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Will Cell Phones Dethrone the iPod?

In yesterday’s Wall Street Journal, reporters Christopher Rhoads and Nick Wingfield speculate that the Apple iPod will face a serious challenge from cell phones (subscription required). I think this will turn out to be wrong. It’s certainly true that the…
April 12, 2005

In yesterday’s Wall Street Journal, reporters Christopher Rhoads and Nick Wingfield speculate that the Apple iPod will face a serious challenge from cell phones (subscription required).

I think this will turn out to be wrong. It’s certainly true that the success of iPod/iTunes has sent other manufacturers scrambling to tap into the market for digital-music-on-the-go. And with Samsung selling two phones with internal hard drives, multimedia players such as RealPlayer available on the Treo 650 and other smart phones, and SonyEricsson planning to market a Walkman phone in Asia and Europe starting later this year, it’s obvious that a growing number of cell-phone owners will be trying out their phones’ music-playing capabilities. But it’s a very big leap to conclude that MP3-capable cell phones will make a real dent in Apple’s iPod revenues. Here’s why:

Smart phones are good at many things, but excel at none. (Except, of course, for old-fashioned voice communications.) To churn through a ton of e-mail or locate information on the Web, people don’t use their Internet-enabled phones; they use their desktops. To take album-quality pictures, they don’t use camera-phones, they use dedicated digital cameras. Just because a phone can play music files, in other words, doesn’t mean that it’s the best tool for the job. The iPod, meanwhile, is tuned for tunes. Its vast memory (even the cheapest iPod Mini comes with a 4-GB hard drive) and its specialized scroll-wheel interface are perfect for carrying around and sorting through large volumes of music or podcasts. The real question for marketers is about purchasing decisions: will people be more likely to buy a cell phone instead of (or in addition to) an iPod if they know that the phone can also play music? I really doubt it. If you’re a music lover, you buy an iPod. You don’t but a cell phone until your old one dies – and then it’s because you need to stay in touch, not because you need to listen to tunes.

The iPod isn’t just a music player, it’s an identity statement. For better or worse, wearing those telltale white earbud cords in public sends out a message – a mixture of “I’m a music lover,” “I can afford an iPod,” and maybe “I’ve got better things to listen to than what’s actually going on around me.”  But if your earphones are attached to a cell phone, the message is very different. Then you’re saying “I’m so busy I have to be on the phone all the time.” Music and fashion are inseparable: why else would customers wait for months for an iPod Mini in their favorite tint of brushed aluminum?

When you have an iPod, you’re dealing with one trusted middleman: Apple. The same people who will replace your iPod if the battery wears out are the ones running the music store. There are no complicated corporate alliances to figure out, no third or fourth or fifth parties trying to extract another buck at every layer in the process of downloading content. Getting music onto your cell phone, on the other hand, is going to be an adventure in telecommunications politics. Wanna rock to U2 on your Nokia cell phone? Then you’ll be dealing with a) Nokia,  b) Loudeye, which provides the merchandising interface for Nokia’s music service, c) your cellular provider, which will handle the billing, and d) Microsoft, whose Media Player will be the PC client for Nokia’s service. Everyone in this chain will want their piece of the action – perhaps a substantial piece. As Rhoads and Winfield themselves observe, “Carriers…don’t want to sell subsidized phones unless they can share in the revenue stream, such as from downloading songs from their networks for a few dollars each.” A few dollars? Why not, when you’re already selling 15-second ringtones for $4.50 a pop?

Apple itself has an eye on the mobile phone as a music channel. It has already inked a deal with Motorola to bring out an iTunes-compatible cell phone, supposedly this year. Business 2.0, meanwhile, recently hired Robert Brunner, Apple’s chief designer from 1989 to 1996, to take an educated guess at what an Apple iPhone would look like; the results were striking. If nothing else, they demonstrated if nothing else that a phone and a music player can be packaged together with just as much elegance as the iPod alone possesses. My guess is that if anyone can figure out how to make the music-listening experience work well on a cell phone, it is Apple.


All previous forecasts about device convergence have been wrong. In an article I edited for Technology Review, “Handhelds of Tomorrow”, we predicted that whoever was first to make an all-in-one gadget “feel right” – that is, whichever company solved the human-factors-engineering problems involved in combining voice, text, and Internet communications in a single device, to say nothing of music or video – would control a multibillion-dollar business. That was three years ago. In the interim, some companies have come close to solving the puzzle (most notably, in my eyes, Handspring/PalmOne with the Treo line of smart phones, but there are others). So why are people are still carrying around separate cell phones, cameras, MP3 players, voice recorders, pagers, game players, and laptops? Because each of those devices is still the best at its particular job. People who care about that function won’t settle for the dumbed-down version that inevitably appears in a converged device.

Don’t get me wrong; I think Rhoads and Wingfield did their homework and wrote a compelling piece. The questions of specialization versus convergence and convenience versus function are going to be around for a long time. And it’s only natural to think that people will want to do more with the devices they already have; after all, people who use cell phones regularly far outnumber those who use dedicated music players (by 76 percent to 7 percent, respectively, according to Jupiter Research). But the iPod is perhaps the most broad-based and firmly-rooted consumer electronics phenomenon ever, surpassing even the Sony Walkman. The iPod came along at the exact moment when people were learning to expect their data to be mobile and when large amounts of portable digital music, requiring large amounts of storage, were becoming available. As long as that content stream keeps flowing – which it will – we’ll need devices capable of handling more and more bits gracefully.

My prediction: if the iPod phenomenon has blown over by 2008, it will only be through Apple’s own missteps.

Technorati tags: ipod gadgets cellphones itunes Apple WallStreetJournal convergence

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