Picture tells it better - iPod share is 14%

I am frustrated by so many visiting our blogsite who seem unable to understand what is happening. Nobody refutes the numbers. Apple fully admits 17 quarters of continuous growth, now two quarters of a fall. Apple admits (CFO Peter Oppenheimer in quarterly review conference call on 19 July 2006) that musicphones are viable contenders, to the degree that Apple is readying their iPod phone. But with all this, the hostility of the responses, as if our visitors refuse the facts.

I finally spotted one brilliant way to explain it. At the Mac Rumors Forum - where several are discussing very intelligently about Apple's strategies forward. They had what probably was the official Apple graphic on the iPod sales. I don't have the ability to seek permission to use that official Apple graph here - but it is easy to replicate using the official Apple data and my spreadsheet programme. Like Mac Rumors I took the last 12 quarters as the first 6 quarters are tiny and wouldn't even display well on this graph.

Look at this graph. Any sane business executive looks at this graph, observes that for 10 straight quarters - two Christmas periods - the graph grows every quarter. Then it peaks in the Christmas quarter of 2005 and suddenly falls. Not for one season - which could be explained as a seasonal drop-off, but now two quarters in a row. It is not sheer lunacy, to look at these graphs, and ask, "what happened" is it? (the source for all numbers is official Apple)

Now - to understand what happened. This one "crazy" consultant based in London who tracks converging technologies, spotted a related stat. Music phone sales. They were non-existent at the start of the period. But last year - 2005 - they suddenly came and exploded.

Notice that the total graph grows very smoothly through the last 12 quarters. Apple started to lose market share in the beginning of 2005 and struggled to keep up with the huge growth rate through 2005. Then in 2006 they lost it. Now the market is running away from Apple. Look at this second graph - on the top is musicphones, the bottom is iPod (note the scale is much greater, thus Apple's graph is "more flat". The numbers are identical - the scale on the left is adjusted to reflect the total scale with musicphones. (the source for all Apple iPod numbers is official Apple. The source for musicphone sales is IDC/Informa and Ovum)

For those who like to "nitpick" - YES I have left out all stand-alone MP3 players who are a very slight sliver into these graphs. Please forgive me those. They are less than a fourth of Apple's share and rather consistent. I am in a hurry and their impact is pretty irrelevant to the iPods vs mobile phones argument made here. But I acknowledge that the correct graph needs a third colour slice on the bottom..

I hope this helps those who are bewildered how could Apple's 80% turn into 14% in only 18 months/6 quarters. This is what I mean. And I thank the brilliant folks at the Mac Rumors for displaying that Apple graph, it hopefully helps our visitors as it helped the Mac Rumors members move the discussion into a more intelligent level. Not if it has happened - nobody argues it has - but how can Apple now best move forward?

And I will reply to all the missing replies next. I just wanted to add these two illustrations now, as I understand my original posting has also confused some visitors.

Comments

[Johnny Appleseed]

Apologies for my inability to understand, but your figures still fail to account for numerous potentially confounding variables, including, but not limited to:
* Market saturation: iPod sales could be slowing due to most people in the potential market (i.e. computer-using music lovers) now owning one.
* Respondents who report that they use their phone to listen to music might also own iPods, and use them as their primary source of music. Is there a distinction between "occasional" and "exclusive" use of a music phone?
* The increase in music phone sales is more likely attributable to more phones incorporating the function than more users choosing the function.
I'm afraid sheer sales data don't count for much. You need to perform a deeper analysis of usage habits.

[Johnny Appleseed]

Oh, and I don't want to give the impression that I'm anti-music phones. I considered getting a ROKR E2 before deciding to hold out for the iPhone. I just think reports of the iPod's decline are exaggerated (or at least premature).

[Cybereer]

By your logic, selling 14+ million iPods for 2005 Xmas was a fatal mistake that would kill the golden goose, so Apple should have deliberately kept the sales under 8 million to make a better looking chart.

For someone penning books, it's just remarkable that you are so clueless about product life cycle and market seasonality, despite having been reminded by countless people. Does it ever occur to you that people buy more products when new models are released, and retailers make most of their profit in holiday season?

People call you a moron for a reason, because you are one and probably an outright liar too. You are making a fool of yourself by spreading this silly 14% market share FUD, when everyone except you know that iPod is far from dying.

I have a Nokia camera phone that can also play some games and music, but the whole damn thing is so clumsy and ugly that it doesn’t even function properly as a phone, let alone as a camera or music player.

What you don’t appear to understand is that most of the phones are Microsoft-like bloated junks with useless features and but poor usability. They are heavily subsidized by the network, and practically given away to entice new customers and discarded quickly like old socks, while iPods are emotionally attached to users and last much longer. Apple has sold 50+ million iPods so far, and I bet most of them are being actively used. How many billions of cellphones are in the trash?

[Dean Bubley]

Tomi

You're making a lot of good points, but I still think you're being selective about how you present & interpret the data.... although so is everyone else.

You still haven't picked up on my "laptops & PCs are MP3 players too" angle, though. I reckon that on any flight I take, 30-50% of laptop users have headphones plugged in. And I'm listening to an MP3 Internet radio stream on my home PC as I type this.... (with my Nano & two MP3-capable phones next to me)

One other thing occurs to me - most of the shipped music-capable phones are Nokia's. How do they define music-capable - a full dedicated music client (with library etc function), just having MP3 codecs for replay of audio files.... or maybe just an FM radio & headphone jack? Do they all have stereo headphone capability?

[Ian Betteridge]

Johnny, I think I can answer a couple of your points.

If the market were saturated, then why are people buying music-capable phones? People are, we know, buying music-capable models rather than other cheaper options. This seems to indicate that they're buying them for the music capabilities. If the market for music players were saturated, this wouldn't happen.

Usage data was covered in the TNS survey that Tomi has linked to elsewhere. To recap, twice as many people worldwide use mobile phones for music than dedicated players. Even if you assume 100% crossover (unlikely) that's not good news for Apple (until it brings out its own phone).

Cybeer: Come back when you have some facts. Your experience with one single phone isn't the same as everyone else's experience. Just remember that before you start running around calling people "morons" because they present facts you don't like.

Dean: Laptops and PCs are not use for mobile music, unless you're thinking that "mobile" means "carried from room and room" (and if you're doing that, I recommend you get an Airport Express with AirTunes - they're damn good :) ).

[KeithJamesMc]

I would have thought that Apple would be extremely happy with a 14% market share of personal music player market: they only have 4.8% of the PC market.

For me the iPod provides a better quality sound than my SonyEricsson Walkman, but I don't think that more than 5% would either notice a difference or pay a premium for a iPod. I'm sure the results of a "Pepsi" test of iPod's vs MusicPhones would be really interesting especially when cost is factored into the equation.

Personally, I think the cellular companies should go for the Apple jugular and offer to re-license every song downloaded with Apple's DRM with the "standard" mobile DRM.

After all, a couple of billion free downloads are nothing compared to the regular handset subsidies that the mobile phone companies provide...

[Johnny Appleseed]

Thanks Ian, but I refer you to my third point: Are you sure the increase in music phone sales isn't simply due to more phones incorporating a music player as standard equipment? Windows Media Player is preinstalled on every PC but it doesn't mean everyone uses it.

[Jedd]

The whole discussion is getting ridiculous already. Tomi knows what he's doing, he knows he's wrong, everyone knows he's wrong. Even a 10 year old would KNOW he's wrong. You can't argue with a liar. Why bother?

[charles hansrote]

hey, me again, sorry for lack of paragraphs seeing as how this is not formal writing i never felt it necessary, but some seemed to disagree.
the portability of a laptop is brought into question... well maybe for the average user. i keep mine on me at almost all times, especial since i have a constant need to be able to work and photoshop and indesign do not work on a hand held all that well. i would say though as i became continually impressed with my phone, i ended up combining it to my laptop. using a hacked blue tooth sync i run it through either my mac or my pc, and just leave in in the cradle or charging off the laptop most of the time when ever i get a call a message pops up on my desktop, and i either answer it via headset or if in private, via my current sound set up. this is not only because they have become crippled, but id have to say do to their size. i know many will disagree with me about this but many phones are just too small and it hurts my hands to continually use them, so when i can just use a mouse, key board, or stylus (for my illustration tablet) i do. this has also been the case with my psp forcing me to buy a grip extender, and use it less.
as for things a cell phone must have blue tooth is the biggest thing. i looked for that and waited 3 months for a good sized phone that had sufficient weight before buying. the added weight also means i am less likely to break it. blue tooth should be embedded in more devices just for communication between devices. i want to be able to move stored info from my scale to my computer so i can do more with it (maybe build really cool graphs).
back to the mp3 thing though, it was a bonus unintended with my phone. just like the motion sensor it has. the motion sensor is fun to play with and even more fun since i figured out how to write scripts for it. however, the music function still does not work right despite the fact it is supposed to play all major media formats. i have gotten music onto it through the “video function” where i just listen occasional as a video-less movie, this is more to show off my skills with code, and the fact my phone can do this than since head phones with the device part of the closed system philosophy these telecomm’s believe in. this also hinders adoption of your devices as a primary mp3 player. in my family there are 13 cell phones, 6 of those are primary or only lines to reach people, all but 2 of those play mp3s and only mine has ever been used for such. there are also 8 mp3 players, and only one of those goes unused (i own 2 devices). these people are not technically challenged either, most of them i am or text over phone, majority use blue tooth. this would seem to go right along with your adoption rate theory, but they do not use the devices for such things. i do not see how it can be counted, and as for korea, and japan, mp3 players them selves are undergoing a massive boom as people buy them to use with or replace phone based players, just visiting any electronics mall and seeing the number of cheap knock offs being sold should point to that. the phone is a commodity, and just like other commodities it will out sell, luxury items, which mp3 players are, including a commodity in a luxury markets statistics makes no sense. and thats really what i was getting at there, the other stuff is just banter. you have to have a phone, and a cell makes more sense than a land line. mp3 players are nice to have if you can afford them
ill save digital cameras for next time

[charles hansrote]

just curious could you post number of available cell phones models with music playing ability by month in a graph too, or give us the numbers in a month by month break down. i am sure i could track this down, but it would make things easier if you already have the data.

[Ian Betteridge]

Jedd, let me translate your comment for you:

"I can't actually argue with Tomi because he knows more about this than I do and has facts and figures to back up what he's saying. So I'm just going to call him a liar and run off, like a 6 year old does in the playground. Meh".

[Ian Betteridge]

Johnny Appleseed: I refer you back to the survey that Tomi quoted on music player usage, which found twice as many folk *using* phones for music as used a dedicated portable music player.

[Dean Bubley]

Ian Betteridge: I am deeply suspicious of that survey, and, indeed, most similar surveys.

Firstly, it runs counters to my own empirical observations of end-user behaviour in multiple countries (including Korea) and "common sense". Can you honestly say that you personally saw twice as much usage of musicphones (which will be divided in any case between MP3 and FM radio) vs. iPods this time last year when the survey was done? If so, in which country & what context? If not, surely that throws into doubt the credibility of the study.

Secondly, the survey was conducted a year ago, ie before many of the (non-Korean) music-capable phones like S-E Walkmans shipped. So what devices were people using? Or again, maybe it was Nokias with FM radios. Thirdly, it was a selected group of "sophisticated" users (eg only in metropolitan areas of China & India) so extrapolating to the 2bn+ overall cellular user base is fallacious.

I actually commented on a previous, and even more spurious, Nokia-sponsored survey about multifunctional phones a while back - see.
http://disruptivewireless.blogspot.com/2006/06/nonsense-surveys.html

[Johnny Appleseed]

Thanks Ian, but the figures don't tally. Twice as many people might use phones for music, but six times as many music phones are sold. Which proves not everyone is buying these phones for the music function.

[Tomi T Ahonen]

First a quick comment...

Hi all. I am amazed at the level of the discussion at this comments section. Thank you very much. There is much reasoned, sensible thinking on both sides, very much helped by the returning contributions by Johnny Appleseed, Dean Bubley, Ian Betteridge and charles hansrote.

It is very illuminating and delightful for me to read about this topic.

I will now take the comments, go offline for a moment (dig for some stats some of you asked for) and return and post a full reply to each of you. Hold on...

Tomi :-)

[Tomi T Ahonen]

REPLIES

Let me start again with two observations. Many of you feel very suspicious of the numbers - because your own experiences do not at all support these reported findings. It makes sense if I talk about flying cars, and of all the cars you've ever seen or heard about, none can fly. Right? The frame of reference is totally off. I don't see anyobdy in a bus or elevator - or in my family etc using phones for this.

I think this is a very valid concern. Tomi might be selling you magical elixir from the back of a van, take your money and vanish tomorrow, eh? A total fraudster? (well, the virtual equivalent of one ha-ha)

As many of the people posting comments come from the US, let me do the quick "America is artificially blinded to this" pitch. Apple clearly states that the USA is by far its best market - 77% local market share in USA, even in Canada their market share is only 45% (Source Apple CFO Oppenheimer 19 April 2006). So iPods are very prevalent and they dominate the USA market. You see them all the time, all seem to have iPods.

But just about all experts agree, that the North American cellular market is the backwaters of cellular telecoms. USA is second-to-last in cellphone penetration among industrialized countries (Canada is last) with a lousy 74% penetration rate per capita. For contrast European average (cellphone subscription) is over 100%. Leading countries like Taiwan, Hong Kong, Israel and Italy have penetration rates of over 125%. The cellular networks in America are horrendous (in Austria all subway tunnels, train tunnels, long car tunnels through the Alps, etc have full cellular coverage). The carriers in America are lousy. They charge some of the highest prices in the world and give lousy service. And handsets? All great handsets appear elsewhere first and arrive on North American shores often 6 months or even 12 months later.

With all that. I TOTALLY understand, that if this phenomenon only became "visible" to some of us "deep experts" who were "looking for it" last year, and America lags by at least a year - then the phenomenon is really "not visible" YET in America.

I hope this partly helps? Don't be alarmed that you don't "see" it. It is not in America to see YET. With that, if you KNOW that in Japan there is a cool new Playstation 3 (I believe its releasing just about now), but you have not seen ANYBODY with it, you then have to take it by trust alone, if reputable sources - say CNN or the Wall Street Journal or Wired Magazine or someone like that reports on it? Make sense. You have not seen a Playstation 3, but if you trust the source to be reputable, and this radical new development happens in another country - you can trust its true, provided you trust the source? And then consider what to do if and when that happens in America. Is it better than the new Xbox, how does it relate to PSP, etc?

I KNOW the evidence is not very visible IN AMERICA. But I am here to tell you that globally it has already happened. It happened only last year. And it is a tidal wave sweeping the globe - America will not be left behind. The moment these new phones appear in mass on American soil, and the carriers keep improving their offering - Helio is a good step to show what is possbible - then what happened overnight (in 18 months mind you) outside America, will ALSO happen in America.

That is the premise. Don't take MY word on it. Trust the experts. In this case, phone makers are biased, but so is Apple. The independents, with no axe to grind, are the music industry. What are they saying? They have examined both and clearly are saying that the phone is the future, not the iPod.

If I was trying to argue for iPod "not being in the same market" or that "customers don't want it" or that "it isn't happening" - and ALL four of the music giants say the opposite - now is the time to wake up and ask "WHY is the music industry saying so" ?

So then. In my long original posting I did quote the only global source of music sales - the official representative of the music recording industry and all artists - the IFPI. They said - that from negligable sales of music to phones in 2004, to 40% of all online music in 2005, this first quarter of 2006 - HALF of all online music is sold to phones. And the remaining half is not all iTunes. iTunes is only part of the remaining half.

Oh, and the online music sales to mobiles is full-track MP3 sales (and music streaming etc services). That is not ringing tones by the way. Ringing tones are a GIANT business - over ten times bigger than iTunes - worth over 5.1 billion dollars worldwide.

So. I did report that actual customers who buy music online, are - according to the MOST REPUTABLE source for music sales and royalties, IFPI - buying more music on phones than on iTunes. The American RIAA is a member of IFPI.

Now. If the end-user customers ARE actually BUYING songs, not just copying songs from their existing CD libraries - but buying songs to phones. And in 15 months, they have not only exceeded iTunes sales worldwide, but now account for half of ALL online music sold worldwide, I think THIS more than any other, proves my point.

It really does not matter if YOU the reader of this blogsite think a "musicphone is a toy", and not valid to compare to your fave gadget, the iPod. It doesn't matter at all if YOUR family never consumes music on a musicphone. I have the global music industry association reporting that MORE people in the world already do. The "average" customer, the "mass market" customer, not the demanding music fan, the "dumb customer" like someone referred to it. The non-technical customer who will not walk into a HiFi store or PC store. THAT customer IS buying music to phones. You cannot refute this source. And you have to accept that if MORE music is already sold to these silly phones, then yes, to at least half of the population of the planet, phones have somehow suddenly become viable as iPod replacements.

But one more bit on this. You are very doubtful, and it is understandable again, because you don't see it. Here are some very recent national stats

In Japan (world's second largest music market after USA), 211 million dollars worth of music was sold to mobile phones in 2005 (source IFPI). Contrast with iTunes global sales of 400 million dollars in 2005 (source Apple).

In UK the third largest music market I don't have numbers for all users. I do have numbers for 3G users (and 3G is growing fast in the UK but is only 8% of all cellphone subscribers). Of the 3G customers, 27% download songs to phones. (source Telephia)

In Germany, the world's fourth largest music market, a survey released this week reveals that 32% of Germans download music to their phones (source Chip Xonio).

These are not the leading countries. In Sweden one 3G carrier, Tre (part of the 3/Hutchison group), already account for 35% of ALL online music sales, and yes more than iTunes Sweden. One carrier with less than 8% of the Swedish mobile phone customers. (source Finanstidningen)

But the world leader is of course South Korea where MP3 track downloads direct to mobile phones were first introduced in June of 2003. In Korea today - 45% of ALL MUSIC SOLD, not online music, all music sold - is to mobile phones (source Telecom Korea - note this source this is the English language industry periodical, its not a carrier in Korea which is confusingly called Korea Telecom)

I understand you doubt the facts because you have not observed anything like it (so far). I hope you can accept the above sources as credible. The IFPI is by far the most reputable source for music industry stats. They say more to mobile than all online including iTunes. That means customers DO buy music to phones. That means customers do think of iPods and musicphones as part of the same market.

Then think what do the honest independents say. Go back to the original posting and read the quotes from EMI, Warner, Sony BMG and Universal. And after that, perhaps you can accept that this is a viable scenario. And after that, perhaps you should consider my reported numbers with MUCH MORE urgency?

Like some have commented here and elsewhere, Apple had all the keys to govern this big market - last year. They knew this was happening, but they failed to capitalize. They threw this whole opportunity away. Nokia, Motorola, Samsung, LG and SonyEricsson are now reeping all those customer dollars that could have come to Apple.

I think it is a shame. Apple deserved better. I did not want to see another Apple 2 and another Macintosh phenomenon.

ONTO INDIVIDUAL REPLIES

Johnny Appleseed. Saturation, are iPod sales slowing because of saturation? Good point. But at the same time people are rushing for musicphones - and remember all the analysis above, for regular customers the MP3 player in the phone is a valid option vs an iPod. Consider what happens in the car market. SUVs were the big sellers many years in America. Now high fuel prices mean nobody wants SUVs. They sit on the lots, heavily discounted. BUT people ARE buying automobiles, only smaller ones with fuel efficent engines. A classic shift in demand from one sector to another. We have witnessed the shift of demand away from standalone MP3 players - even the best of them, the iPod experiencing a 45% drop in sales, INSPITE of heavy DISCOUNTS. While musicphones are in short supply.

Primary vs secondary music device. Valid concern but only for the early adopter segment - like all of us reading these comments - who will have bought several such gadgets and compared. For the mass market - think your own mother - if and when she buys an MP3 player, it will be the only one. And already in six cases out of seven, that MP3 player comes in the form of a phone, not an iPod.

But I agree. Sales volume data is not enough. We need more data. I would put to you - that the three critical facts here are the overall user study - twice as many listen on phones. The music money angle, that IFPI says more money is already earned through sales to phones. And the industry view - all music execs say phone, not MP3 player.

But really, Johnny, do you think iPod decline "premature"? In 2004 the global market share figures for iPods were 80%. Now - if you buy my argument that musicphones have crashed the party and are now courting the same customers - and thus market share fell to 14% - is this NOT enough for you? Premature? How low does it need to go? 5% 1%?

Cyberseer. First, if you think I'm a liar, I'd like you to show why, where am I lying.

Ha ha about the chart. No, Apple tried hard to fight the phones with iPods including the Nano in 2005. But the Apple strategy of sticking to the "technically superior" stand-alone gadget brought them exactly the same failure as the Betamax, Concorde, and yes Macintosh computer. Best technically, but not the market fave.

"Clueless about product life cycle and seasonality?" - hold on. Why does product life cycle come here? Are you seriously suggesting this is a deliberate Apple strategy to respond to a sudden competitor with INACTIVITY and that Apple will "rebound" and sell 880 million iPods later this year to recover to its approx 80% market share? Come on. Product life cycle? Apple is in total crisis in handling mobile phone development cycles. Apple releases about 2 iPods per year. Nokia releases that many phones not every quarter, but every MONTH. But even more relevant is the product REPLACEMENT cycle. The seminconductor industry association just remarked earlier this year that amazingly phones now have a global replacement cycle of 18 months. For PCs its 3 and a half years. Hello? If you don't like the latest Motorola you just bought. You'll have another one by Christmas of next year. If you look back 18 months, suddenly a 4GB storage musicphone with inbuilt megapixel camera, messaging, calendar, web browsing, etc is very modern compared to the iPod from Christmas 2004.

But on "seasonality". That is the VERY POINT of the original blog entry this time. In April of 2006 the point of my blog was the catastrophic decline in iPod sales. The first EVER. After 17 months of straight growth. Every earlier January quarter had seen more sales of iPods than the previous Christmas quarter, until now. The first ever post-Christmas decline. And at 40%, a massive one. So yes, many argued "seasonality" back then - including Apple execs.

THAT is why this blog entry was more important. If you were right, and there was seasonality. Then iPod sales would have to have recovered to this quarter. We need 14.2 million unit sales in the second quarter 2006 - to restore iPod to its previous level and continue the growth. There was no recovery. Not even a PARTIAL recovery - to try to explain seasonality. No. There was a further decline in sales. From 8.5 million to 8.1 million. No seasonality. Go talk to your marketing professor.

If I say iPod market share has declined to 14% - that is not saying iPods are dying. I never said that. I said iPods are shifting from being a mass market industry darling - with 80% market share globally as recently as 2004, to a withering niche market, at 14% today and 10% by the end of this year. I never said iPods will die and you can have GROWTH in sales, while market share shrinks. It means you are not keeping up with the competition.

Then you complain about your Nokia experience. Two comments. If you already HAVE an iPod, you'll compare the music experience between the two. For almost all on the planet - and yes, for 60% of Americans even - if they buy an MP3 player today it will be their first. The people who comment on this blogsite are all techies. Call us "nerds" if you will. The average population does not have MP3 players yet, and are buying them now. So if you cannot compare the MP3 player on your phone to an iPod, then you don't know how much better it "could have been" on an iPod. Someone who has never driven a Ferrari does not understand the intensity of those breaks and handling and acceleration, and may think that what they have in their BMW or Jaguar or Mustang are quite amazing...

Note how I just associated the iPod as being the Ferrari of MP3 players. I think it is like that. A top-end super performance device. But a niche device. Not for the masses.

You ask how many billions of cellphones are in the trash? I also can answer that. Worldwide approx 4.2 billion cellphones have been sold since the first network went live in Japan in 1979. The current cellphone user population is 2.4 billion (and worlwide about 10% have two subscriptions. If we assume of those about half have two phoens and the other half have one phone but two SIM cards) we get an active phone population of 2,280 million phones in use. So about 1,980 million (ie almost 2 billion) cellphones have been discarded as obsolete.

Dean Bubley. You caught me out, ha-ha.. No. I think I am very serious about this. In the end of 2004 there were practically no musicphones. Apple's global market share was only vs its small MP3 player rivals, and the various Chinese, Taiwanese, Korean etc MP3 makers were only ramping up. Apple did command almost an 80% market share.

THEY KNEW the phone would emerge as the dominant MP3 player platform, and Apple had every opportunity to become the big boy in that space. Either by their own iPhones or partnering with some of the big boys of phones, or through licensing and/or a combo of all of the above. They ignored this opportunity and saw the market slip through their fingers. To quote Sir Humphrey form Yes Minster - Apple snatched defeat from the jaws of victory.

On laptops and PCs. I'm sorry. I have been replying to that too many times so I'm sorry if I didn't reply to you. I think laptops don't need to be considered as they are not really a pocketable option. Can't jog with them, bicycle with them, etc. Yes perhaps a hybrid option but not really a significant threat. The other thing - laptops are not a big enough market to really care. Only 300 million or so laptops are currently in use (I won't run for this stat today, as this is not central to our theme, ok? and only last year more laptops were sold than desktops worldwide) and most laptops are not moved around every day. Most laptops sit at executive desks at offices where perhaps for the weekend or one night the exec takes the laptop home, or for the one business trip per month. Only I think 2% of the total population is even a TARGET for laptop modems - ie for true "road warrier" work - like those using a laptop at a Starbucks. Yes, visible, but tiny, trivial, irrelevant vs the huge numbers in mobile. Laptops are no threat to iPods. Phones are.
As to desktops - they are not really even portable. So they do "sit" ha-ha in a different market.

Most shipped are Nokia? No I don't think so. I think the opposite is true but have not seen a breakdown. Motorola's Razr is the global must-have right now (V3i models have MP3 players) and the LG Chocolate is the hot new phone, Carphone Warehouse says their bestselling phone of all time. I think Nokia came late into this and is at best on par with their normal market share. Also - I would sense that Nokia makes very strong moves in this space, with the N-Series etc.

As to how music phones defined. I don't think there is a standard definition by any means for the industry. I think its a lot of creative labeling - and accounting - for now, a wild west, until consumers become more demanding and we some consensus form factors appear.

Ian - I'd love to also comment to you, I don't want you to feel I'm ignoring you and only talking to those who disagree with me. But you know I agree with you. You make great points. Thanks.

KeithJamesMC - ha-ha, funny about 14% is above Mac share of 5%. Good point about most average customers can't tell the difference in sound quality.

Johnny Appleseed. On Ian's reply and "MP3 players pre-installed" - I think we've discussed that now? Currently as musicphones in short supply, most who actually go through the trouble (or cost) of getting one will want one. Thus they know specifically the MP3 feature and will at least try it. Not all will use it (hence the discrepancy between devices sold - last year 2005 phones outsold iPods 4 to 1 - versus the user study of ratio of music listened to only 2 to 1. But yes, I argue most currently know its a musicphone and want it. Not all will use it. Increasingly MP3 players become staples and many will be ignored.

Which should give Apple a lot of thought. What happened to independent makers when the converged solution arrived? WordPerfect was the world's biggest selling word processing software. Lotus 1-2-3 was the biggest selling spreadsheet. Today Mircosoft's office with Word and Excel etc totally wiped them out. What of e-mail? Before Outlook there were I recall four strong e-mail providers. Not anymore. What of Netscape? Come on, in Apple's back yard, they've seen this happen time and again.

Jedd. "Tomi knows what he's doing, he knows he's wrong, everybody knows he's wrong.". Ok Jedd. That is a rather wide-sweeping statement. Many in this thread already are admitting at least PARTS of what I say make sense. Could you please give me one area you think I am wrong?"

charles hansrote. Laptop - see above. Bluetooth, agree. I am happy your quick survey of your surroundings validated my reported numbers, ha-ha. Ok. So they don't use them for music? Could you see this happening. EACH of the members of your family will get a new phone in the next two years. And if any of them now listen to music, they all will be "interested" in the music ability of the next phone. Can you grant me that over time the phone makers will release "good enough" phones that some will use them for music. Not necessarily all music listening - as they all have standalone MP3 players already, but the transition will start. This even in a family which is overloaded with MP3 players. Most families are of course not as gadget-laden as yours is, ha-ha..

But as to Japan and Korea - no. You are making now a classic error of assumption. Check out the actual data for both countries - the battle is totally over. Look at my stats above. What little sales of the cheap knock-off MP3 players happen to happen, those are old stock, perhaps sold to tourists etc. The Korean market moved first, and Japan second, and they are overwhelmingly already in the phone based future. ABSOLUTELY no going back.

You also asked for the number of music playing cellphone numbers. Sorry. I wish I could. You're asking a bit like a question, how many car models exist with diesel engines? For cars there are catalogues, and you could do a search and calculate. Phones have life spans of 6 months typically. Any market (any country) has typically about 200 live models at any one time. The UK market is significantly different from the Italian one or the Swedish one, not to mention the market in Israel, Hong Kong, or Japan. Would be a horrible amount of work. We may spot some analyst with that - perhaps in the big industry sector reports like Informa's Mobile Music report, but for now, I don't have that info and don't think anyone has it. Oh, the phone makers are not only the big five I mentioned. After Nokia, Motorola, Samsung, SonyEricsson and LG, there are in no particular order BenQ (Formerly Siemens), Alcatel, Panasonic, Sanyo, HTC, Sendo, and on and on and on and on. There are about 20 cellphone manufactures in Taiwan alone.

Dean Bubley (again) You replied to Ian and said you're deeply suspicious of that survey (the TNS survey I take it?). Because it goes against your empirical observations? Well, please look at the country data I posted from the three largest music markets after USA, and two of the most advanced markets for mobile music. Then please reconsider. Do you really think the TNS survey would NOT produce a global result, if these five countries are mixed in with USA etc numbers? I think so. 2 to 1 ratio for 2005 seems very reasonable to me, if musicphones themselves outsold iPods 4 to 1. There will be a lag, but yes, it makes perfect sense.

MOST OF ALL, it is verified by the IFPI trends to mobile music.

They are consisten, Dean. It is a sudden big global shift, but its there. Please reconsider. I know you think about these things a lot and you and I often discuss these matters. I do share with you the severe concerns with manufactur surveys like any Nokia study (although, as it was my personal responsibility and budget that used to run those when I was Nokia's Global Head of Business Consultancy until 2001 - they are done totally independent, using only the most reputable global reserach companies like Mori, NPD and so forth, and typically are enormous in total survey size, like 10,000 surveys across 8 countries etc)

Johnny Appleseed. I've explained the ratios in the above, why more devices than users than revenues. I trust you understand my position now.

Thats all. Thanks all for writing. Please come back.

Tomi :-)

[schlunzi]

When the music industry reports that 40% of all online music is consumed on cellphones, are they not maybe talking about ringtones? From their perspective a licenced ringtone and an MP3 sold over iTunes are really the same thing, a source of revenue. From the consumer (and our) perspective they are apples and oranges though: completely different use cases and to be used on specialised devices.

[Ian Betteridge]

Hi Marcus - no, they're not talking about ringtones, as Tomi mentions above. That's music only. Ringtones are a much much larger business.

[Tomi T Ahonen]

Hi Marcus and Ian.

Good question Marcus.

But yes, Ian is right. Ringing tone revenues are more than 12x larger than iTunes worldwide. Ringing tones were a 5.1 billion dollar global industry already last year (source International Herald Tribune 2 December 2005)

So no, those numbers don't include ringing tones.

Tomi :-)

[Johnny Appleseed]

A couple of final thoughts:

* It's too early to count Apple out as Tomi is doing. Even if the market is moving towards music phones, there are scores, probably hundreds, of disparate services with no clear leader, and no standard way to move music to other devices as Apple allows. Is it not conceivable that a phone with the powerful iPod brand could sweep the industry if released this year or next?
* Apple already has a piece of the music phone action through its partnership with Motorola. It would be interesting to know what percentage of phones *actively used* for music are running iTunes Mobile Music.