First, thanks for mentioning my posting. I wish I’d spotted it earlier and would definitely have come here to post a comment back then.

I am now doing the update round as Apple has just released its latest quarterly data yesterday 19 July 2006. Like I predicted last year and the Financial Times quoted me almost a year ago, yes, today July 2006 the game is utterly totally completely over. The iPod has lost. It is now a niche play, exactly like the (also excellent) Macintosh PC.

Numbers. Last quarter 2005 iPods sold 14 million. First quarter 2006 8.5 million. Now ended second quarter 8.1 million. No matter how hard Apple management tries to spin it, this is a drop of 45% in only 6 months.

If it was a total collapse of the global MP3 player market, then Apple’s performance would be understandible. But it isn’t.

For the first 13 quarters Apple had the MP3 player market all to itself, with only tiny “nuisance” competitors like Creative Labs. So from 2001 to 2004, Apple built an 80% market share.

In 2005 all of the big phone makers decided to enter the MP3 player market (before 2005 when the market was under 10 million units, no handset maker bothered with such puny numbers. Remember the phone market is the biggest consumer item market on the planet, selling 1 BILLION mobile phones this year alone)

So as the phone makers ramped up their product portfolios and production lines, by the first quarter 2006 all phone makers had top-line musicphones. The Nokia N-Series. The Motorola Razr V3i. The SonyEricsson Walkman series phones. Samsung was the first to release a phone with 6 GB of storage (1.5x a typical iPod Nano) and LG released its Chocolate.

Guess what. All phone makers report enormous growth in the first quarter, and again in the second quarter. Typically 50% above the Christmas sales levels. So Apple says iPod sales are down 45%. Phone makers say musicphone sales are up 50%. I think our opinions are pretty irrelevant at this stage, the customers have voted with their dollars. They want musicphones.

Apple talks of a 77% market share for iPods. That is being covered by many in the press. Don’t be fooled. This is management spin. It is not a global number, it is only the USA. And it very conveniently ignores the musicphones. The real market share is 14% – and dropping.

I have all the stats, survey results, and independent quotes from leadign execs of the music industry about iPod vs mobile phone – all at my blogsite at http://www.communities-dominate.blogs.com

Finally let me quickly respond to a few comments.

First on the original posting – about ringing tones. No, I actually do track these numbers for the industry, report them in my books, and am regularly quoted about them in the industry press and mainstream media like the Wall Street Journal, Business Week, Financial Times, Economist etc. The actual value of 440 million dollars of music sales direct to phones in 2005 was true MP3 tracks. Reported by the IFPI – the umbrella industry body for the worldwide recording industry ie the most reliable and neutral source possible for music revenues.

RINGING TONE sales were worth 5.1 billion dollars in 2005. Thats where the Crazy Frog is. And Apple’s iTunes. That game was over last year, as iTunes earned 400 million dollars. Already last year more music was sold (true MP3 full-track songs) to phones than to iPods. If you’re like me, living in the UK, it might not be obvious. Then it may help to know that the leading countries for this are South Korea and Japan. Remember I’m looking at global numbers. Korea was the first country where this became possible, that was in the summer of 2003 – two years after the launch of the iPod. Today three years later 45% of all music sold in Korea is sold directly to phones. Korea is also the world’s leading country by 3G phone penetration (a year ahead of Japan) so that is why the numbers are that dramatic there. When we have half of the population with 3G phones, it will be easy for us as well.

But while we’re on the subject, prices are falling also for music sold to phones. In Sweden they already sell songs at about 8 cents – 6 pence – per download track. UK prices are still rather high….

So yes, that number did not include ringing tones.

Nathan – I take it you don’t send SMS text messages either with your phone? Do you use indoor plumbing in your house? Read by candle light? Play clay disk music on a gramophone? Did you type that posting on a manual typewriter and then asked your nephew to go post it onto the net? I don’t mean to be cruel, but hey, 72% of the population use the phone as their wristwatch. 73% use the phone as their alarm clock. 84% of Europeans send SMS text messages. Maybe you too could expand your concept of what you can do with your phone? get with the times perhaps?

Andy – I hear you. There also are very simple and small phones targetted at you. What you could do is get one with a (simple) camera though. Its not to take pictures so much, as the unanticipated need to store a memory. Say you are – in no fault of your own – in a car accident. And the other guy starts to move his car before the police arrive. You see he is doing it to shift the blame. If you have a cameraphone with you (we carry the phone 24 h a day, 60% of us take the phoen physically to bed with us) then in this kind of instance you can snap that photo. People really have a wide range of bizarre uses, not to take snaps, photos, but more to aid the memory. The picture of the subway map. The picture of the change in the temporary time table. The picture of the taxi driver (girls do this at night when they fear the taxi driver might molest them when they return home from partying) etc etc etc. But yes, I totally understand the “I want it small and simple”. I’m the exact opposite of that. I want everything in my phone ha-ha…

DK good point. Battery life is always a compromise with portable equipment, the smarter the device the more it is a problem…

Wolfie – Samsung already started to ship a 6GB musicphone last year – plenty of offers to get it on contract for free or at very modest cost – obviosly in countries where subsidies are allowed like the UK (eg Italy subsidies are illegal)

Rebecca – its not that the iPod is superior – nobody in their right mind would disagree with that. The iPod is and will be the best music device, if we can trust Apple after two decades of brilliance in design with the Macintosh computers. But that is not the point. Some customers are like you, they want the best, and will pay whatever it takes. That is exactly what marketing people call a niche market. The mass market is not like that. They are happy with what is good enough. It is why there are more Renaults and Fiats and Mazdas than Bentleys, Maseratis and Porsches.

Thank you.

Tomi Ahonen
4-time bestselling author and consultant on high tech
lecturing at Oxford University
foundign member Engagement Alliance, Wireless Watch, Forum Oxford and Carnival of the Mobilists
website http://www.tomiahonen.com
http://www.communities-dominate.blogs.com

On a different note – I have to unpack the shopping alone and unaided every month – if I moaned about it as much as you you’d leave me!

Oh, and one more thing – your continuance to cling to your buggered up phone is pathetic – get over it

Could be very annoying…

DK

I’m like this with every product I enjoy. I get mad when clothing stores update their product lines. Damn it! The stuff they sold a few years back was perfect!

Very apt.

It manages this by having no cameras, no music ability, no nothing, other than the ability to make and receive calls, and texting.

It’s on the blink, but I’m going to keep it until it dies, because I’ve still not found anything smaller.

Everything these days is chock full of widgets that I simply don’t need.

Yes, I’m a mobile luddite.

Gotta keep the technologies in different devices. Otherwise, we’re just inviting the coming robot apocalypse.