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iPod vs MP3 phone – Apple losing

Tomi Ahonen has been taking a beating from the rabid Apple fans for his analysis of the portable music player market, despite the fact that his numbers and premise are completely sound (Tomi replies to the more reasonable comments at this post. Please don’t bother posting any comments here with out at least reading this).

To summarize: Apple’s market share in the portable music player market is slipping drastically as more people buy and use phones capable of playing music.

What leaves me shaking my head, though, is the comments on the page where Tomi replies to earlier comments – which repeat the same arguments that he’s just responded to. I sometimes wonder if using the internet rots your brain, leaving you incapable of reading.

Comments on this entry are closed.

  • Steve P

    Seems you can’t even tell the truth without mac zealots spamming you – Apple have already said that convergence is the key here so whats the big issue.

    most people want to carry one device and they will buy whatever brand if it has decent capacity and ease of use (i.e. the granny test)

  • TomB

    I didn’t know cell phones could recieve podcasts now.

    I agree with Ronald. Having an MP3 player doesn’t mean you use it.

  • http://www.tomiahonen.com Tomi T Ahonen

    Hi Ian and visitors to Technovia

    (yes I’m that guy who started this bruu-haa-haa about iPod global market share now being 14% because of musicphones)

    First, Ian THANK YOU so much for injecting some reason into the discussion at our blogsite. You are a godsend. THANK YOU.

    Secondly, thank you also for posting about it here. We clearly agree on the topic.

    For the comments here, a quick few replies (says he who hasn’t replied enough today ha-ha – hey, its evening in London and nothing on TV as per usual, so the consultant without a life is arguing technology on the web. How do you spell loser? ha-ha)

    Ronald. Good point. Valid. Will become very significant once music players are standard features on phones. They are not now. Motorola reports their best seller is the music-enabled Razr V3i series. SonyEricsson says Walkman phones drive their sales. Nokia says their musicplaying N-series are exceeding supply. So as of now, the music playing feature is the driver for phones. You have to pay extra for that. You must request it from your dealer. Often you have to order the phone and on the shelf they have non-music phones. What this means, is that currently – as these are hot – almost all buyers do know its a musicphone, and was willing to want it.

    Why get a musicphone unless you use the MP3 player? But yes, it is a valid point that not all MP3 phones are used for music. The industry does need to analyze this. But I would argue – without more than some late Friday fried-brains logic – that currently with musicphones in short supply, most are indeed used for music.

    By the way, the global study by TNS of 6,800 adults and their music habits, was done before the current crop of hot musicphones. And when it was run, Apple’s market share was about 20%. Thus the “usage market share of 33% is actually rather appropriate (never thought of it that way, good point). And you bet your bottom dollar that today that ratio is stronger in the musicphones’ favour. Meaning more than twice as many people listen on musicphones than iPods. Because many more, better, musicphones ship now than last year, and Apple sales have dropped 46% since Christmas (from 14.1 million to 8.1 million quarterly)

    Tom B – yes you can now receive podcasts on mobile phones.

    Tomi Ahonen :-)

    a very tired guy tonite ha-ha..

  • Cliff

    The 14 % market share figure is flawed because it’s a current figure and currently, mp3 phones are not used in place of separate mp3 players like the iPod. They just aren’t, by any significant numbers of people. Maybe in the future. Maybe even in the near future. But until that day arrives, it is improper to combine include mp3 playing phones in the calculation of the iPod’s marketshare.

    Nothing Ahonen says in his replies deals with this fundamental flaw.

  • Cliff

    Further, even once people start using music playing cell phones to replace separate mp3 players, it would really make a lot more sense to keep the marketshare figures separate for mp3 players. What you would do is look at whether the size of that market is shrinking. So even if the iPod had 70 percent share, if it’s a shrinking market because people are switching to cell phones that play music, you just acknowledge that. It’s 70 percent share of a shrinking market. That’s a lot sounder analytically.

  • http://technovia.typepad.com Ian Betteridge

    Cliff: You claim that MP3 phones are not used instead of dedicated portable players, and yet you have no data for this. Clearly, as Tomi points out, it’s the music-playing capabilities that are driving sales of these phones. Are you suggesting that they’re being bought for music playing, but not being used? That’s counter to the data in the TNS survey that Tomi points to.

    Further, if you’re serious about your claim that “nothing Ahonen says in his replies deals with this fundamental flaw” then you clearly haven’t read his post. Read again, with special reference to the TNS survey.

  • http://technovia.typepad.com Ian Betteridge

    TomB: “I agree with Ronald. Having an MP3 player doesn’t mean you use it.”

    Equally true for iPods, I’m afraid. I both a 60Gb iPod and a Shuffle. Guess which one I don’t use.

  • TomB

    My nano runs 8 plus hours on a charge– my oldish Motorola Cell Phone runs about 30 minutes.

  • Cliff

    Ian, first of all, who has the burden of proof here? Tomi is the one that wants to do something unorthodox that other market analysts are not doing – i.e., combining the market figures for mp3 players and cell phones that happen to have music playing capability. Thus, it’s his burden to show that people are really treating the music features of these phones as sufficient to replace an iPod.

    Second, we have the fact that apple is selling millions of iPods and most analysts project that the market for separate mp3 players is still growing. If lots of people were treating music playing cell phones as replacements for separte mp3 players, I think we would see the market for separate players shrinking. That hasn’t happened, not yet.

    Third, Tomi’s assertion that “it’s the music-playing capabilities that are driving sales of these phones,” is without support. All he has done is point out that the most popular, best selling phones have music capabilities now. Well, it’s easy for cell phone makers to add that capability (however weak it is). People are buying new phones. Increasingly they happen to have music capabilities. That doesn’t mean the music capabilities are driving the sale of the phones. There is no support for this.

    Fourth, the survey cited shows that only 4% of people (in the U.S.) used their cell phones with music capabilities to listen to music. OK, doesn’t that support my point? (and 19 percent in the rest of the world is not a whole lot better). Further, all the surveyed people said was they used the music feature. They didn’t say it was sufficient to replace an iPOd. For all we know, 2/3 or 3/4 of the people that said they listened to music on their cellphone found that the feature wasn’t good enough to replace an iPOd or other mp3 player.

    Fifth, we all can compare the experience on an iPod and a music playing cell phone and I think most people would agree cell phones currently are not a replacement.

  • TomB

    Sixth: If AAPL went ahead and decided to do an Apple cell phone, that would mark the FIRST cell phone on the market that doesn’t suck (presumably. AAPL’s got a great track record, in general). The fact they haven’t done so yet indicates 1) they know something YOU don’t or 2) they are about to.

  • Matt

    I think the problem people have with Tomi’s article is that it creates a “false dilemma” to a large extent.

    When an article is titled “Demise of a Darling,” it certainly gives the reader the impression that “OMG! Teh iPod is d00mEd!”- when that is certainly NOT the case.

    Everyone knows that FAR more cell phones are sold worldwide than iPods. But it’s inherently inaccurate and misleading to include cell phones as part of the “portable MP3 player market”, and then claim that iPod’s market share is now 14% and d00mEd, just because many cell phones now include some rudimentary (or maybe even halfway decent) MP3-playing functions as standard equipment. Just because some cell phones have a minute subset of the iPod’s capabilities and both devices are portable does *not* mean that cell phones and iPods are competitors in the SAME MARKET. The iPod’s market share in the “any sort of portable device that can store and play an MP3 file, be it one MP3 file or 10,000, regardless of whether the purchaser even gave a rat’s arse about the MP3 feature, the inclusion of the feature was a decision-making factor, or if the purchaser ever uses said feature” market may well be 14%. Hell, I could invent a tire-pressure gauge with a built-in 128 MB MP3 player if I felt like it and sell the thing for $50. Would it be a threat to the iPod? Ummm…NO.

    The Sony PSP plays music and videos. The iPod comes with a couple of built-in games. Are they competing in the same market? Not really, IMHO. If I was shopping for a portable video game player, I would NEVER consider purchasing the iPod over the PSP. If I was shopping for a portable music player, I would NEVER consider purchasing a PSP (or a MP3-playing cell phone) instead of an iPod. The only way these devices are competing in the same market, IMHO is in the “a person only has so many expendable dollars and may not be able to buy both devices, so one will sell and the other won’t” market. But obviously, iPods are selling just fine (Tomi’s attempts to equate quarter-to-quarter with year-to-year sales figures notwithstanding).

    The *real* question, as it pertains to the iPod, its “market share”, and its eventual demise (or not) is: “Are people who want to listen to digital music files on-the-go, who are/were AT ALL LIKELY to buy an iPod (or iRiver, whatever) MP3 player for that purpose, choosing NOT to buy an iPod because the MP3-playing capabilities of their cell phones are satisfactory enough to make an iPod purchase unnecessary or undesirable?” So far, I think the answer to that question is “No, not in any large numbers”. Could this change? Certainly! As cell phones become more and more capable MP3 players, if Apple is going to remain a leader in the portable device market they are going to have to continue to innovate by adding some sort of new features or “killer apps” or design wizardry to their future gadgets to maintain their image as “super-cool must-buy” items.

    If you aren’t someone who enjoys listening to music enough to spend $100-$400 on a portable music player, you weren’t in the iPod “market” under discussion to begin with. You weren’t EVER going to buy one. If your cell phone just happens to play MP3s, well sure, you might use the feature sometimes if you can figure out how to get it to work.

    I have an MP3 playing, photo-taking, video-filming, PDA-function-having, video-game-playing, web-surfing, email-sending, IM-ing cell phone. I also have a laptop computer, a desktop computer, a stand-alone digital camera, a video camera, and have purchased 3 iPods over the last few years and consider myself “somewhat likely” to purchase a “new & improved” iPod model, whenever it is released. Note, however, that I haven’t bought a new PDA since 1998 and my PDA has been sitting in a desk drawer for a few years now.

    Do I use the MP3 playing function of my cell phone? Almost never (except I did set one of my MP3s as my ringtone, if that counts). Do I take pictures with my phone? Almost never. Do I film video on my phone? Almost never. Do I play games on my cell phone? Almost never. Do I IM on my phone? Never. Do I web-surf with my phone? Only in a pinch, like if I’m in a bar having a debate with someone and I need to Google some factoid to prove a point. Do I send email with my phone? Almost never, with the exception of Hurricane Katrina when I didn’t have access to my regular computer or ISP. Why? Because the game-playing, websurfing, picture-taking, MP3-playing, etc. experience on my cell phone is F-ING TERRIBLE. However, I use the PDA-type functions of my phone very frequently because the experience is almost but not quite as useful as a stand-alone PDA, but it is MUCH more convenient.

    My cell phone goes with me everywhere, my iPod goes with me everywhere except when I’m out bar-hopping at night, my laptop generally is used at home or in the office with the occasional use at a WI-FI hotspot if I’m traveling.

    Almost everyone I know has a cell phone. The majority of my friends have iPods. I think I have seen only one person out of my group of friends listening to music on a cell phone. YMMV. I think it’s likely that things are different outside the U.S. (less disposable income to spend on iPods, perhaps?), but I don’t think Apple has much to worry about at this time.

    The reason the article is flamebait is that while the various numbers quoted may possibly be technically “correct” on their own, the statistics cited are somewhat unrelated to each other and are presented and arranged in order to make a falsehood appear true (i.e. iPod is doomed, sales are in the pits, MP3 cell phones have taken over as users’ preferred music players, cue ominous music here).

  • http://technovia.typepad.com Ian Betteridge

    TomB: My first generation iPod has a battery life of about 5 seconds, and my next gen one doesn’t run at all. Comparing a new nano to an old cellphone isn’t exactly useful.

    Cliff: Yes, of course Tomi has the burden of proof… for his claims. But you have the burden of proof for yours, and if you’re claiming that something that he’s backing up with figures is wrong, the onus is on you to show how.

    On your second point, you’re missing the difference between sales growth and market share. Apple’s iPod sales could easily continue to grow – in double digits, in fact – and its market share could shrink, if the market as a whole is growing faster than its sales. It’s a point that Mac users often fail to grasp, as they see Apple’s sales growing at 10-20% for Macs while its market share barely budges.

    On your third point, you’re right to highlight this as a potential weak point in the argument. However, it seems unlikely to me that the best-selling phones across all manufacturers would be music phones IF playing music wasn’t a major attraction. If it were one manufacturer, I think you’d be right. But all of them? No.

    I don’t really see how the 4% in the US figure supports your point, nor do I think you can get away with saying 19% isn’t “a whole lot better”. If you think the difference between 4% and 19% isn’t significant, remind me not to let you negotiate a loan for me :) But seriously, it wasn’t 19% for the rest of the world: it was an average of 19%, including that 4%. And don’t forget that it’s 10% for iPods.

    Your fifth point is entirely subjective, so I’ll pass on answering that one.

    TomB: If you think that all cell phones on the market “suck”, I commend you for buying and testing a lot of cell phones. I wish I had your disposable income :)

  • http://technovia.typepad.com Ian Betteridge

    Matt: Read Tomi’s article, it doesn’t suggest the iPod is doomed (far from it). However, the “demise of a darling” headline is perfectly fair: the iPod has been the “darling of the market” and it’s not going to be so in the future. It’s market share will continue to shrink. That doesn’t mean it’s doomed, or that it won’t remain a highly profitable business. It just means it won’t have the high-digit figures we’ve seen in the past.

    A lot of the rest of your comment is down to “I don’t use it, so no one does”, which isn’t really an answer to real market research. Sorry!

  • Cliff Stevens

    Ian, the “numbers” Tomi cited don’t prove that any significant numbers of people are buying music playing cell phones as a replacement for a separate mp3 player. In the U.S., the “numbers” show that only 4 percent of people that bought a cell phone with music capability even used the feature. Outside the U.S., it’s only 19 percent. Plus, the survey only asked whether they used the feature, not whether they considered it an iPod replacement. I pointed this out, and you just ignored it.

    Tomi has the burden of showing that people are using music playing cell phones as replacement for an iPod. Currently. Otherwise his 14 percent market share figure fails. He hasn’t met that burden.

  • Cliff Stevens

    Ian,

    The TNS study found that 13 percent of people used the music playing feature daily or weekly, globally.

    http://breakingnewsblog.com/mp3players/archives/worldwide_use_of_music_on_cell_phones_gaining_wide_acceptance

    So based on that study I think we can say that at least 87 percent of the 48 million cell phones sold with music playing capability in second quarter 2006, are not being used as an iPod replacement. If you don’t use the music playing feature at least weekly, there’s no way you bought the phone instead of an iPod. YOu simply bought a phone, for the phone, not to replace an iPod you would have bought but for the music features of the phone. Multiplying 48 million by 13 percent yields about 6 million phones. So at worst, iPod’s global share is 50 percent (8 million ipods divided by 16 million total players ( 8 million ipods, plus 2 million other players and 6 million phones).

    However, that’s a “best case” for Tomi’s argument. It likely understates the iPod’s share because using a music feature once a week does not really mean you are using it as an iPod replacement. Most people use their iPods more than once a week.

  • http://technovia.typepad.com Ian Betteridge

    Cliff, I didn’t ignore your point: your point simply doesn’t make any sense. You can’t listen to two different music players at the same time. You can own two (I own more than two), but if you’re listening to one, you can’t be listening to the other at the same time.

    Secondly, you’re wrong when you say that “the “numbers” show that only 4 percent of people that bought a cell phone with music capability even used the feature.” That’s actually 4% of ALL mobile phone users. The difference, I think you’ll agree, is rather significant – and makes most of the rest of your claims invalid.

  • Cliff Stevens

    Ian,

    If the survey was of all cell phone users, Tomi has offered absolutely no proof, data or statistics whatsoever regarding how many music playing cell phones are used as an iPod replacement (rather than as a phone that happens to have music playing capability). So Tomi is adding 28 million cellphones to the market share statistics, when he has offered zero, zip, nada proof whatsoever that any significant numbers of those phones are used as an iPod replacement. He has the burden of proof an he’s utterly failed to provide any proof.

    And again, on the point you refuse to acknowledge, the survey only said that 19 percent of people worldwide (4 percent in the U.S.) used the music feature on their phone. Since you are having difficulty understanding this point, I will explain it again. Saying you use the music feature on your phone does not mean you consider it a replacement for an iPod. I have a music playing cell phone. I’ve used it a few times. But I don’t consider it a replacement for my iPod. There’s a difference between saying you use a phone for music (which could be light use or rarely) and saying you bought the phone and use it for music in place of an iPod. Got it yet?

  • http://technovia.typepad.com Ian Betteridge

    Cliff, are or are not there double the number of people worldwide regularly using a mobile phone to play music on, compared to dedicated portable music players?

    We are not talking about *you* and how you use your phone. That’s irrelevant. What’s more, whether people consider it an iPod replacement or not is irrelevant, too: what matters is how these phones are being used. What matters is that (and I’ll say it again for your benefit) TWICE as many people are using phones for portable music as use dedicated players.

    I understand your point completely. What you’re failing to understand is that it’s just not relevant. What matters is that, for a big slice of the market, a phone is good enough to serve their portable music needs. And that means no sale for Apple, until it brings out its inevitable music phone.

  • http://www.allpointsnorth.co.uk Chris Brennan

    Come on people it’s about tone. The whole thing is expertly written to annoy the hell out of Mac nutcases. The tone is all, like, a, y’know, teenager shouting FACTS and not gently using the statistics to prove a point. If he’d said ‘hey look at this I think if you look at the figures and research the market might be diluting’ no one would have taken the slightest interest. This way there are a huge number of comments and traffic. He’s pulled a textbook Dvorak. Without the tone it’s a very interesting look at the market and statistics. My only complaint is the use of exclamation marks. As if a 40% drop in sales didn’t speak for itself.

  • http://technovia.typepad.com Ian Betteridge

    Except that Dvorak rarely uses facts in any depth, Chris.

  • Cliff Stevens

    Ian, you’re changing the subject. I’m not disputing that more people globally have listened to music on a cell phone (how many times we don’t know) compared to an iPod.

    That can all be true. But the 14 percent market share figure is still flawed. There are many, many cell phones sold with mp3 player capability that never gets used. Tomi is including all mp3 playing cell phones in the calculation of the 14 percent share for the iPod, without any effort to determine how many people are even using that feature. It’s common knowledge that many cell phone features are never used by people, because they can’t figure out how to even use those features.

    Including mp3 playing cell phones in the calculation assumes that the vast majority of people are really treating those phones as equivalent to an iPod. that’s an incorrect assumption at best. I’d say it defies common sense.

  • http://technovia.typepad.com Ian Betteridge

    Cliff: “But the 14 percent market share figure is still flawed. There are many, many cell phones sold with mp3 player capability that never gets used.”

    So you keep saying. However, you’re not backing this up with any figures. Until you do, you’re not going to get anywhere with this argument.

  • Matt

    I’ve been mulling this over, and I think the real issue being debated here is whether or not MP3-playing cell phones should be included in the same “market” as iPods and other standalone MP3 players.

    If one thinks that the phones and iPods are in the same market, then Tomi’s 14% market share makes some sense.

    If (like me), one thinks that cell phones and iPods are two largely *separate* markets with a bit of overlap, the idea of claiming that the millions and millions of cell phones sold that have some, any, sort of MP3 capability are in fact iPod competitors and are “splitting” the market with the iPod seems like (as Cliff Stevens said) “an incorrect assumption at best. I’d say it defies common sense.”

    Perhaps I believe the “separate markets” theory because I’m in the U.S. and our cell phone capabilities are in the Dark Ages. Maybe the rest of the world really ARE rockin’ out all day to their cell phones and wirelessly downloading songs through the cell networks.

    I’m skeptical of “real market research” because I participate in lots of market research surveys, and frequently the questions are written in a way that forces the respondent to give an inaccurate or incomplete answer that will undoubtedly make the final survey results misleading or otherwise unreliable.

    When I use my own two eyes, in the U.S. from the East coast to the West coast all the way down to a relative tech backwater like Louisiana, all I see being used for portable music are iPods and ancient portable CD players. Cell phones? Not so much. Not at all, actually.

  • Cliff Stevens

    Ian, you said, “So you keep saying. However, you’re not backing this up with any figures. Until you do, you’re not going to get anywhere with this argument.”

    Again, it’s common sense that not all – in fact a significant portion — of music playing cell phones are not actually being used to play music much if at all. The question is how many – is it 1/4, 1/2, 3/4? We don’t know and Tomi did not provide any figures. He’s the one that lops the whole 28 million of music capable cell phones into the iPod marketshare calculation. He does this while the whole frickin world knows that many of the phones are owned by people who have rarely if ever used the music function. He has the burden of showing that all 28 million of those phones are actually used to play music. Has he done this? No. Not even close. Until he does, his 14 percent market share figure is bogus.

  • http://technovia.typepad.com Ian Betteridge

    Cliff, your common sense is unfortunately flawed. First of all, you’re completely ignoring the 19% usage figure. Secondly, you’re ignoring that mobile phones with music playing capabilities are the most popular models at present – for example, the SonyEricsson Walkman phone (the W800) represents 25% of ALL SE sales at the moment, worldwide. Now the only thing about this phone that differentiates it from other cheaper models in the same range is its music playing capabilities. So why do you think people are buying it? Secondly, you’re ignoring that usage figure, again. Twice as many people listen to music regularly on a phone as on an iPod-like device.

    Matt: Yes, I suspect a lot of the resistance to this idea is cultural. When I commute to work, I notice a lot of people using their phones for music. What’s interesting is that it’s a very clear split: people in the mid-20’s and older use iPods, anyone younger is much more likely to use a phone.

  • Cliff Stevens

    Ian,

    Neither the 19 percent number nor the “twice as many” statistic means all 28 million of those cell phones are being used to play music. Today’s phones are packed with features that users ignore because they are too dificult to access.

    Again, people buy a new phone. Why? Most times, it’s because their old one died, is a few years old and too big or they changed carriers. People pick the one that is the smallest and fits their price range, most of the time. All kinds of features are in the phone they never use. This is all common knowledge.

    The 19 percent figure – which by the way falls to 13 percent when people were asked if they used the phone to play music daily or monthy – doesn’t change this. It doesn’t mean every phone with music capability is used to play music. At best, it means more people (3 percentage points more) use a cell phone to play music at least once a month than own an iPod. That’s it. And once a month is not even that often. I would argue if you listen once a month, you’re not really using the music playing feature. People that own iPods use them way more than once a month.

  • Cliff Stevens

    Also, Sony has a small share of the phone market (I think around percent). Most of the phones sold are from Nokia, Motorola. Others are ahead of Sony. So that data is anecdotal and doesn’t help us to determine what percentage of the 28 million cell phone with music playing capability are used (let’s say at least 2 to 3 times a week) to play music.

  • cliff Stevens

    I meant to say 6 percent share for SE.

  • Cliff Stevens

    sorry, my mistake the 13 percent was weekly. But I think the same thing holds – you need to be using the music feature 2 to 3 times a week for us to say it’s really being used. Ipods get used daily or at least 2 to 3 times a week.

  • http://www.tomiahonen.com Tomi T Ahonen

    Hi everybody

    Wow, cool. You have 33 replies here at your blogsite on what was “our topic” at our site (and some 100 comments there). This is an “extension” of the debate. Cool.

    Anyway. I see the discussion here is becoming a bit repetitious. Let me try to add some meat to the points.

    I totally agree with you that the burden is on me to prove the argument. I do think I’ve done that. But lets examine this a bit more.

    Premise: the MP3 player market is now seen by the general public, the mass market, worldwide not only USA – as one which includes both MP3 players like iPod and musicphones.

    If so – there must be purhcases, usage of phones as musicplayers, and significant money used to BUY music directly to phones, right? And most of you have not seen any such activity (in the USA).

    So, in my original blog I post the global sales numbers of iPods and musicphones (musicphones outsell iPods now 7 to 1).

    I then post the first and so far only global survey of portable music usage by which at the end of 2005 already twice as many people consumed music on phones than on iPods. I think the proportion is irrelevant (it obviously proves that at least as many people with musicphones DON’T use them for music as they do) – remember this PROVES that truly global masses – twice as many people as iPod users – already consider the musicphone as a viable rival to the iPod.

    Finally I post the global numbers from the music industry, as reported by their global association the IFPI (of which the American RIAA is a member) – that today more revenues are earned by songs purchased to mobile phones – full track MP3 files – than iTunes. The ratio here is about 1.2 to 1.

    Thus far, I think I’ve met my burden of proof. That yes, for the mass market, worldwide, MORE people actuallly do consider musicphone viable as MP3 players and use them as such, and even purchase (a little bit) more music to them than to iPods.

    Thus the initial posting that iPods are in the same market as musicphones, is valid. And the headline, that as iPods commanded a global market share of almost 80% only 18 months ago, and now their market share dropped to 14% in the last quarter, this is also valid to call it the “Demise of the Darling”.

    But you push me further here. You don’t think the evidence is strong enough, right?

    Fine. If the numbers are true, then we MUST have relevant national studies to support this point of view?

    Japan is the second largest music market after USA. In Japan last year already 211 Million dollars worth of music was sold directly to mobile phones – half what iTunes did worldwide. (source IFPI)

    UK is the third largest music market. I don’t have the full numbers for the UK, but for the 3G phones, a recent Telephia survey reveals 27% of all 3G phone users in the UK already download music to their phones.

    Germany is the fourth largest music market. In Germany this week a survey (I don’t remember the name, some weird Germany company, Xenia something, please visit my site for the exact stat and source) said that over 30% of the TOTAL GERMAN POPULATION download music to mobile phones. If you remember, the Apple quarterly conference call of April 19, 2006, said that iPod market share in Germany is 11%.

    This is the kind of numbers we have from all kinds of countries. In Sweden 35% of ALL online music sales go to just one carrier, Tre, a 3G operator, who has only 8% of the Swedish market for cellphones.

    Best of all South Korea. In South Korea 45% of ALL MUSIC SOLD. not online music, but ALL music, is already sold to mobile phones. Korea is where this innovation was first launched only 3 years ago.

    Now re-consider the user survey data which says 19% of all adults (in industrialized countries) consume music on phones, and only 10% on all stand-alone MP3 players including iPods.

    Then re-consider the IFPI numbers saying that from near-nothing in 2004, to 40% in 2005, now 50% in the first quarter of 2006 of all online music is sold to mobile phones. The other half is not iTunes alone, there are dozens of other online music stores as well around the world..

    Finally – I hope I have “opened your eyes” enough, to reconsider the big picture?

    If so, then consider who has a bias in this? Apple obviously wants to claim iPod is the only real musicplayer. Mobile phone makers want to claim all kinds of nonsense about the dominance of their devices.

    But the MUSIC INDUSTRY itself, has no axe to grind. They want the best sales for their product. What do the music industry say? In my original post I have quotes from each of the four music majors – EMI, Warner, Sony BMG and Universal. All of them say its not the iPod, it is the musicphone which will be the platform for their content.

    Now – have I met your burden, and have I provided further proof that my position is valid.

    PLEASE REMEMBER – I am not saying iPods will disappear. They can easily grow in sales. Apple is doing fine. But iPod’s market share has crashed. Apple owned this market only 18 months ago. They could clearly see the rivals coming in. They ignored the new market space. They lost. Today iPod is a niche product. Yes, a brilliant top-end expensive musicplayer. But a niche market. The mass market came and went to the phones. Game over.

    That is what I said… :-)

    What do you think. If the customers cannot see a difference – and more people consume music on phones than on iPods, and more money is spent on buying songs to phones than iTunes, isn’t it valid to consider the two as part of the same market. Clearly the mass market customers think so.

    And if so, then lets go ask the true experts, the music industry, what they think?

    Tomi Ahonen :-)

  • Cliff

    Tomi said above, “at least as many people with musicphones DON’T use them for music as they do.” Yet he lumps the whole 28 million of music playing cell phones into the calculation of the iPod’s marketshare. In other words, he’s including in the calculation of the iPod’s market share phone units sold that people bought for reasons other than to play music.

    Ian, another way of looking at the TNS data is as follows. 10 percent of the people said they owned an iPod. We can assume the great majority are using the thing to play music, because that’s what it does and otherwise they would not have bought it or they would sell it. Apple got that 10 percent figure, while selling 8 million iPods this most recent quarter. Now, 28 million music playing cell phones were sold during the same quarter. That’s the figure Tomi lops into calculation of the iPod’s supposed 14 percent share. OK, with that 28 million sold, only 13 percent of people surveyed (worldwide) said they used a cell phone to play music daily or weekly. Thus, there were over 3 times as many music playing cell phones sold than iPods, but only 3 percentage points more people said they used their cell phone to play music at least weekly (which isn’t even all that often). Those figures themselves tell you lots of those 28 million phones are being used to play music at all, which Tomi flat out admits.

  • Cliff

    In the last sentence, I meant “not being used to play music at all,” which Tomi flat out admits.

  • http://www.tomiahonen.com Tomi T Ahonen

    Cliff – hold on. Not all iPods are used to consume music as well? There are all kinds of podcasts, used by professors at universities, etc. Yes the vast majority of iPods are used for music, BUT NOT ALL. And if we take all content that is listened to – now phones RULE over that definition of the iPod market. There are millions upon millions of phones with built-in FM tuners, or ones that connect to online content streaming systems etc.

    But fine. For the sake of argment, lets assume that all iPods are used for music. Why is it NOT relevant to count all musicplayers in phones, if they only appeared (outside of Japan and Korea) last year, and already twice as many people listen to musicphones than to iPods worldwide?

    There is a significant “learning curve” – that Apple itself showed with the slow adoption of iTunes when it was launched. It takes a while for this to spread across the whole population.

    So, lets consider car owners. Is it fair to count Ford’s and Toyota’s market share based on ownership? Some are used ever day. Other cars are used very rarely (only for the family vacation once per year). STILL OTHERS ARE USED NEVER. They once were used, but for example the grand-dad had an accident, his eye-sight is going, and he doesn’t dare to drive anymore. But his car is still registered and sits in the garage. Even as he doesn’t use the car, he is a car owner and counts as Ford’s total market share.

    But Cliff – would you be willing to come at me half way. Is it at least fair, for me to report today, that “a large proportion” of all people around the world who buy music players, that they actually do count musicphones as part of the same market as iPods. They may WANT to buy the iPod, but more are buying now musicphones.

    Are you willing to accept at the minimal level of market share, that (almost) twice as many people buy musicphones TO CONSUME MUSIC than iPods (and other stand-alone MP3 players like Creative etc).

    In other words, is it fair to say, that by the music consuming population, iPod’s market share is about 34% – and musicphones have about 66%? Is this fair, based on the TNS survey?

    We don’t have any other data yet, by any other research organization so far – and trust me, we’ll have dozens reporting by end of year 2006 – so is THIS a fair reporting of the music consumption market?

    If you think it is fair, then consider my view on this. I think – and I don’t have concrete evidence, so I am just applying my experience in spotting and reporting on trends for this industry for the Economist, Financial Times, Wall Street Journal, Business Week etc – that there is a “delay” between the actual penetration of multi-purpose devices, and the actual usage of those capabilities on those devices.

    So, it makes sense that if you want an music player, and you buy an iPod. It is “only” a musicplayer, so you will immediately start to use it as a music player.

    But EVEN IF YOU WANTED a musicphone, and your current carrier offers you the upgrade for this month to include the brand new SonyEricsson Walkman phone, and you WANTED to start to consume music on it – the first thing you do when the phone battery is charged and you start to work on your new toy, is NOT to load music onto it. The first thing you do is transfer your phone numbers from your OLD phone.

    There IS always, even for those most hungry for the MP3 player features – a delay in starting to use those new features. We saw it with messaging (SMS text messages) and the clock feature (watch, alarm clock) and the calendar/scheduler (ie PDA-like features) and the digital camera etc etc. The same holds for music players.

    So, even if I think your view is valid, to consider actual usage (remember the TNS data was for the year 2005, not now July 2006) – I think my view is more insightful and helpful for the industry – that there is a MUCH GREATER change already happening, because of the two hundred million MP3 player musicphones already sold, as their users start to discover the music player and move some music onto these devices.

    And I immediately grant you the point, that NOT ALL musicphones will be used for music. But please, neither are all iPods.

    Tomi Ahonen :-)

  • http://www.tomiahonen.com Tomi T Ahonen

    POSTSCRIPT

    The original blog attracted very wide coverage on the web. I collected all of those together into one blog posting called Electronic Echoes. It includes this site of course and the comments from here. Thank you!

    If you want to read that summary, visit this link

    http://communities-dominate.blogs.com/brands/2006/07/electronioc_ech.html

    Tomi :-)