Cell Phones Challenge Apple's iPod Empire

Strategic Insights -

Cell phone makers, including Nokia and Sony Ericsson, are gearing up to take on Apple Computer's dominant iPod business with new music-playing phones. Microsoft Chairman Bill Gates has even gone so far as to predict that music-playing phones will eventually replace standalone devices like the iPod. However, analysts caution that these hybrid phones still face significant hurdles before they can become a viable alternative to the iPod. Challenges include battery life, resistance from cellular providers, and technological limitations.

Key Takeaways:

  • Battery life is a major concern for cell phones that double as digital music players, with analysts predicting that users will not drain their phone batteries to listen to music.
  • Cellular providers have been unwilling to subsidize hybrid phones, citing their desire to share in the emerging wireless music download business.
  • The Nokia N91, a new hybrid phone announced in April, has an integrated 4-gigabyte hard drive, capable of storing up to 3,000 songs.
  • Sony Ericsson's W800 Walkman music phone can store 150 songs on a 500-megabyte Memory Stick Duo card.
  • Analysts predict that cell phones will eventually become a growth market for music, but they are unlikely to have a significant impact on the iPod business in the foreseeable future.
  • Hybrid phones may appeal to users who want a single device for both phone and music functions, but may be deterred by their smaller capacity and more complicated controls.
  • Cell phone makers may try to jump-start the market by offering hybrid phones without carrier discounts to consumers willing to pay a premium.
  • Consumers may have to pay a surcharge for downloading songs wirelessly, potentially up to $1.50 per song.
  • Improved wireless networks will be necessary before subscription music services like Napster can become a reality.

Statistics:

  • The Nokia N91 has an integrated 4-gigabyte hard drive.
  • The N91 can store up to 3,000 songs.
  • Sony Ericsson's W800 Walkman music phone can store 150 songs on a 500-megabyte Memory Stick Duo card.
  • The W800 is expected to be released in the third quarter at a target price of $400.
  • The Nokia N91 is expected to be available by year's end for about $900.
  • Analysts predict that consumers may have to pay a surcharge of up to $1.50 per song for wireless downloads.

Sources:

  • "Microsoft Chairman Gates Declares Music Phones Will Replace iPod" [link to German newspaper article]
  • Darcy Travlos, analyst with CreditSights, as quoted in "Cell Phones that Double as Digital Music Players Face Challenges"
  • Phil Leigh, analyst with Inside Digital Media, as quoted in "Cell Phones Challenge Apple's iPod Empire"
  • David Linsalata, analyst with International Data Corp, as quoted in "Cell Phones May Not Replace iPods"
  • Nokia N91 product announcement (April 27)
  • Sony Ericsson W800 Walkman music phone product announcement (March 1)