“It was a bit of a shock when Apple announced a deal on July 26 to put a special version of iTunes software onto Motorola cell phones. Owners of certain high-end handsets will be able to download to their phones songs stored in both Mac and Windows versions of iTunes, including songs purchased from iTMS. Jobs has given the world’s second-largest maker of handsets the first license to use FairPlay,” Alex Salkever writes for BusinessWeek. “Apple CEO Steve Jobs has earned a reputation as the most intense and controlling CEO in the tech universe, thanks to such tactics as shutting down makers of Mac clones and the fanatical secrecy he maintains around new products. True to form, he has kept a tight handle on Apple’s red-hot digital-music business. Apple (AAPL ) only allows a handful of file types to play on its iPod music player.”
“Apple fans and analysts are wondering if Jobs isn’t letting a fox into the iPod henhouse. They fear the deal could cannibalize the $1 billion or more in annual iPod sales in exchange for less-profitable digital-music sales and customer growth of dubious value. At the July 26 press conference to announce the pact, Jobs stated — via video cam — that this wouldn’t happen. And he’s right. What’s more, the potential benefits of this deal easily outweigh possible downsides,” Salkever writes.
“It’s clear that Jobs’s decision to hook up with Motorola won’t threaten the iPod’s position in the near term,” Salkever writes. “And the harmonious arrangement could well enhance Apple’s position in the digital-music market and cement iTunes as the preferred digital jukebox for handheld devices. What’s not to like?”
Full article here.
You’ve got 2 choices:
The iPod:
A wonderful, unique design that plays music.
A Motorola iPhone:
A jack-of-all trades (camera, mp3 player, phone, pda), but a master of none.
I know what I want, and it’s not the phone.
Apple was never going to create a devise to take on cheap flash based mp3 player directly, now Moterola has done it for them.
great deal, if I could hook it to my car stereo, I would buy one, as long as it works with iSync
The notion that cell phones with a capacity of 50-100 songs or so could cannibalize iPods, or even minis, with capacities of 1,000 – 10,000 is just plain silly. This is very, very smart for Apple.
1281.. the whole point of the article is that you don’t have to choose between the two..
this deal adds heft for apple with it’s aac/fairplay/QT solution and for motorolla it adds cool new features..
but the ipod and the phones aren’t competing with each other.. in fact, it’s conceivable that some people might have both an ipod and a moto phone with around 40 songs on it.. (ahem.. can you say Top 40 playlist on iTunes?)
the fact that consumers won’t be required to choose between the two was the WHOLE POINT.
nice little pun on the article headline btw.. (harmony..)
mike,
Are we reading the same article?
“Apple fans and analysts are wondering if Jobs isn’t letting a fox into the iPod henhouse. They fear the deal could cannibalize the $1 billion or more in annual iPod sales in exchange for less-profitable digital-music sales and customer growth of dubious value.”
(Extracted from the top of the page)
Irrelavant to me I think. I believe Motorola doesn’t sell in Japan (but maybe au is motorola?????)
this is similar to cell phones with cameras, except we don’t know if any digital camera mfr licensed processing code to the cell phone companies to add this in.
the cell phones will cannibalize the low-end flash players (like they are doing with low-end digital cameras), where Apple doesn’t tread, and for those, who like a dedicated device, there is Apple’s iPod mini and iPod.
if Apple can just get $1 (or more) per new phone sale for licensing iTunes-Fairplay DRM software, and there are hundreds of millions of new phones sold every year, that’s hundreds of millions of dollars for software. Add in the music sales from iTMS (as the software will work best with iTMS), and this is a true bonanza. That’s the Windows model all over again!
I don’t think this is meant to cut into the iPod sales. If anything, it will boost the sales of iPods due to brand familiarity. I think the “Halo effect” or whatever you want to call it is happening, albeit slowly, but surely. This is Apple’s push back into becoming a household name. I didn’t know this, but if people will pay from $1-$4 for a ringer, they will surely pay a few bucks for some songs on their phone. And these phones are ubiquitous.
I just hope another round of deadly Internet viruses comes and gnarls up a few million Windoze boxes once and for all. Then maybe Apple will get some more customers.
Wouldn’t it be nice if they had a virus that formatted the hard drive of a Pee Sea, but right before that, the blue screen of death would come up and it would say, “You should have bought a Mac moron!” and then the Apple symbol, and then the thing just crashes into oblivion.
</back on topic now>
No g … That virus idea would not be cool.
This concept is missing a proper introduction via Steve’s RDF.
1281, Mike has a point, the author also states…
“It’s clear that Jobs’s decision to hook up with Motorola won’t threaten the iPod’s position in the near term.”
(extracted from the bottom of the page)
I have a Tungsten T which plays 8 dozen (98+) songs, a new moto phone that I sync with the mac, and I STILL want an ipod mini. Why? The ipod mini is rugged, small, and plays more songs and uses firewire to speed up song transfers. Plus I could take the mini to the gym without looking too much like a tech nerd. I would rather have a mini strapped to my arm rather than a cell phone.
Very nice and insightful comments all around today; thank you all.
But no one has commented on Apple’s true motive here, and why it’s a great coup for them. Leaving aside the many sales and publicity advantages many of you mentioned, there’s the market for mobile phone ringtones. Do any of you realize that some estimates put total sales of ringtones for 2003 at 3.2 billion dollars? This is projected to rise over the next few years with the penetration of mobile phones globally, but then is expected to thin out because of increased unauthorized downloading, as well as potentially more appealing content, games or even video.
My belief is that Apple is positioning iTunes/iTMS as “potentially more appealing content”, while reaping the current benefits of “halo” sales and more importantly, achieving dramatic penetration of the Fairplay format on possibly billions of handheld devices in the coming years. I fully expect other manufacturers to follow suit as this service takes off. Imagine the licensing revenues Apple could rake in.
Re: ringtone market
From yesterday’s RealNetworks’ iPod hack may screw up Apple’s ‘scheme to monopolize music on cell phones’ MDN post:
This whole flap with RealNetworks’ “Harmony” technology isn’t about the music and the player, according to John Dvorak, “It’s about a scheme afoot to monopolize music delivered to cell phones. Although the online music business is expected to grow to $1.7 billion by 2009, few people realize that the dopey cell phone ringtone market is already past that with $2.3 billion worldwide sales in 2003 according to the Yankee Group.”
Sounds like what you were referring to, Viridian?
Yeah, I’m surprised there hasn’t been more commenting about that particular point.