Do iPods Cause Hearing Loss? Should Apple Investors Care? (AAPL, SNE, MC)

Includes: AAPL, MC-OLD, SNE

As Macworld Expo commences today, the Wall St. Journal (sub. req.) pours cold water on the party, citing hearing experts in LA and Boston who are raising concerns that MP3 players are causing a mass wave of hearing loss among young Americans. Excerpts:

Similar concerns were raised when the first generation of portable music players, including Sony Corp.'s Walkman, hit the market in the 1980s. But the latest portable stereos -- including Apple Computer Inc.'s iPod, and other players by iRiver, Sony and SanDisk -- can hold thousands of songs and have longer-lasting batteries than older players. As a result, people are listening to the devices for much longer periods of time. Because hearing damage is directly related to the duration of exposure -- not just the volume -- one concern is that the steady, long-term exposure to even moderately loud music could contribute to premature hearing loss...

The concerns are emerging as sales of MP3 players explode. Roughly 38 million MP3 players were shipped to U.S. retailers in 2005, according to forecasts by the research firm IDC, and an estimated 28% of the U.S. population owns a player. Apple controls about 70% of the MP3 player market...

Further spurring worries about hearing loss was a blog posting a few weeks ago by Pete Townshend, the former guitarist for The Who. Mr. Townshend warned the iPod generation about the dangers of hearing damage, and said he blames his own severe hearing loss on years of using studio headphones. "Hearing loss is a terrible thing because it cannot be repaired," wrote Mr. Townshend. "If you use an iPod or anything like it, or your child uses one, you MAY be OK… But my intuition tells me there is terrible trouble ahead."

A number of companies are addressing the concerns with products that may minimize the problem:

There are two distinct headphone styles that minimize background noise. Sony (NYSE:SNE), Bose and Panasonic (MC-OLD) sell the more expensive "noise-canceling headphones." The battery-powered sets feature tiny microphones on each earpiece that detect ambient noise. The headset then generates sound waves that cancel out the ambient noise before it reaches your ear. A cheaper option is "sound-isolating" earphones, made by companies including Shure and Etymotic. These earphones, which typically cost $50 to $200, fit snugly in the ear and are made of sound-proof material that helps block out background noise.

Note that Apple is not among the crowd offering a sound-minimizing headset. Perhaps acknowledging the issue would, at this stage, cause more problems that it solves. In any case, those who are looking for Apple to start stumbling could certainly add this to the potential problems. In BusinessWeek, Harvard professor Clayton M. Christensen notes another big roadblock for Apple -- when asked 'Can Apple keep it up?', Christensen says:

I don't think so. Look at any industry -- not just computers and MP3 players. You also see it in aircrafts and software, and medical devices, and over and over. During the early stages of an industry, when the functionality and reliability of a product isn't yet adequate to meet customer's needs, a proprietary solution is almost always the right solution -- because it allows you to knit all the pieces together in an optimized way.

But once the technology matures and becomes good enough, industry standards emerge. That leads to the standardization of interfaces, which lets companies specialize on pieces of the overall system, and the product becomes modular. At that point, the competitive advantage of the early leader dissipates, and the ability to make money migrates to whoever controls the performance-defining subsystem.

In the modular PC world, that meant Microsoft and Intel, and the same thing will happen in the iPod world as well. Apple may think the proprietary iPod is their competitive advantage, but it's temporary. In the future, what will matter will be the software inside that lets users find exactly the kind of music they want to listen to, when and where they want to, with minimal effort.

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