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« Placeless but permanently connected | Main | Stampeded by Mac fanatics, replying to 32 comments on iPod 14% »

July 20, 2006

Comments

natcire

Personally, I have a Mot Razr v3, Razr v3x, Samsung D600 and a Mot v330, all GSM on T-Mobile (I only use one at a time). Though I do not own an iPod. Thought I would use my phones for music, camera and video. After the initial excitement of the new phone wears off I use my phone for calling only. Not even for email, sharing pictures etc.

The Samsung D600 had fantastic sound. But it is a phone...I have had cell phones since 1991 and that is what I think of them. But younger people, tweens and teenagers may think otherwise.

The cell phones with MP3 player, camera, videos etc is a way of the handset manufacturers to get the users to buy and upgrade the handsets: more features. This discussion is just akin to the PC that is capable of DVD, music and TV but very few people now use the PC for their only entertainment center.

I think there is a market for cell phones with MP3 capabilities. It is like cell phones with cameras and video...after the first month the novelty wears off and I stopped using it.

Would I take my cell phone jogging? No. Would I take an iPod joggging or exercising (if I had one)? Yes. So that is why I think the iPod will live on.

But that is not Tomi's discussion. Tomi's discussion is that Apple is bad investmeent and that iPod is not viable. That the smart cell phones will displace the iPods. To that, I say to Tomi, "no product stays constant forever." Apple will keep innovating. Look how far it has brought the Mac computers. Look for the next gen iPod and for iPods that can make phone calls! Or iPods that will be PDAs! They may infringe into the cell phone markets!

Nick

I'd guess the "seasonal downturn" came from the fact that Apple has not launched a new player...

They launched the 4Gb Mini in January 2004, which will have kept the sales up for Q1 2004. In July 2004, they launched the 4G version of the original iPod - guess what that did for the Q3 sales?

In January 2005 they launched the Shuffle and February the second generation of the Mini.

The last iPod to have been released to date is the 5G version of the original, way back in October 2005. Given that (from these figures) the launch of a new iPod variant always causes a rise in sales, the 2004 and 2005 Q1 sales are probably seasonal dips being hidden by the new product launches.

The big spike for Q4 2005? That's the first time you've seen the new product launch sales combined with the seasonal uplift from Christmas. As I noted earlier, there was no January/February product launch to buoy-up the Q1 figures.

It *is* possible that the music phone will cause the death of the iPod, but at the moment the only conclusion you can reasonably reach is that Apple have not launched a new player and they are running out of people to sell the old ones to (a.k.a. Saturation).

As for Minolta-Konica pulling out of the camera market, it's more likely that this was because: a) They arrived late to the game with unspectacular products and b) stayed in the low-sales & low-margin area of the market for the higher-spec consumer products. Their products, whilst perfectly servicable, were neither aspirational nor competatively priced.

Tomi T Ahonen

Hi natcire and Nick

First, I hope you noticed there were two follow-up postings by me about the issue when it was "hot" last month, and a final review of the coverage the issue got in the various blogsites etc.

Natrice - We agree for the most part, Alan and I have repeatedly said that the youth are the digital natives, for them their ultimate gadget is their cellphone and anything they can get onto their phones, they will "play with" and make use of. And no, they are not limited to that device, the new Generation-C (for Community Generation) is competent at multitasking on multiple simultaneous networks and connections, so they will also play multplayer games, use IM Instant Messaging sessions, etc. But their gadget of choice is the cellphone.

I would put it to you, natcire, that once people discover they have this multipurpose device in their pockets, they can rapidly learn new ways of using them. For example. I don't mean we take the cameraphone to take portait pictures of the high school class. But since we have the cameraphone with us, I've heard of several people who use it to take pictures of their car where they park - and/or take pictures of the license plates of the cars parked next to them (in case there is a scratch on the door) or for example taking pictures of the rental car scratches before you drive off in it. All cases where the cameraphone gives us exceptional convenience, but these pictures are not intended to be sent via the network - nor printed. They are temporary memories intended to be discarded when no longer needed.

A good example is young adult women in the UK. There are always horror stories in the press a couple of times per year, of an unlicensed taxicab driver raping some woman passenger over the weekend. Now it is common for the young women to snap pictures of their drivers before they get into the cab. It gives them the confidence to get into a strangers' cab, and the woman knows she has enough time if he starts to behave weirdly, to send the picture to their best mate - if that were to happen.

It doesn't mean, that sometimes, we may spot the perfect image (wow, there is a pub with the name of my wife's maiden name - lets take a picture) and then the only camera we have is that on the phone. Even if of modest resolution, this is the memory we snap. And then the cameraphone is the only phone we had, this is the picture we take.

But much more the the usage of the cameraphone is for new things that we do with the camera being upon our person. I personally take pictures of the subway maps in strange cities. I will always have it on the phone, don't have to worry about carrying the leaflet maps, and I delete it when I leave the country..

Now - about Apple. Here you misunderstood us, natcire. We never - ANYWHERE - in the lentghy postings and replies - said anything about Apple the company being a good or bad investment. If you were to ask me, I'd say Apple has been brilliant in the PC game, and so far has been excellent in creating the marketspace for new portable musicplayers (we had Walkmans and portable CD players) around the MP3 standards. But Apple has now lost what was an effective monopoly.

We have repeatedly said that Apple will continue to sell iPods. And profitably. Only that their market lead is gone. There is nothing wrong with being a niche market and making healthy profits in that.

So please don't assume we think Apple is in trouble. This is not a site about financial performance of corporations, it is a site about digital convergence and digital community power. The iPod and iTunes were brilliant market innovations five years ago, now their age of controlling that market is gone. That is all. Certainly Apple will continue to derive lots of revenues and profits from them for a long time. And if the (Apple/2/Lisa/) Macintosh evolution of the PC heritage of Apple is any guide, the iPod will keep innovating and maintaining a very loyal passionate user base, at the high end of the scale.

Nick - fine, I hear you. So the previous January-March quarter performance by iPods was due to new launches, and this year there was none. So far so good.

If you want to hold onto the seasonality argument - then it must happen that iPod sales reach - AND EXCEED - the level of iPod sales last year? So what now has to happen in the third and fourth quarters of 2006 is a dramatic upturn in sales, to grow very strongly so as to EXCEED the level of the record sales in the fourth quarter of 2005.

I will grant you that theoretically that can happen. If that happens, that total sales in the fourth quarter this year are well above those of last year - then seasonality can be said to have occurred. Fine. I have said elsewhere in the discussions, that I am fully willing to return to this topic, and celebrate Apple's revival, if that were to happen. You do recognize it means fourth quarter sales well in excess of 14.1 million units, when currently they sell 8.1 million. This inspite of the ever better musicphones.

But yes, if the second half now compensates for the serious downturn (46% drop over two quarters) then yes it can be explained as a seasonal variance.

It does not detract from a catastrophic loss of market share. Like Detroit car makers in 1974 and 1979, when they held over 75% of the total American car market, and were not prepared for the sudden shift in market tastes to smaller gasoline-efficient cars from Asia, they lost their market lead and emerged in the early 1980s with only half of the market, and all US car makers with lots overstocked with cars nobody wanted, and the manufacturers massively in the red, while their Asian rivals were making record profits and could not make cars fast enough for the American market.

We have seen that kind of shift. EVEN if Apple were to post a dramatic return to form, and somehow say sell 50 million iPods this year (would an excellent growth record especially for the second half of the year) - they would still have only one SIXTH of the total portable MP3 player market as the phone industry now expects to ship about 250 million MP3 player equipped musicphones this year. But yes, if that reversal happens, I'll grant you that, and I promise to blog about it.

Thanks for writing!

Tomi :-)

Håkan

Fascination blog, but what's even more fascinating are the negative responses given. The writing are so clearly on the wall.

Some have responded that a do-it-all device do most things poorly - and that is correct. Is this a valid criticism? Not really. Let me explain why.

The mobile phone seem to have found it's natural size at roughly 60-100 grams and 8-10 cm in height. Make them smaller and the keys will be to small to be really useful, it could easily be lost etc. Compare this to laptops that seem to have found their size at roughly 5-7 pounds and with 14-15 inch screen. Of course exceptions exist but I dare to claim that three quarter of all laptops sold fit in this category. Not because they couldn't be made smaller and lighter (as my X40 proves) but because people doesn't want to sacrifice performance, battery life or screen real estate in search for a thinner, lighter laptop.

Add to this storage saturation. Roughly two thirds of all iPods sold are Shuffle or Nano/Mini. This tells us that two thirds of buyers are happy with 512MB-4GB of storage. A 4GB SD flash memory card can be had for $60 these days, compare this to the $250 Apple ask for a 4GB iPod Nano. A mobile phone is needed to utilise the flash card - but as shown earlier everyone has a mobile phone anyway.

So storage is not a problem. And if it were, flash memory seem to be growing by the minute and soon (three years?) [email protected] dollar will be [email protected] dollar and ready to replace even the harddrive-based iPod. Most people have much less music than that stored.

Is a mobile phone fit as a real camera replacement? No, the tiny lens and lack of optical zoom (hurdles that can't be overcome in todays small phones) prevents that. But of course a phone with camera can replace a normal camera in many situations.

But we're talking about mp3-players, not cameras. Is a phone fit as a iPod/Mp3-replacement? Yes, very well. They already have a display fit for displaying text, a battery with enough capacity for many hours of music playback and enough room to fit a decent DAC. The keypad even makes it easy to search for music, should such a feature be implemented in a phone. A phone also brings many other advantages, like always access to the operator and his services and bluetooth, for easy sharing of music among other phones. Belive me, I live in Sweden (the very stronghold of SE and their Walkman phones) and I see this sharing happen all the time.

And more important, we always bring our phone with us.

Where does it leave us?
1: The nano will face fierce competion from the phone manufacturers. And lose I dare to claim.
2: The Shuffle may survive as a fitness companion but lose its position as the standard player people bring with them.
3: The normal Ipod will stand tall for at least 1 more year, but 3-4 year from now with flash memory hitting 16-32 gig for a hundred dollar or so it will be doomed.
4: A video Ipod with a larger screen may also stand tall since a mobile phone may be fit for music but not as a movie player since the screen is to small and battery life would be to limited.

Tomi, great blog. You should also feel proud over the long, detailed and polite answers you have given to the comments.

/Håkan

Aaron

I'd just like to point out that you appear to be missing one fact about the MP3 player/MP3 playing phone "war": people will buy cell phones much more than they will every buy a standalone MP3 player, because cell phones have become a necessary part of life, while MP3 players are and always will be add-ons. And, if people are buying cell phones, why not buy one that plays music? What you aren't realizing is that MP3 playing cell phones do not take up market share from the iPod, because the iPod is a high capacity MP3 player, while the largest you can really get a MP3 cell phone is around 2 GB. Many people who buy MP3 enabled cell phones also have iPods, and use their iPod more often than their cell phone to listen to music, because the iPod has a more user-friendly interface, with the possible exception of LG's Chocolate.

Tomi T Ahonen

Hi Hakan and Aaron

Thanks Hakan! We agree :-)

Aaron - we mostly agree, but just so you know, two years ago Samsung released the first mobile phone with more storage than an iPod Nano ie 5 GB. Today there are several top-end phones that store up to 6 GB internally, and also most top-end phones take removable storage memory chips which runs currently up to 2 GB, with 4G expected to ship before the end of the year.

Thanks for writing

Tomi Ahonen :-)

John

14 percent of crash would surely cause a big loss to the industery.

Tobias

Wow. Obviously I've gotten to this article late, but it was never the less a really interesting read. I've always broken out the MP3 phones and MP3 players into different categories, but obviously that can't be the case any more. Apple knew, or seemed to know at the time, that their competition wasn't Microsoft's Zune, but instead it was Nokia and LG. The decline in market share is understandable given the fact that people only have a certain pool of money to purchase an MP3 or cell phone with and having the opportunity to purchase a single device that has both functions has to have an effect.
Being a life long Apple geek and owner of the original iPod and a 1G Nano, I do love Apple's form factor and user interface. But Apple has to battle for every inch and I don't think they are delusional about their "market share". Yet, they know when to present the best numbers to fit their interests.
Thanks, a really good article.

Tomi T Ahonen

Hi John and Tobias

Thanks for visiting

John - am not sure of your point, but thanks for commenting.

Tobias - Thanks. Yes, Apple was quite cagey - now with the clarity of hindsight - to keep the focuss off the phone side until they were ready to launch the iPhone, and also that the iPhone obviously was timed to be launched after the Christmas peak sale period for the iPod, not to cut into that significant revenue stream in 2006. But yes, Apple has clearly known for a long while that this was the case, and also that their strategic future is inevitably linked to the success of the iPhone (not the iPod).

Thanks for writing

Tomi Ahonen :-)

LOL

LOL, this is among the funniest and most idiotic stuff I've read this couple years. Yes the MP3 capable mobile phones are growing, nowadays almost every single budget mobile phone has MP3 playing capability, the thing is, you almost CANNOT buy a mobile phone without MP3 playing capaibility nowadays, but it'd be simply ridiculous to count them as any threat to the MP3 player market, since 99.99999...% of those who buy a Nokia 6070 don't use them to listen to music. And according to a survey in Europe, only around 50% of those who buy W800i, the WALKMAN phone, use it to listen to music, the other 50% only use it as a regular phone.

So for this article to mean anything, first it needs to be clear what their "MP3 playing music phone" means, do they count Motorola V3 and Nokia 6070 as "MP3 playing phones"? It says Nokia sold 40 million music phones in 2005, but in 2005 Nokia hasn't produced one single XpressMusic phone yet, so I guess they count some budget MP3 capable phones with 5MB internal memory and no memory card extension ability as "MP3 playing music phones" too.

And secondly how many really use their "MP3 playing music phone" as a MP3 player? You can't boast that the MP3 player market have 56 million units when only 12 million something are actually used to listen to music, while to other 40 million something are just used to have MP3 ringtone and used as regular mobile phone.

So in the end, as far as we know, Apple still dominates the MP3 player market, as long as we logically define "MP3 player market" as to exclude those music phones not used to listen to music, not to mention those "MP3 capable phones" that have less than 10M total memory.

Tomi Ahonen

Dear LOL,

Thank you for writing. Our postings on this topic were not intended in the least bit as a parody or humour. The story is also no longer "idiotic" as you suggest. You are referring to an old posting from a almost year ago, part of an ongoing discussion dating to 2005 consisting of four major commentaries.

We concluded that story early this year (2007) when the final 2006 iPod sales numbers were released, shortly after the iPhone was announced. Please read that posting to see more (Requiem for a Heavyweight)

But in short - all you claim in your comment here, LOL, that we are somehow idiotic - are in fact now verified not only independently by the Financial Times, Newsweek, Barrons, Wall Street Journal, Economist, etc; and by ALL leading industry analysts from Informa (the source used by Apple) on down.

The fact that MP3 playing musicphones form the same market as the iPod was implicitly confirmed by Steve Jobs at the iPhone launch, and explicitly confirmed by Apple CFO Steve Oppenheimer.

I have nothing more to add to this story. If Apple itself clearly states this is the same market - and in their GLOBAL market share (ie not the USA market share of near 80%) - Apple admits their global market share is in near single digits - then we have nothing more to discuss on this matter.

it is YOU who is funny about this. You have stuck your head in the sand. ALL surveys around the world show that more people listen to music on musicphones - in 2006 - and that musicphones outsold iPods during 2006 by 7 to 1. This year its even more so.

Sorry, LOL. You are mistaken. Please wake up, read the updates to the story, verify the independent sources and Apple sources and music industry sources quoted - IFPI for example says that in South Korea alone, over half of all music sold - not half of digital music, half of ALL music sold - goes directly to musicphones. Meanwhile in America - the best market for the iPod - only 10% of all music goes to web music services, and iTunes is only a part of that (meaning less than 10% is iTunes)

Sorry LOL, you are so wrong, so out of date, it is not even funny. It is amazing to see how many people simply refuse to face reality. Like we wrote earlier this year, after Apple itself admitted this market, the story was closed to us. Perhaps some day you LOL will also wake up to the real world

But thank you for writing.

Tomi Ahonen :-)

bobie

this one may be useful for you

http://www.hutwitina.com

sandeep

There are many ipod nano movies sites out there in the market but you may be wondering which are the ones that score well in terms of usability, pricing, etc.

pradeep

It’s called common sense. Something that I guess people these days have forgotten. Naturally if you are going to blast your iPod in your ears at full volume you will have hearing problems. If you can’t control the volume then you shouldn’t own any kind of stereo equipment at all because they can all damage your ears easily. Apple or any company cannot be your baby sitter for what you do with your equipment every second of the day.

suresh

AMAZING. My ipod just stopped working a few weekes ago. The hard dreive wouldn’t “turn over”. I could hear it clicking and see he apple logo flashing on but no sad face or anything. I was sad. I don’t want to spend $$for a new ipod.

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kdt

"I promise you. I PROMISE you. I will be back if the Apple numbers for the iPod show ANY increase of any level from the sales of 8.1 million iPods in the second quarter of 2006. I have told you in the original posting and my replies - that both Alan Moore and I love Apple the company, Macintosh the computer, iPod the MP3 player, iTunes the music store. I love them. If there is good news to report, I WILL. I promise you that."

Well let's see...

3rd Quarter 2006 - 8,111,000
4th Quarter 2006 - 8,729,000
1st Quarter 2007 - 21,066,000
2nd Quarter 2007 - 10,549,000
3rd Quarter 2007 - 9,815,000

When the author said that iPod sales never dropped after the first quarter (which includes the Christmas season), he failed to realize that sales didn't even hit 1 million a quarter until 4th quarter 2004. The iPod is now like any other consumer electronic device where you will see a spike in sales during the Christmas season.

kdt

Are you including all music playing cell phones? If so, then you are including phones like my Samsung A900 sold by Sprint with a whopping 56MB of available memory and no ability for expansion. Do you seriously think people are using this phone to play music?

Tomi T Ahonen

kdt - thank you for posting (two comments)

First, as I promised - I DID return to the iPod story one last time after the Christmas quarter 2006 numbers had been released. The game is over, iPod's reign is over, by then musicphones outsold iPods over 6 to 1 and I said we won't return to kick this dead horse story unless something dramatic happens.

Obviously that Apple had announced the iPhone two weeks prior to the iPod numbers being released, pretty much made it an academic matter by late January 2007.

Today musicphones keep GROWING their sales while again Apple iPod sales fell after Christmas, today musicphones outsell iPods at more than 8 to one.

YOu complain about your Samsung by Sprint. Its so sad you Americans have such lousy phones and lousy carriers. The rest of the world has moved so far beyond this. Globally, HALF of all who own a musicphone now listen to music on them. It does not mean that the iPod vanishes, as iPods will outpeform even the top musicphones for a pure music experience. But for the mass market it does not need to be excellent, it needs to be good enough. In Europe and Asia most musicphones have removable memory chip slots, so you can easily store 2 GB of music now, and 4 GB before Christmas, on removable media. Thats a pretty serious iPod already by capacity.

And yes, I've never said musicphones were better for LISTENING to music. But I've also consistently said that musicphones TOTALLY dominate in music experience - having over a DOZEN music experiences you cannot have on your basic iPod today.

The iPod was a brilliant invention. It has now found its natural annual sales levels, evening off at about 50 million units per year. That is very good news for a company called Apple. But among portable musicplayers, the market this year is over 500 million units and obviously its Nokia, SonyEricsson, Motorola, Samsung and LG who all will outsell the Apple brand in portable music players, as they all will feature a rich catalog of musicphones.

Game has been over since 2006.

But thank you for writing.

Tomi Ahonen :-)

kdt

Wow, what a quick response -- I'm seriously impressed

But you didn't answer the question, do you count all phones that are theoretically capable of playing music in your assessment? Surely you must agree that not all users of mp3 playing cell phones are using them for playing music either because of usability or a fear of running down their battery. Also, wouldn't you think that most iPod owners also own cell phones?

I've been scouring the net but the best reference I could find was

http://www.comscore.com/press/release.asp?press=1184

showing that only between 8% and 20% of cell phone buyers, depending on age group, care about a cell phone's ability to play mp3's.


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