carphone Warehouse - which said that the LG Chocolate - a music phone - is the best-selling phone in their stores - the best-selling phone of all time. This in the supposedly "saturated" European market of mostly replacement phones? Yes, with a fall from 80% to 14% market share in 18 months, the iPod is wilting away before our eyes.

But the iPod is a better music experience.

Some will say that the iPod is technically better than musicphones. They complain that the MP3 player they've tried out on some musicphone was not as good as the iPod (its best described as a toy) or that the iPod user interface, music storage ability, music library etc is better. The "my technology is better than yours" argument.

That is a totally irrelevant argument. I can immediately grant you the argument. You win! Yes! You win! Yes the iPod is inherently better than any musicphone, for listeing to music. I totally completely without a doubt give you that argument. YES the iPod is inherently better.

But that is irrelevant. IRRELEVANT. Just being technically best does not give you market leadership. A Ferrari or Rolls Royce is technically a better car than a Mitsubishi, Chevrolet or Renault. Yet Ferraris and Rolls Royces are niche markets. The Sony Betamax was technically superior at every generation to its VHS video recorder rivals, yet Betamax lost the VCR wars. The Concorde was technically superior to its compatriot, the Boeing 747 Jumbo Jet - and forecasts from 1960s suggested a larger market for Concordes than Jumbo Jets, yet only 14 Concordes were ever manufactured against over 1000 Boeing 747's.

And the ultimate proof lies with the Apple Macintosh computer. For every generation it has been superior to the IBM-compatible (Dos) and Windows PCs yet Macs are a niche proposition with well under 10% of the PC market. If technology decided, we'd all use Macs and Windows would be a forgotten relic. But its the other way around. Macs are the rarity among personal computers, no matter how much every generation of Macs has been technically (and by its user interface etc) better.

So who cares if the music experience is better on an iPod. If Apple's market share has plummetted from 80% two years ago to 14% today, the battle is totally over. Apple cannot recover.

Then there are those who say most musicphones are not used to consume music. First, I'd immediately point out that neither are all iPods. There are plenty of iPods used for example in education for recording lectures, for various podcasts, for video consumption etc. So comparing "apples to apples" - no pun intended - we'd need to compare the iPods and the mobile phone's abilities to consume all digital content, where mobile phone experience is vastly superior.

The phone is always connected. The phone has a built-in response channel (SMS text messaging), a built-in payment channel, and allows placing and receiving phone calls. A phone is far superior overall as a multi-purpose data device, than an iPod. Just on videos alone, the UK mobile phone network Three/Hutchison reports that they have sold 15 million music videos to their 3G phone users in a little over a year, in a market where they have 5 million phone users. Worldwide there are 2.4 billion mobile phone users - over 200 million of those are 3G phones - all which can not only play music, but can download music directly off the air (like iTunes only better) and can "stream" music ie like listening to radio and can identify music via Shazam -type services and can play ringing tones and can display music videos over the air. A vastly superior complete music experience than what iPod could ever hope for. And Apple's total shipped iPod population even now in July 2006 is a bit over 58 million.

As to music consumption? Where does most music come from to iPods? Not from iTunes, it comes from the personal libraries of the users, ripping music from CDs onto MP3 files. Ask those people would they prefer to carry two devices or one - as everybody carries a phone - and so far every person I've ever asked the question said they'd prefer to carry one device, combining the phone and the MP3 player.

But iTunes sells millions of songs?

Then what of iTunes? Yes, a wonderful innovation for the music industry. Yet as the vast majority of portable devices are already mobile phones, not iPods, so too is rapidly the shift in music sales. The IFPI (International Federation of Phonographic Industry) collects the global data on all music sales and coordinates the royalty payments worldwide as the umbrella organization for example for the RIAA (Recording Industry Association of America) for American numbers etc. They have been reporting on iTunes (and other online digital sales) of MP3 songs for many years now.

The first MP3 songs sold to phones were introduced in the summer of 2003 in South Korea. The IFPI said that for 2004 the total sales of music to mobile phones worldwide was so trivial that they did not bother to break it down (ie much less than 1% of all digital music sold). But with enormous growth, for 2005 the IFPI reported that MP3 full-track music sold to mobile phones was 40% of all digital music sold. iTunes was the biggest part, but there were also other legal online sales outlets such as the re-introduced legal version of Napster, etc.

Now for the first quarter 2006, the IFPI reports that already half of all music sold goes directly to mobile phones. (oh, and this is true MP3 music, not ringing tones. The Ringing Tone business is more than ten times larger than iTunes, over 5.1 Billion dollars worldwide in 2005. I'm not talking about ringing tones here). And as the IFPI reports music sales to phones growing rapidly, what did Apple tell us in its quarterly review? its other music revenues (iTunes) are DOWN by 6%. Again the same shift from iPods to musicphones.

The tide is turning. Inevitably. Irreversably. The majority of the devices are there, the majority of the users are there. The majority of the money is there. The majority of music sold is also there, on mobile phones, not on iPods.

And what of the users themselves? The first landmark independent study by TNS of 6,800 adult users came out earlier this year reporting that already twice as many people consume music on musicphones than on any brand stand-alone MP3 players including iPods, and more tellingly 35% of the total population wanted to consume music expressly on their mobile phones. Nobody wants to consume music on a separate portable MP3 player when they have to carry their mobile phone with them anyway. It is common sense, after all, but now we have the definitive study on it as well.

All numbers stacked against iPod

I want to remind readers of the big picture economics. In Apple's record year it shipped 22.5 million iPods last year and has shipped about 58 million iPods in the past 5 years in total. The mobile phone industry ships between 950 million and 1 billion mobile phones this year alone. Yes, last year about 40 times as many phones shipped as iPods.

Not all have MP3 players, obviously. But this year at least 20% of those - more than likely 25% - will be musicphones. So anywhere from 190 million to 250 million musicphones will ship this year. Even if Apple somehow managed to DOUBLE its annual sales from last year and reach 45 million units sold this year - and trust me they won't perform this kind of miracle - NONE of the market analysts suggest Apple would double its sales for iPods this year - its market share this year would still be between 18% and 23%. Apple cannot recover from this loss.

How often are iPods replaced? I don't know. Certainly some of the iPods go to existing users who want for example a smaller iPod like a Nano, or who have issues with reliabilty, broken screens, battery problems, etc. Therefore the total iPod user base is significantly LESS than the total shipped units of under 58 million so far. The total phone population is 2.4 billion worldwide.

Phones are replaced every 18 months. 20% of Europeans have two phones (or more precisely have two subscriptions, most of those people also have two phones, but not all). For those who have two phones, the effective replacement cycle is 9 months. How rapidly does everybody who ever wanted a portable music player, get it "automatically" as part of their next upgrade?

What happens to the older phone? It gets passed onto kids - who all want the new musicphones but often cannot afford them. While the replacement cycle is very rapid in mobile telecoms, most of the cool phones that have been replaced by newer models, are recycled within the families to children, younger nephews and nieces and cousins etc.

But who is the competition. Apple is doomed here. The big five phone makers, Nokia, Motorola, Samsung, SonyEricsson and LG are all companies with deep pockets in research, and about a decade of history of doing pocketable consumer devices. No matter how much Apple can create iconic designs, they are now up to the world's best rivals in this space.

And by now every phone maker has released their first or second generation of musicphones. But the phone market is not only 40 times larger than the MP3 player market, the phone market is fierce in its competition. Apple releases a couple of new iPods per year. Nokia alone releases a couple of new phone models every month. With global competition and dozens of smaller rivals from Taiwan and China, and creative input from the major mobile operators like NTT DoCoMo, Orange, Vodafone, etc, the phones rapidly keep getting better and better. There are literally several hundred new phone models every year. Cameras were introduced four years ago and in 2005 over half of all phones shipping had built-in cameras. It does not take long for most phones to incorporate MP3 players. Apple cannot hope to compete against this many rivals in so many diverse markets.

Already today, in the Spring of 2006, the independent technology press reviews of SonyEricsson Walkman Phones, the Nokia N-Series and the LG Cocolate phones are all on par with iPod Nanos. Bear in mind you don't NEED to have technical superiority to win in the market place. But if Apple's rivals catch up on the technical side of the MP3 player on the phone, Apple's second-to-last competitive advantage is lost.

What of the iconic state of the iPod?

It is easy to fall into the trap of the white earphones. Next time on a longer journey in public transport - whether in a train, bus, underground, etc - observe those with white earphones. Then observe what device emerges when they change tunes? Its no longer that white earphones equals iPod user. Now many phone makers - and other MP3 maker rivals - as well as independent earphone manufacturers - offer white earphones. More than likely those white earphones are connected to a device other than an iPod. The person wants to appear cool - with white earphones - without actually having an iPod. So much for iconic.

Phone is addictive - and iPod is not

As to the phone? No device has as severe addiction as the mobile phone. The recent study by Queensland University in Australia revealed that the addiction to mobile phones is as strong as that to cigarette smoking. We cannot live without our phones. We take them literally everywhere including to the bathroom. The BDDO study from last year revealed that 60% of the phone owners on the planet take the phone physically to bed at night. And the Nokia survey of 5000 users this spring showed that already 72% of us use the phone as our alarm clock (and extrapolating from these two studies, apparently 12% place the phone at our bedside table...)

The most severe punishment you can inflect upon your child is not to take away Playstation privileges or remove the iPod. It is if you take away their mobile phone for the weekend. The Mobile Youth study showed that teenagers in the UK today - the world's third biggest music market after USA and Japan - spend 8 times more of their disposable income on mobile phones than on music. Yes the iPod is iconic. But the mobile phone is the only must-have device. The iPod is an optional extra. Game over.

Last nail into the coffin: Subsidised handsets

Then the ultimate killer. Subsidies. Most Western markets have handset subsidies, which mean that a new mobile phone will be sold at a nominal price of anything from zero dollars to 20-50 dollars. A small fraction of the true off-the-shelf price in the 200-300-400 dollar range. But iPods are never subsidised. So compare 200 dollars for the iPod or 25 dollars for a musicphone? The economics totally tip the balance against the iPod. So people can get their MP3 player "for free" as simply part of the upgrade and contract renewal for next year.

And finally, if you don't like our view on this. Lets go ask the big boys themselves? What does the music industry say? Here are comments from the senior management in the music industry, all released within the last year:

The world's largest music label is EMI. Its Senior VP of Digital Distribution, Ted Cohen says "Mobile phone will become the digital music player of choice" 

Another of the big four global music labels, Sony BMG SVP of Digital Business JJ Rosen explains why this will happen as he says "Everyone likes music, and everyone has a cell phone"

Universal Music is the third of the four. Universal Music's General Manager Rio Caraeff explains why music on mobiles: "Music is inherently mobile and something you enjoy on the go"

And finally the fourth of the big labels, Warner Music CEO Edgar Bronfman states where the focus will be: "Wireless will become the most formidable music platform on the planet"

After we've reported the trend from stand-alone MP3 players to musicphones, and arguing from the analogy of the PDA wars and the digital camera wars, now the first major analysts are also committing to this future. Yankee Group and Strategy Analytics have both come out now in June of 2006 stating that the battle will definitely be won by the musicphone.

No expert is committing to an unpredecented dramatic sudden Apple recovery. No expert believes Apple could ever come back from this total thrashing it received in the first half of 2006. The game is truly over.

Epitaph for the iPod

The iPod. It was the technology darling. Alan and I both love Apple and totally adored the iPod for all it brought us and the industry.

When the portable music player market was deemed dead in 2001 - Walkman cassette players and portable CD players had supposedly "saturated" the market, and whatever little growth was seen, global giants like Sony were pushing the minidisk as the evolution to the Walkman experience. Nobody believed in MP3 players.

In 2001 Apple had the vision to launch the iPod. A company not known for a consumer music brand, but rather a geeky and proprietary PC brand, nonetheless Apple released its iPod. And most bravely of all, at a time when the whole music industry was in panic about the napsterization and illegal file-sharing of digital MP3 files, Apple collected the industry together for the revolutionary iTunes.

We applaud all that. Like we wrote in our book Communities Dominate Brands as one of the 13 case studies, Apple was brave, visionary, bold and successful in creating a new market space with the iPod and iTunes. They were brilliant.

As they now report Macintosh PC sales growth, the iPod has brought a lot of additional sales to Apple in another market that was said to be stagnant - the PC sales. Apple has been able to create a niche market almost all to itself for nearly 5 years, and in that process added sales to its main product - PCs - all along also increasing its profit margins very strongly.

Brilliant strategy Apple. We applaud you.

But we also have to face reality. Apple had the MP3 player market almost exclusively to itself - with essentially only Creative Labs and a few other small IT players on the stand-alone MP3 player market. That all changed in 2005 when the big phone makers decided to launch musicphones.

The final battle was as brutal as it was brief. Apple lost out in the first half of 2006. What was the ultimate darling of the IT industry, was coldly sweeped to the sideheap of history. The iPod market share this year is about 14% and dropping. Like the Financial Times quoted me August 30 of 2005 in the story about music phones fighting against the iPod, "Next year the game will be totally over," says Mr Ahonen.

The iPod is dead. Long live the iPod.

UPDATE 2 - I've blogged a rebuttal blog answering the first 32 people commenting on this story. Please see [Stampeded by Mac Fanatics]

UPDATE 3 - The story received very broad coverage by several dozen blogsites, websites, news aggregators and discussion groups. This blog has been called excellent as well as the worst writing of all time. I've collected the commentary to this posting [Electronic Echoes]

Comments

[Dean Bubley]

Tomi

Some good stuff in here. A couple of nit-picking points:

- total 3G subscribers is 110m, not 200m+ (see http://www.gsmworld.com/news/statistics/pdf/gsma_stats_q2_06.pdf)
- both that figure and the overall 2.4bn number include substantial double-counting from people with 2 phones / multiple SIMs etc, so the actual user base is considerably lower (same thing as you mention with iPods)
- I suspect Apple's profit per iPod (and therefore overall market share of profit for the "MP3 player industry") is higher than for mobile phones
- Actually, the iPod share of "hybridised" MP3 players is even lower than you suggest, as you need to add in laptops (and maybe desktop PCs) as well as mobile phones, as they all have MP3 capabilities, headphone socket etc & are often used to play audio.
- RIM ships far more than 1m Blackberries per year - it shipped 1.2m in the last quarter alone.

Oh, and I owned the first (I think) MP3-playing mobile in 2002 - the Siemens SL45i - so the mobile guys have been trying this for a few years, not just recently.

For what it's worth, I reckon you're right that the iPod's share has reduced a bit, but I still reckon that 70%+ of MP3 users I see in London use iPods (not just on the basis of white headphones, but seeing the actual device)

[Tomi T Ahonen]

Hi Dean !!

Thanks for visiting and commenting. And thanks for the stats-police work...

On the 3G stats, I always report both technologies, CDMA2000 EV-DO ran ahead of WCDMA (GSM Association) stats for the first 3 years and only last year WCDMA climbed ahead of CDMA2000 3G subscribers. On WCDMA there are 110 million yes but I was talking of all 3G subs.

The 2.4B global subs is yes subscriptions not users, and my estimate is that a little over 10% of all humans with phones (20% of Europeans) have 2 subscriptions. So 2.15 billion humans. Doesn't really matter in the big picture especially at the growth rates of mobile ha-ha, but good catch.

RIM? I recently spotted the 5 millionth blackberry milepost, I recall late last year. So its been running at less than a million at least until 2005. But yes, if they now ship 1.2 million in a quarter, I have to update my stats. I'll look into it. Sounds like very sudden and quite dramatic upturn (and goes very strongly against the "gut feeling" of many of my colleagues recently around the world who all seem to suggest Blackberries are underperforming in all of their markets - that is outside North America obviously)

I wasn't aware of the Siemens but I know there were some PDA-smartphone converging devices that included MP3 player functionality. South Korea in June 2003 Ricky Martin's six MP3 tracks were I am very certain, the first mass market attempt at selling full-track music to mobile phones. In that way, I'd classify your phone and you then, as more of a beta-tester, thought-leader, "Alpha User" type, ha-ha, but that the MP3 market for mobiles started in June 2003 in Korea. Its a bit a question of definitions, definitely :-)

I'll also do a sanity-check/numbers check on the actual blog probably tomorrow, so whatever clear errors are there, I will want to correct. So thank you also for that, I know many read our site for refernce, and we do want the numbers to be as solid as is humanly possible (without employing a staff of researchers ha-ha...)

Thanks for writing Dean !

Tomi :-)

[Piers Fawkes]

maybe, we all have one now - accessories are up 90%

[Sandeep]

Uhhh....

The phone will kill the iPod just like it killed the Digital Camera. Just like it killed hand held gaming consoles.

MP3s, Cameras, games maybe add ons to a phone but it is certainly something that a majority of people don't use. I know several people (me included) who own MP3 phones. But I don't know a single person who ever uses this functionality.

Dream on, fan boy.

[BobAB]

Can any of the Mp3 phones do this?
http://www.time.com/time/business/article/0,8599,1216589,00.html

AAPL up $6.33 this morning. Good luck selling your book.

[Bert C]

also...
http://www.macworld.co.uk/news/index.cfm?RSS&NewsID=15296

"Apple hints at iPod phone
...
Apple chief financial officer Peter Oppenheimer said: "Apple is investing heavily in iPod and iTunes engineering and is very enthusiastic about products in the pipeline."

Oppenheimer also dropped Apple's biggest suggestion yet that it has plans to deliver a hybrid mobile phone iPod, saying: "We don't think that the phones that are available today make the best music players. We think the iPod is. But over time, that is likely to change, and we are not sitting around doing nothing."
..."

[Kevin Barbs]

I rarely post in response to any article on the web. But this article was one of the most laughable I'd ever read. To lump in music playing cell phones into the calculation is grasping for straws. Those cell phones would have sold without the ability to play music. The cell phone market is enormous on it's own. So, when customers are presented with a cell phone that plays music vs one that doesn't, they pick the phone with more features. This doesn't reflect on the standalone mp3 player market,...yet. This will be a force in the future when many quality, battery, and usability hurdles are crossed. But for now, you can't even begin to make this claim. Hence, you can't claim these numbers until these devices actually meet on a more accurate playing field. So in regards to this article, I disagree at this point.

[swissfondue]

I have a radio in my car, but only listen to CDs. Staticians would define me as "a radio listener".

I have small noname mp3 player, an iPod mini and a mp3 capable mobile phone at home. I listen to music and podcasts only on my iPod mini (now almost 2 years old).

So market share says nothing in terms of the importance of the iPod in my life, but only refers to the potential listening based on hardware numbers.

A more significant number as you mentioned is the music bought online through mobile phones. I doubt this is taking market share away from Apple, as the market is not a zero game but is growing.

Apple said as much yesterday. They also hint that they will be ready whenever an "iphone" will be the accepted way to listen and buy music.

[Bela Sopron]

If the rumor sites are to be believed, Apple is already planning for this eventuality with the release of an "iPhone". It would be the perfect move by Apple to capture market share yet again with a great product. The motorola iTunes phone deal was DOA, if they are to do it right the next time, Apple will start their own cell service via a cell network renting agreement with one of the big carriers.

This would solve a lot of problems and create some interesting possibilities, for instance if they run the service and make the phone they could allow you to upload files and music directly to your phone unlike the standard policy of carriers which is to force you to download through the cell network and pay their rip-off fees. That feature alone would drive hordes of customers to their product/service and shake up the whole industry model.

Not sure how having their own service would impact the handset subsidy issue, that is definitely a big one. I imagine if they ran their own service they could work it in their favor with lock-in contracts, etc. the way other carriers do.

Normally I would say Apple has no business getting into a totally different industry, telecommunications. But look what they did with the iPod and iTunes and all the deals with the music industry and soon Hollywood. Unthinkable six years ago.

[william]

Rather than being prescient you seem a bit delusional. Apple making selling over 8 million iPods for a profit of a hundred million or so is somehow a crushing defeat. Maintaining their dominance of the MP3 player market is a failure. You confuse what people CAN do, with what they ACTUALLY DO. I have a Sony walkman phone and guess what, I don't listen to music on it because it ISN'T as good as an iPod and I need my phone as a phone and don't want to drain the battery listening to tunes. The only times I've done it is when I left my iPod at home.

Funny, but I don't think I've EVER seen ANYONE listening to a Walkman phone here in the US but you're unlikely to even be in an elevator without someone listening to an iPod (or possibly another MP3 player.) Perhaps things are different overseas, what a blow for Apple not to control the whole world.

There are some very nice "walkman phones" out there, but the convergence hasn't happened yet so you can quit patting yourself on the back.

[Curious]

While you're in the business of creative market-share numerology, I'm curious to know the market share numbers between cell-phones and stand-alone devices of the following types:

1) Cameras (35mm & Digital)
2) Camcorders
3) Alarm Clocks
4) Web Browsers
5) IM Clients
6) Datebook Organizers
7) Game Systems
8) Calculators
9) Time Pieces

Granted, I tend to use my phone as a PHONE and have other devices to do all of the above, but I'm still interested in seeing the numbers.

[Jiim Harner]

I have a camera and MP3 on my Treo, but never use them. No one I know uses these functionalies and that is unlikely to change. My battery life it too short as it is.

I see the iPod going to very small, e.g., the Nano, and big, the new true video iPod with 3D games, and fairly small, the iPod phone. There are reasond you want all three sizes and functionalities. I do not mind carrying a small Nano and a small phone and I do not want to drain my phone's battery by doing lots of things other than making calls. That is why I am geting rid of my Treo.

[Rus]

This article is filled with non sequitur, poor research, and a complete (and obvious) bias and hatred for the Apple platform.

Not a single paragraph in this commentary contains fact or insight into business ... get an editor.

[william]

One more comment I forgot to make:

You mentioned that camera phones have been available for several years.

If you aren't feeling too stupid yet, tell us how that has affected the market for standalone cameras.

Here's Nikon's outlook for 2007:

Q: What are your forecasts regarding shipments for this period?
A: We plan to increase the shipment for digital SLR cameras of 30% compared with the year ended March 31, 2006, with the proportion accounted for by high-end and mid-range models expected to rise.
(From their presentation of financial results for the year ended 3/31/06, on their website)

Oh, the humanity! Can you stand the carnage? Is Nikon's failure even forgivable?

Here's how Canon charaterized their Q1 2006 results:
Within the camera segment, digital SLR cameras continued to enjoy robust growth, bolstered by particularly strong sales of the EOS DIGITAL REBEL XT and the newly introduced EOS 30D.... Sales of compact-model digital cameras also continued to expand steadily,.... Accordingly, unit sales of digital cameras for the quarter recorded growth of
approximately 20% from the year-ago period.

A dismal failure, the final nail in coffin, the last blow, the dying breath. Is there anything that can stop the camera phone?

[D9]

I would dare say that if you measure the MP3 sales figures for the 4th Q of 2005 vs. 1st Q of 2006, you'd see that the entire market was down in comparison. To isolate Apple's downturn as an indication of overall customer displeasure for the iPod is a grave misconstruction of the market. I won't get into the distortion of the phone percentages since previous posters has so succinctly detailed the fallacy of such an opinion.

Bottom line is that if someone is looking to purchase a device to play MP3/digital songs, 3 out of 4 are choosing an iPod. The rest is merely smoke and mirrors.

To paraphrase another's point, good luck selling your Kool-Aid!

[Barney F.]

I would dare say that if you measure the MP3 sales figures for the 4th Q of 2005 vs. 1st Q of 2006, you'd see that the entire market was down in comparison. To isolate Apple's downturn as an indication of overall customer displeasure for the iPod is a grave misconstruction of the market. I won't get into the distortion of the phone percentages since previous posters has so succinctly detailed the fallacy of such an opinion.

Bottom line is that if someone is looking to purchase a device to play MP3/digital songs, 3 out of 4 are choosing an iPod. The rest is merely smoke and mirrors.

To paraphrase another's point, good luck selling your Kool-Aid!

[Johnny Appleseed]

Your article conveniently avoids the question of how many owners of music phones actually use them to listen to music? If more and more phones are incorporating music players, it's inevitable more music-playing phones will be sold.

Also, the relatively low-capacity music phones are in a whole different market segment to the HD-based iPods that allow users to carry their entire music collection, videos etc.

The fact the iTunes Music Store has 80% US market share should tell you where most downloaded music is going.

Oh, and could you please stop calling this a blogsite. "Blog" is already a contraction for weblog, so call it a weblog if you must.

[David Gnotta]

Your article is so far beyond absurd that it does not deserve an
eloquent response. So here is the response it does merit
.... you are so full of sh#t

[MacKeyser]

This article is just proof positive that Samuel Clemens was right when he said, "there are three kinds of liars: a liar, a damned liar and a statistician."

These numbers have been manipulated and stretched more than taffy on the Atlantic City boardwalk.

Even with my iPod Mini, I have 4 GIGABYTES for audio. My next one will be the one with the biggest harddrive, likely 80-100+GB. So, while phones will meet the needs of iPod Nano listeners (maybe), I listen to my music for HOURS at a time and NO phone is even close to blowing my ears off for hours at a time.

Is there crossover? Sure, and you make some valid points on where that convergence is headed. However, the iPod as a device is multipronged. The coming Video iPod with likely 100+ GB and phones are WAY more than 5 years from having the storage and battery life to play full length movies.

If you restrict the entire MP3 market to those who only hold 256MB of music at a time, don't care about audio quality or battery life, then cool. However, right now there simply are no equivalents to even the iPod Mini, let alone the Video iPod. Moreover, they aren't JUST mp3 players. Like phones they have other features and ignoring the points of differentiation is like comparing cars and skateboards. They both have 4 wheels and get you someplace, but the points of differentiation make it so that GM isn't about to start making skateboard. Now, Apple WILL make an iPhone, but they certainly aren't gonna abandon their Video iPod level devices for which there simply won't be a phone equivalent.

[Rus]

I had to blog about this myself ... it's hard to believe that this guy didn't have Dvorak write this lunatic piece

http://fixyourthinking.com/2006/07/in-history-of-all-articles-written-on.html

Titled: In The History Of Articles Written On The Net - This Is The Worst!