Apple’s iPod and Cellphones

Barron’s writes:

Handset numbers overwhelm the iPod’s. While optimists think Apple could sell 45 million iPods next year, mobile-phone makers will be selling more than 750 million handsets.

All those handsets could weigh on the iPod’s growth prospects — and Apple’s premium stock valuation. Cellphone users won’t need to lug around a second gadget to have their music. By next year, a standard feature in many new handsets will be the software, circuitry and data storage for portable music. Handsets will be able to “side-load” songs from a personal computer, like the iPod. But in addition, they will be able to download music over-the-air, using the fast transmission speeds of the third-generation wireless networks that cellular carriers are now deploying around the country. The cellular firms are upgrading to third-generation, or 3G, technology, in large part so they can sell their voice customers stuff like music.

The wireless companies will start launching their music services in the fall. They’re not planning to match Apple’s musical offering — they want to marginalize it. Wireless technology will allow interactivity and immediacy beyond what’s possible with a tethered product like the iPod. Convenience and impulsiveness pay: Cellphone subscribers willingly spend two bucks for a six-second pop-song ringtone, while spending only 99 cents for the full-track song at Apple’s iTunes Music Store. Ringtones are already a multi-billion dollar business for cellular firms and for recording companies.

So far, the Apple iPod story has been a great success. But I do agree with Barron’s especially in the context of emerging markets where the mobile will be the one device which will need to do it all – including playing music.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.