iPod phone - Myth or reality?

iPod phone - Myth or reality?

Summary: Is the next bit of hardware to be released by Apple going to be the long awaited iPod phone? I don't know, but if Apple does come out with a cellphone variant of the hugely successful iPod, it's certainly going to make waves.

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TOPICS: Apple
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Is the next bit of hardware to be released by Apple going to be the long awaited iPod phone?  I don't know, but if Apple does come out with a cellphone variant of the hugely successful iPod, it's certainly going to make waves.

It has to be remembered that Apple has already ventured into the cellphone market in September of last year with the Motorola ROKR.  The ROKR wasn't a huge success, in fact I think it's fair to say that it was a dismal failure.  Many of the reasons as to why it failed can be traced back to the fact that it was ultimately an iPod-branded Motorola phone rather than being a true iPod phone.  Also, the ROKR was a crippled, cut-down iPod at best, capable of holding only 100 tunes.  To put it bluntly, the ROKR wasn't much more than a marketing stunt.

If Apple is serious about entering (or re-entering) into the cellphone market, it will need to learn from the past.  The first question is obvious - is there a market for an iPod phone?  In the short term at least I think that there is, but the cellphone market is a fickle one, and something that's a success today might not be such a success tomorrow.  The pace of change when it comes to cellphones in incredible and Apple will have to complete in a fierce market against existing, and entrenched, cellphone manufacturers.  Existing manufacturers would certainly try to torpedo any iPod phone before it took off. 

Next point to consider is price.  History has shown that Cingular wasn't prepared to subsidize the cost of the ROKR, and it's likely that the same would be true of any other Apple phone.  The fact that wireless operators weren't falling over themselves to add the ROKR to their line shows that they don't want Apple's disruptive influence in their market.  The lack of a subsidy is going to make any iPod phone an expensive one.  Too expensive and it'll sink just like the ROKR did.

Next is the issue of features.  The ROKR clearly demonstrated that consumers don't want a phone with a few iPod-like features.  If Apple is going to make a success of an iPod phone, it's going to have to be a true iPod/cellphone fusion.  That means combining the ease of use of the iPod with the bewildering array of features that cellphones currently offer, and that's not as easy as it sounds.  Make it too complicated and you lose iPod ethos, make it too simplistic and the phone just won't cut it compared to others on the market.

An iPod phone is also going to need the support of at least one of the major operators.  And that's a big sticking, because an iPod phone is going to be bound to iTunes, cutting the wireless operators out of the lucrative market music download market (there the feeling is that if users are willing to pay ridiculous prices for daft ringtones, that they'll be willing to pay ridiculous prices for music too), a market that they are just getting into.  The enormous success of the iPod and iTunes is bound to make all the big wireless operators wary of letting Apple get a foot in the door, especially given how much power the company now wields over the recording industry.

Finally, there's an issue of DRM.  Apple loves DRM and especially its own flavor of DRM.  While other players in the market are trying to make it possible of people to share tunes (at least snippets of tunes) Apple is bound to be committed to their FairPlay DRM scheme.  Combining the restrictions of the iPod with a cellphone is going to mean a minefield of incompatibilities.

There are some advantages of an iPod phone though.  Combining a media player with a cellphone would mean one less thing to carry (assuming a healthy battery life).  This would be pretty convenient.  The ability to buy and download music while on the move would also be pretty cool.  iTunes straight to cellphone would be interesting indeed, especially if Apple can sort out alternative payment schemes.

I have to admit, I'll be surprised in Apple releases an iPod phone any time soon.  It looks like there are too many things stacked against them.  Some of these are because the market is already crowded, but it's also partly because of the way that Apple does business.  Apple is big on DRM and reluctant to license their technology to third parties (mistakes made in the 80s is a big reason why Mac has the incredibly small market share that you see today).  All this makes an iPod phone as likely as an iPod games console.

One market that Apple could enter into though is the in-car GPS PMP (portable media player).  This is a booming market currently dominated by GPS receiver manufacturers such as Garmin and TomTom and it's pretty open for a company like Apple to make headway into it.

Thoughts?  Would you buy an iPod phone?  Why?  What about Apple entering into other markets, such as in-car GPS PMP?

Topic: Apple

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32 comments
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  • "iPhone" : the keys to success

    For me, complementing all your arguments, there are actually TWO critical and industry changing points for Apple to succeed (ie survive) :

    First, NAME : Apple needs to prevent itself to call this a phone and move to Nokia high end / high margin approach around "multimedia computers" ; Computer is the only marketing term that makes your product natively multipurposed in customers minds ==> My suggestion : "iMac Nano" would be great.
    Second, BUSINESS MODEL : Apple needs to keep on its High Margin Products & Zero Margin Services Bundles by selling the iMac Nano with a ultra low cost (flat fee ideally) connectivity service for Phone minutes and IP packets. So they'll need to become an MVNO. ==> My suggestion : "iTunes Cell Store" to buy for little money IP&Cell units in order to fill the free wifi gaps.
    JulienBoyreau
    • I agree

      The name is key and they can choose what they want there. The business model is different and unless Apple becomes a wireless operator in its own right, I don't see anyone else bundling anything with it simply because it threatens their existing business model. The last thing that the wireless operators want is Apple telling them how to do their job.
      Adrian Kingsley-Hughes
  • Unlocked?

    Not up to snuff with all the regulations of the cel phone world, but couldn't Apple sell this as an unlocked phone, similar to the way Motorola, Nokia et al sell unlocked phones? Then you'd just drop the sim card from your already existing service in and be good to go (assuming Apple built it to coexist with the right GSM or whatever network).

    Would this work? You wouldn't get the big price breaks you get on the hardware that you normally get when signing up with a carrier, but people are willing to spend $400 on an iPod already, so buying one with a built-in phone wouldn't be much of a stretch.
    tic swayback
    • The unlocked cellphone market is tiny

      .. In the US it's something like 0.5%. As you say, it could happen, and might be the only way that it will happen, but without a wireless operator backing it, it's a risk.
      Adrian Kingsley-Hughes
      • I think it's intriguing

        Think of all the people who buy iPods. Wouldn't most of them, when the time comes to buy a new iPod, just get one with a built-in phone? Then you pull the sim card out of your current phone and drop it in the iPod and you're good to go.

        It strikes me as the one way Apple could get around all of the roadblocks the cel phone companies are trying to put up to stop us from having an iPod-phone. The cel phone companies all want to have their own music stores where they sell songs for $3.99 each. No way will they ever back down and let Apple be the song-seller. This way, the wishes of the cel phone companies become irrelevant.
        tic swayback
        • It's a possibility ...

          ... but it's a dodgy too ... Apple would be forced into a position of having to support other companies services and would have to set up these phone for all the various networks (you can get a lot of features to work by swapping SIM cards but it's not all 100% straightforward). It would be interesting to see them shake up the cell phone market though.
          Adrian Kingsley-Hughes
          • True

            Support might be a nightmare. Then again, Nokia and all the other cel phone companies seem to do just fine with unlocked phones, so perhaps it's not all that complicated.
            tic swayback
          • You have a point ...

            ... but their unlocked phone business is a really small one and their phones live alongside "badged" dopplegangers that are sold by the wireles operators, so it's not a big problem to get setup help because all the big names aleary handle and support that phone.
            Like I said, it'll be really interesting to see what Apple do if they do go down this route.
            Adrian Kingsley-Hughes
  • Where is the outcry?

    Funny that when the Zune story broke, hundreds of ABMers lambasted MS for competing with its licensees yet no one blinks when Apple does the same to Motorola. I've said it before and I'll say it again, this is a pattern with Apple: release a tiny bit of control and when things don't go exactly as planned, pull it all back in, licensees be damned!

    Apple is no worse than MS to be sure but I seriously wonder how people can, with a straight face, write that Apple is somehow more angelic than MS in their treatment of licensees. Clones, Apple stores, and now the iPod. How many more times does Apple need to screw those who work with her before people see Apple for what she is: a business who will stop at nothing to make one more $ (just like MS).
    NonZealot
    • Multiple reasons

      Why no outcry?

      1) This product does not exist (of course, one could say the exact same thing about Zune). Apple made no announcement about any such product. No indication of their actual plans. I know you're used to a Microsoft world of empty promises, pie in the sky announcements with no actual business plans to back them up and the use of press releases as FUD strategy, but in this case, the sky is not yet falling.

      2) It's also a very different product from what Motorola was offering. They offered a phone with some iTunes functionality built-in. This is an iPod with a phone built in. MS is offering the exact same products as their licensees (iPod ripoff device and iTunes ripoff store).

      3) Motorola is, I'm sure, less than thrilled with the ROKR program, as it's been a major commercial failure. Do they even want to continue their arrangement with Apple?
      tic swayback
      • Interesting

        [i]I know you're used to a Microsoft world of empty promises, pie in the sky announcements with no actual business plans to back them up and the use of press releases as FUD strategy, but in this case, the sky is not yet falling.[/i]

        Ah, so there will be no Zune ever released? Excellent, I expect you to take back all your comments about MS screwing her partners then. :)

        [i]It's also a very different product from what Motorola was offering. They offered a phone with some iTunes functionality built-in. This is an iPod with a phone built in.[/i]

        I'm curious, were you able to supress the smirk you wanted to let out as you wrote this? If it smells like a cell/iPod device, looks like a cell/iPod device, and acts like a cell/iPod device, it is. Saying "nu uh, this is a iPod/cell device" doesn't really change what it actually is.

        [i]Do they even want to continue their arrangement with Apple?[/i]

        I suppose they have found out first hand why no one partners with Apple? Don't blame them, Apple doesn't treat her partners with much respect.
        NonZealot
        • I give it a 50:50 chance

          ---Ah, so there will be no Zune ever released?---

          Given MS' track record, I'd say the odds are about even. Actually, the more likely event is that the product will come out, but it will be wholly different from what has been promised, and will be drastically reduced. So in this case, it won't have any of the wireless capability, or the store won't be built. Also, knowing MS, they'll deflect critcism of this by announcing a name change for the device, which will be on the front page of ZDNet and inspire at least 15 blog articles.

          ---I expect you to take back all your comments about MS screwing her partners then---

          But will there be anyone left to apologize to? By the time MS bails on their promises, I expect a few of their partners to have declared bankruptcy.

          ---If it smells like a cell/iPod device, looks like a cell/iPod device, and acts like a cell/iPod device, it is.---

          I don't think either of us can say for sure. You've got some vague drawings. You hammered me for speculating that the Zune won't be compatible with Plays For Sure. Yet you're already speculating on what the Apple device will be, if it ever exists, on even less than I had. This is all pure rumor.

          But let's suppose it's accurate. Remember that the ROKR was an incredibly poorly designed device, one that was crippled from the start (100 song limit, despite the available memory). If MS can produce a Zune device that is as head and shoulders above a Zen or Creative player as the iPod is head and shoulders about a ROKR, then I'll give them a lot more credit. However, given that many of the non-Apple players are some of the most advanced on the market (in terms of features and battery life), I have a hard time seeing MS doing this. They are, after all, a "me-too" company by their very nature.

          ---I suppose they have found out first hand why no one partners with Apple? Don't blame them, Apple doesn't treat her partners with much respect---

          Fair enough, which is why Apple doesn't partner up that much. And the clone business should have provided the lesson necessary that one should be wary. Then again, Apple isn't pretending to sell all of these great services and software to all licensees as MS did with Plays For Sure. I see a lot less harm in licensing one device to one company for a limited time, then not renewing that license than I see in getting tens of companies to sign on and invest large sums of money basing their entire financial lives on the promises of the system that you're offering them. Without Apple, Motorola will be just fine. Without Plays For Sure, Napster, Creative, and all the others are toast.
          tic swayback
          • One thing is for sure ...

            Zune won't come out until Microsoft have an music store to take advantage of it!
            Adrian Kingsley-Hughes
          • I'd say that if Zune isn't compatible with "Plays for Sure"

            then they will be taking a huge risk. Unless Microsoft can undercut iTunes prices (which is unlikley) I really can't see them abandoning "Plays for Sure".
            Adrian Kingsley-Hughes
          • They'll play both sides of the fence

            They'll come out with their own device and store not compatible with Plays for Sure. Yet they'll continue to collect money from every other player in the market (except for Apple). Slowly, all of those companies will be bled dry, and once they've all given what remains of their bank accounts to MS for licensing, they'll go out of business.

            Meanwhile, MS can continue to lose money hand over fist on this product for decades, so no worries for them.
            tic swayback
          • What option for third parties though?

            It's Plays for Sure or nothing. The ecosystem feels too monopolistic and Apple have helped fuel this. We need more competition. Unfortunatly, I can't see it happening any time soon.
            Adrian Kingsley-Hughes
          • Why would MS want anything different?

            Apple has shown that the key to market dominance is customer lock-in. MS knows this from Windows and Office, so why should they try to set up a system that's any different?

            Bad for consumers, sure, but great for the monopoly holder.
            tic swayback
          • Tic - customer lock in

            Tic (replying here because the other thread is as big as it'll get!)

            The biggest difference between Apple and Microsoft is that Apple is a hardware company and Microsoft is software. The lock in that Microsoft wants is to Windows. Windows and say WMP will always have to have wide support and be agnostic. Locking Zune to a Microsoft-only download site would be a bad idea, certainly early in the game. Locking it to WMP though ... hmmm, that could be different.
            Adrian Kingsley-Hughes
          • Doesn't Zune make MS a hardware manufacturer here?

            Why not go for the big brass ring, create a device that not only locks you into WMA and Windows (I'm assuming Zune will be Windows-only), but also locks you into the MS manufactured hardware? Seems to me that's the goal. Why go half way?
            tic swayback
          • Actually doesn't....

            Xbox, Xbox360, [b][i]&[/i][/b] Zune make MS a hardware manufacturer here?
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