Welcoming visitors from Arstechnica (Apple iPod/iTunes story)

We noticed that the Arstechnica discussion board became very involved in the iTunes/iPod story and has sent a couple of hundred visitors to our pages already.

We welcome you. We hope you will also find other intersting postings at this site, which is not an iPod/iTunes/Apple site - although we do cover the iPod as a case study in our book - as this blogsite covers the stories of digital communities (blogging, massively multiplayer gaming, mobile phone smart mobs, TV interactivity, community collaboration etc) and the related digital convergence, interactivity and engagement marketing stories.

For us the iPod/musicphones is rather strongly "old news" but for anyone visiting us and intersted in our analysis of why MP3 player phones outsell iPods currently already at a ratio of 6:1, music consumption on musicplayer phones exceeds consumption on iPods at over 2:1, and the actual digital sales of MP3 songs (full-track songs, not ringing tones) to musicphones exceeds that of iTunes at a ratio of already 1.1 to 1. We launched this analysis a year ago. There are five related postings on the story. I ask that you read the related articles. If you are in a hurry and want the quick view, then please look at the charts we prepared at this story:

Picture tells it better - iPod market share is 14%

The actual discussion of the iPod vs musicphones story is in five parts. We started a year ago discussing the emerging threat of musicphones to challenge the technology darling of the iPod. A year ago this time Apple had seen 15 quarters of continuous quarter-on-quarter growth and a prediction that Apple would lose its dominace was quite a brave one (and a lonely one). We still made that at this forward-looking blog:

2006: the year the iPod died

That blog proved to be very controversial at the time, generating a lot of ire from the Apple and iPod fans. But also, with hindsight, our foresight had a remarkable level of insight. Apple's quarterly sales continued to grow for the two last quarters of 2005 resulting in an amazing run of over 4 years fo solid growth, 17 consecutive quarters, but then in the first quarter of 2006, iPod sales crashed. We reported it in March 2006 at this follow-up blog:

Nails into the Coffin of the iPod

Like before, we again attracted some heated comments from the iPod community, but also by this time, many had joined in the view that musicphones were a viable rival to the iPod. Organizations such as Informa, IFPI and TNS all reported on the trend away from the iPod to the musicphone. We were no longer alone in our view. There were many angry Apple and iPod fans who reacted claiming that the iPod drop in sales of 40% was because of "seasonality" even though for the previous four years there never was a seasonal drop in iPod sales in the January-March quarter. No Seasonal Drop in ANY quarter in fact. Still, we allowed for this possibility, and promised to return to the story after second quarter 2006 numbers by Apple had been revealed.

That happened in July 2006, when we posted our most read posting reporting that for the second consecutive quarter, the sales of iPods were down again, a further 6%. Now seasonality was totally out of question, as musicphones were soaring, each of the global giant mobile phone manufacturers from leading Nokia and Motorola to the LGs and SonyEricssons reported unmet demand for their top-end musicphones. The market shifted totally away from Apple. By now Microsoft's Bill Gates, Nokia's Anssi Vanjoki, and the leading senior executives of each of the four record industry giants - Warner, Universal, Sony BMG and EMI all had made statements that the musicphones would dominate over iPods as a music selling and consumption platform. Even Apple's own senior management - CFO Peter Oppenheimer admitted they now track musicphones in the same market as the iPod, also pointing out that as of now, the iPod still holds a technical lead.

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

That story ignited the ire of the Apple and iPod community like nothing we've seen at this website. But by now we were no longer a lonely voice. The story was covered in July at dozens of discussion groups and attracted hundreds of comments - including over 145 comments left at our blogsite alone. We dutifully replied personally to each and every comment, and invited all to continue the dialogue. We also visited dozens of other sites where the discussion also was maintained, and offered our views. I posted a review of that discussion in the final entry to this story entitled:

Electronic Echoes: Hundreds commented on our iPod 14% story.

Now, as final comments - we don't carry advertising at this site, and we are not aiming to. So there is no reason whatsoever for us to generate sensational traffic and raise our profile.

For all who think our view is preposterous, please consider that this view has now been covered in various press such as the Financial Times, Business Week, Observer, Guardian, etc. The same principles - that musicphones are part of the same market as iPods - is no longer heresy, it is reported amongst others, by Informa/IDC - the market research organization that Apple itself quotes for its sales numbers. Most revealingly all of the four major music labels feel the musicphones are a direct rival to iPods. Our view is now the mainstream, and any Apple iPod fanatical view that we are somehow heretics, is about as pointless as claiming the Intel based windows computers are not personal computers (that somehow only Macintoshes are PCs).

And yes, we LOVE the iPod. We LOVE Apple. We LOVE iTunes. We say so in our book, and we have celebrated iPod and iTunes for five years. But now its time of ruling the roost is over. iPod has become a high-end niche product. The mass market has shifted to musicphones.

Please read the five related blogs to understand why we think so, and what proof we have. We have listed actual sales numbers from Apple, Nokia, Motorola, etc. We have listed actual global music sales figures from the IFPI. We have listed results of the only usage study which included both iPods and musicphones. All of the data now prove our point.

And as a final note - I have already promised to return to this topic again at the end of the year, when we have final Apple iPod sales numbers - many Apple/iPod fans believe the iPod will make a dramatic return to form, and if that happens of course we will happily report that.

FINAL UPDATE from January 2007 - as I promised, we have returned one last time after Apple relased Christmas quarter sales figures, and concluded this story in Requiem for a Heavyweight: The iPod Reign is now Over.

Comments

[ALF]

Just because every phone sold today has an mp3 player, camera, and a bunch of other crap in it, does NOT mean that people actually USE those features of the phone to the degree people use them on content-specific devices like the iPod or Sansa players.

You are making a leap of faith unless you have access to sales figures from Verizon, Cingular, Sprint, etc. for music purchases. You claim a 1.1 to 1 ratio, but I don't see where you're getting that figure. Moreover, you're only comparing to iTunes. Add in Rhapsody and other music sites and the ratio changes.

There are also plenty of people who have both a cell phone and an iPod. In fact, I'd venture to say everyone with an iPod has a cell phone. How does that figure into your equation?

The trend I see somewhat overlaps yours, just from a different perspective. Cell phone players will overtake flash-based media players, but drive-based players fulfill a "niche" cell phones can't handle -- large media, large numbers of media, etc. That's how the market will probably shake out and that's why Microsoft's Zune may never appear in a flash-based format. They're already thinking ahead (as is Apple with their iPhone).

Just some thoughts...

ALF

[Tomi T Ahonen]

Hi ALF

Thanks for stopping by and posting the comment. I hope you noticed that this blog entry is from last year, when such data was not out yet. I have now the statistics you ask for - with sources such as InStat, Nokia, Continental Research, RIAA etc reporting on music consumption and music downloads. Please read the latest update to this story - I have the link also above where i say there is an update to the story - at this link:

http://communities-dominate.blogs.com/brands/2007/01/requiem_for_a_h.html

So yes, the numbers are out there. Not everybody with a musicphone does listen to music on the phone, but the facts are irrefutable, the MAJORITY of musicphone owners do. Read that story, the various sources and then please re-consider your position.

But thank you for posting

Tomi Ahonen :-)

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