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Barron's: Music-Ready Cellphones Will Hurt Apple iPod Sales
by , 12:15 AM EDT, June 27th, 2005
Apple Computer (AAPL) stock is expected to take a hit Monday after a Barron's newspaper report (subscription required) concluded that as more cellphone companies add the capability of downloading and playing music, sales of the popular iPod digital media device will slow.
The report said that by 2006, many new handsets will carry software, circuitry and data storage for portable music. It said this will let people download songs from personal computers, like iPods, but also download music via a wireless connection to competing music services.
"While optimists think Apple could sell 45 million iPods next year, mobile-phone makers will be selling more than 750 million handsets," wrote Bill Alpert in a store entitled 'Bites Off the Apple'. "All those handsets could weigh on the iPod's growth prospects -- and Apple's premium stock valuation. Cellphone users won't need to lug around a second gadget to have their music."
The report went on to say it will be sad to see the iPod "overtaken by the common cellphone" and quoted an industry executive as saying he sees a day not too soon away where Apple's marketshare of the digital music business could shrink from 90% to just a few percent.
The report said that Apple's dominance with the iPod will dwindle slowly as today's mobile phones sold in the U.S. don't have, and will not have for some time, the capacity to store as many songs as an iPod. In addition, the report said it will be some time before state-of-the-art, third-generation wireless networks are in place in the U.S. that offer more reliable and faster downloads of music files.
Barron's said an Apple spokesperson "declined to discuss looming competition from cellphones, after the newspaper had tried for several weeks to get comment."
Observer Comments
Mon Jun 27, 2005 12:41 am Subject:
I doubt cell phones will be a threat to iPod sales anytime soon. I view any trip south by AAPL on a story like this as a buying opportunity. This kind of story might make good copy for publication sales and a day's media coverage, but cell phones are cell phones and iPods are simply better at music.
Cell phones have been playing games for years, and yet Nintendo's Gameboy owns the midrange game market with thousands of titles and Sony looks to be creating a nice little hardcore premium niche for itself with the PSP, and the development of games on cell phones or lack thereof has no bearing on their hardware. I'm sure people make money on games for cell phones, but no real gamer spends time with them, just as nobody who really cares about music is going to spend time navigating a significant library of titles on the tiny keypad of their cellphone.
The reason is because no matter what, there is always demand for a device that is purely devoted to a single set of tasks rather than doing everything. The iPod is simply better at doing music than anything else, at least that I've used. At worst there might be a dip as some people using motorola phones use the iTMS and iTunes on their phone, but there is some profit, at least in the licensing of the iTunes software, for apple there anyway.
Plus, out of the 750 million cellphones how many will even be used for music? I assume it will be an extra charge just for the service, just like all the other fancy things on my phone I never bother to use.
I just think relating this to Apple's stock value is kind of absurd.
Cell phones have a horrible interface for doing much of anything besides talking to somebody. The iPod is so far superior as a music device. When will these industry goons wake up and realize that it's better to have separate devices dedicated to their own tasks??? I'm getting so sick of "convergence" getting in the way of creating good products. The iPod should stay the iPod and that's what I want, not a cell phone masquerading as a music player!
Mon Jun 27, 2005 1:47 am Subject: I love the way they do math...
"While optimists think Apple could sell 45 million iPods next year, mobile-phone makers will be selling more than 750 million handsets"
And of course this means that every single one of those handsets will be able to play MP3's, right? Not even. They have been claiming for years that the availability of simple camera phones was going to decimate the sales of digital cameras. In fact, I belive this same company stated that by 2005 the sale of camera phones would bring the digital camera industry to its collective knees.
People really need to take a close look at the kind of garbage these guys spew forth just to see what kind of control they have over the stock market. Many of these same analysts have stock interests in the companies they talk about. They get the stock to go down a little so they can buy cheap, then when people realize the doom and gloom was off-target, they make a pretty penny on that same stock going back up in value.
This is just sad.
Mon Jun 27, 2005 7:38 am Subject: Subscription service?
". . . the report said it will be some time before state-of-the-art, third-generation wireless networks are in place in the U.S. that offer more reliable and faster downloads of music files."
Maybe in couple of years the service will be SO fast AND relible (lol) that you could have 'music-on-demand' for a fee as part of your phone package. 1,000,000 songs to LISTEN to as opposed to download (i.e thru WAP or some sort of GPRS service?) Maybe?
"While optimists think Apple could sell 45 million iPods next year, mobile-phone makers will be selling more than 750 million handsets"
Heh! How many iPod makers? 1: HP. How many phone makers? Much more... General Quality of the iPod: good to excellent, with a few so so's. The general portable phone quality: bad to ok with a faw goods. The ipod is a good quality dedicated device, whilst the phones are containing more and more (often poorly deseigned) perks to distract from the main goal: a mobile telephone. Example: my phone works great as a digital camera and game console, but when it comes to phoning, well, not great. The fact is that cell phone makers have to improve their products to be equal to devices like digital cameras or iPods before thinking of seriously competing with them.
Mon Jun 27, 2005 9:48 am Subject: Repeat after RC
[clenched teeth] will you please ... well... let's just say this comment exasperates me [/clenched teeth]
[ back to normal mental state] I just don't think that cheap mobile phones and their progs. will be able to " dethrone" the iPod that quickly without making big quality improvements [/]
Mon Jun 27, 2005 11:29 am Subject: Industry Executive quote
What industry?
If he is from the cell phone industry, of course he thinks cell phones will supplant mp3 players (and why just mention the iPod? Why not say it will kill mp3 players in general?). It is a self-serving quote and should be taken with a huge grain of salt (actually a whole ocean's worth).
Personally, I use my cell phone to talk to people (not take pictures, not listen to music) and my iPod to listen to music (not talk to people). Right tool for the right job. Last thing I need or want is a "jack of all trades, master of none" approach.
But that's just me...
Mon Jun 27, 2005 1:00 pm Subject: Re: Just a matter of time....
QuoteAnonymous wrote:
Let us be honest with ourselves. Even if you love the iPod, it will not have the same type of success once cell phones contain the same functionalities as an iPod. Apple needs to either partner with multiple cell phone companies or add wifi to its product offering or it will most likely make the same strategical mistakes they made during the early years of commercial computing. Just being honest here...
But a computer is not a portable entertainment device. A much better analogy would be portable CD players. They managed to survive many years without any major change to their design or function. I'm not saying the iPod shouldn't or won't change, but clearly there will alway be a place for dedicated music players. That's all some people want.
Music-playing-cell-phones will most certainly make an impact...mostly to the iPod Shuffle, I'd bet. But how could they have any effect on the 20 GB and larger iPods? Who would decide to not buy a 60 GB iPod photo because of their cell phone?
Seems to me if i'm playing music on my cell phone all day long, i run the risk of draining my battery and not having my phone available for emergencies, etc. Right? (I don't use a cell phone, so am unsure what kind of battery life they have these days.)
Just seems to me its more practical to have a phone which i use primarily as a phone and little else. Sure, i'd like to have a camera in it too, and maybe a calendar and addressbook, cause you never know when that might come in handy, but i think i'd want a real camera for when i'm serious about taking pictures, so there's no way i'd use my phone for serious photography. And even if cell phone cameras were really, really good (which i strongly suspect they're not), i'd still want to have a separate camera for the aforementioned battery issue, if for nothing else.
But YMMV.
Yes, "Let us be honest to ourselves": mobile phones are generaly of inferior quality and are not able to execute 2 tasks at the same time, contrarily to the iPod. I'm not saying that all mp3 players are of "Bonne Facture" , but "Let us be honest to ourselves". I'm not satisfied with the current mobile phones.
QuoteAnonymous wrote:
I think Ipod market is definitely going to get smaller through the coming years as cell and mp3 player becomes more common.
You're not an example of that, though. You've already said you had no intention of buying an iPod. So there's no "lost" sale if you buy a music-phone.
Yes, flash players may be in trouble. But I just can't see any challenge to the larger iPods from cell phones. I haven't met anyone yet who was GOING to get a full sized iPod but decided to wait for a cell phone instead.
QuoteGuest wrote:
When I was looking for a new cell phone last year, I wanted mp3 capabilities, but was quite surprise that nobody built one yet. I had my 256 mp3 player for over 3 years now and I plan to buy mp3/cell phone when it comes out. I don’t want to deal with having 2 bulky gadgets in my pocket. I would be even happy if it had at least 2 meg camera for taking quick reference. Like it or not cell and its growing capabilities is taking a bite at a lot of industries. Palm is loosing market. People are using cell for time rather than watches. Games are another issue that is hard to crack. Gaming is about quality of games and look of games…something a cell phone game is far from achieving. Plus the control sucks. I think Ipod market is definitely going to get smaller through the coming years as cell and mp3 player becomes more common.
My wife has a Treo 600 phone/PDA that can play MP3 files. It is okay, but no where near my iPod and no iTunes interface. It also has a digital camera that is better than my cell phone, but not as good a cheap dedicated camera. Nice little full sized keyboard that makes it easier to compose email.
Mon Jun 27, 2005 3:37 pm Subject: Re: Phone with large flash memory
QuoteAnonymous wrote:
That is discounting the advance of larger flash memory like Samsung's new 4gb chip. Put a couple of those in a phone...low battery consumption, lots of songs.Who would want a clunky hard drive model?
If this were to happen, why wouldn't large iPods shift to a similar technology?
No matter how the technology changes, the fact remains that you'll probably always have an iPod that costs 3 times what a cell phone does and has several times the storage. That's not going to change no matter what technology's on the inside.
And at any rate, my point was that I haven't met that person YET. Should they start to appear I'd change my prediction. But they haven't.
My cell phone (Nokia 6610) can't even manage to work decently as a cell phone.
1. I can't hear the regular handset and I have to either use the headphones or speakerphone.
2. The battery life is pityful. As it is, I have to recharge it nearly every night, just to kep it going.
3. The interface is so clunky that I have trouble with it for PHONE_RELATED_operations … iTunes interface, somebody ?
4. It includes a radio functionality I have used maybe 3 or 4 times in the early stages of ownership, but the sound quality (problem 1) and the battery life (problem 2) quickly discouraged me from going any further …
I don't have a camera on it, and I sure don't miss it … that may come with my next cell-phone, as it is becoming ubiquitous, but I'm not going to be using it very much either …
My iPod photo, on the other hand, gives me very good sound, battery life, and allows me to empty my Rebel's card when it's full … ![]()
They already make you check your cell phone at the door of several places if it has a camera on it. Lots of workplaces and such are already concerned about iPods (and keychain USB drives, and more) and security, so they ban the devices from the workplace. By combining the two devices together, you get even more chances you won't have either on you when you want to use them.
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