iPods vs. Music-Phones: Apple Still Has a Huge Advantage

There's been a lot of hoo-ha recently about "is the iPod's star waning?", and, in particular, will it get trounced by music-capable phones?

It all depends on your angle, of course. Depending upon whether you sell music, make flash memory, run an operator, build devices, provide network backhaul capacity, design headphones, or a hundred other roles, your view of "what stat is important" will vary.

What matters?

• Number of "music-capable" devices sold? (and do you include FM radio as well as MP3?)
• Number of "music-optimised" devices sold (eg a SonyEricsson Walkman phone vs a SonyEricsson Cybershot imaging-oriented phone which also has an MP3 function)
• Number of music-capable devices in use (ie addressable "installed base")
• Number of music tracks sold, intended for a specific device? Their value?
• Total hours of music listened to per user per day/week/year?
• Total # of people who have ever used their device for music, even if only once?
• Proportion of people who listen to music "regularly" on a platform
• Source of music listened to (or bought) - mobile download, sideload from a PC, split between online purchases vs CD rips vs peer-to-peer filesharing?
• Number of music devices per person and when/how they're used?
• Proportion of someone's total music listening given per "context" - mobile / car / home hifi / gig / club / friend's house etc?
• Total aggregate share of someone's entire disposal music-related expenditure?
• etc. x 100

You get the point.

Now, I've been engaged as part of a vigorous debate with the esteemed Tomi Ahonen, who stirred up a firestorm a week or so back with a hard-hitting piece on whether we should claim "iPod RIP". I'm not going to re-hash all the arguments, counter-arguments, flames and other stuff. It's all still burning on Tomi's site with small secondary conflagrations on places like the excellent Forum Oxford.

I'm certainly not going to get embroiled in the 14% / 76% market share debate. As the above indicates, there are at least 10 differently-defined "market shares" here, which are of differing importance to different people.

I have, however, tried to do an apples-to-apples comparison with some publicly-available data, which suggests that there may still a range of 2 orders of magnitude (ie a factor of 100) in terms of regularity of purchase of "music for devices".

Firstly - the UK. A market with a fairly good number of musicphones (however defined) and fairly decent 3G penetration, as well as high levels of music-fandom overall. In March 2006, the UK division of Hutchison's 3 mobile operator reported "With average sales of over 200,000 tracks per month, mobile media company 3 today announced that its audio service has made up over 53% of mobile audio track downloads since the start of 2006". In other words, in Q1 2006, the run rate for the market as a whole was about 400k songs to mobiles in the UK.

In Q1, 3 had about 3.5 million 3G subscribers, so it was selling 0.057 songs per sub per month = 0.69 songs / sub / year annualised. As 3 is the leader, this is probably a better rate of sale than the other 3G operators in the UK, ie probably an average 0.5 songs / sub / yr for 3G in the UK (particularly as other operators have more datacards subs). Another source has suggested "11% of 2G/2.5G users in Britain, and 32% of 3G uses in Britain downloaded music to phones" that suggests 2.5G users would perhaps be around 0.15-0.2 songs / sub / yr , and probably (average across all UK subs, probably around 80%+ 2G) about 0.25 / sub / yr averaged across the whole UK mobile population.

Japan is one of the most advanced mobile music markets. KDDI has now downloaded 50m songs, with the last 20m sold between Dec '05 and May '06. ie a run-rate of 4m / month and thus 48m / year. It has 24m subs, so this is 2 tracks / sub / yr. I've seen something else (can't find the source unfortunately) which suggests that 23% of its users download music, so this average figure is skewed between lots of people on zero, and a smaller number on much higher figures.

Conversely, Apple has around 40m iPod users as an "installed base" of users. It had sold 500m iTunes songs in July 2005 and 1bn by Feb 2006 ie a run-rate of 71m per month, ie 1.8 / owner / month or 21 / owner / year.

All this obviously excludes music ripped from CD (or downloaded from other legal/illegal Internet sources) and put onto iPod or phone by USB or memory card. However, to sum up - legal device-oriented full-track music sales, averaged across all users/subscribers (yeah, I know definitions are a little different & some people have several phones or iPods) are:

UK mobile - about 0.25 songs / sub / year, rising to 0.5+ among 3G users (and using some other stats I've seen on what % ever download any music, probably about 2 songs / active mobile-music sub / year)

Japan mobile - about 2 songs / sub / year (and at 23% of KDDI users downloading music at all, about 11 songs / active mobile music sub / year)

iPod - about 20 songs / user / year

I reckon that's about as close to "apple-to-apples" as I can get on published data.

Disclosure: I own an iPod Nano, 3 different MP3 playing-phones and never buy songs from iTunes or via operator download, preferring to buy & rip CDs instead & use USB and memory cards.

Comments

[Tom B:]

I think it is unlikely people will want to listen to music on their phones. Personally , I try to interact with my phone and my phone company as little as humanly possible.

2006 Jul 28 08:42 AM

[Stanley Do...:]

I think the consolidation of all media devices is the trend. Digital camera, MP3 player, data storage, web browser, telephone, in one device is what I believe what the consumer wants, convenience is key.

2006 Jul 28 04:00 PM

[Tom B:]

I have friends with web browser-phones. They are inconvient, so they just use them to quickly call up weather or the jok of the day.

With an MP3 player-- I listen to mine for hours at a sitting sometimes. I think that would kill the battery on a cell phone pretty fast. And Verizon, being idiots, would probably disable, censor, or charge extra for the feature, anyway. I doubt very much that I would be able to get anything resembling a pleasant user experience. I think it would be more like being on "hold".

2006 Jul 28 04:35 PM

[Chris Davies:]

Some interesting stats, though one thing that springs to mind is that mobile providers figures perhaps don't take into account customers purchasing music from partners or other companies. I'm not talking about illegal downloads, I'm thinking about customers going online and entering their favourite song in a search and buying it on an Mp3 or ringtunes site for their handset.

I imagine that the figures from the UK providers are songs purchased or downloaded exclusively from their network on their handsets, and this doesn't really represent the real 'appetite' for music downloads. This method is particularly true for non 3G subscribers, I have 'gone elsewhere' for a ring tune and suggest that this habit may be carried forward to customers upgrading to 3G - they may have their favourite place to purchase music where good service, value and therefore loyalty have been established.

The real challenge for the providers will be to ‘lock-in’ their customers so they purchase music exclusively from their network. This raises an interesting point, how might someone feel if they can only buy from their mobile provider? not very happy I expect, so it's up to the providers to improve and broaden their music offering to compete with the best of the rest.

2006 Jul 30 12:51 PM