Interviewing John White on Digital Music (Part III)

Welcome to the third part of the digital music coverage. Today, John White of Portio Research Ltd will be visiting here. If you missed the previous parts you can follow these links:

Interviewing John White on Digital Music (Part I)

Interviewing John White on Digital Music (Part II)

Let's welcome John:

Hi John. Thank you for coming back, how are you? :)
Hi Xen, thanks a lot, I’m doing great thanks.

Today you’ll be covering the iPhone…
Yes! Here’s what Portio Research has to say about the iPhone:

The day after we published our ‘Digital Music Futures 2007-2011’ report, Steve Jobs of Apple Inc. announced the impending release of the new iPhone. What impact will iPhone have on the mobile music market?

It would be hard for anyone to deny that once again Apple have produced a stunningly desirable looking device. The iPhone that Steve Jobs unveiled on Tuesday 9th January, during his keynote presentation at the MacWorld Expo in San Francisco, looks cool, sexy, fun, easy to use and extremely powerful. Apple has surely set a new benchmark for the user interface. What does this mean for the mobile industry and who will see iPhone as a threat, and who will see it as a reason to celebrate?

Good news all round

The answer is that most players in the mobile industry should find this announcement a good reason to celebrate, as this is generally good news for most players and good news for the industry as a whole. We have argued for years that the user interface on most mobile handsets needs to be easier to use to encourage greater use of non-voice services, and while Jobs stated that Apple have filed many patents with this product, which they intend to defend, a standard has clearly been defined and other manufacturers must now step up and meet the challenge.

The iPhone certainly does not represent a major threat to the dominant position of the leading handset vendors. Apple has set a target of achieving 1% market share in 2008, that’s sales of 10 million iPhones in a market of 1 billion handset sales. Considering the high-profile announcement and the months of rumour and speculation that preceded it, a target of 1% after 18 months in the market seems quite low, but that simply emphasises that the iPhone is not targeted as a mass market device.

One of the defining factors that separates Apple products from the rest of the market is the innovative design and the uber-cool image that consumers attached to many of Apple’s products. If this chic, leading-edge image was lost then a lot of the appeal of Apple, and the premium price fans pay, would be lost, so it is actually not in Apple’s interests to become a mass market manufacturer with double digit market share. Just take a look at what happened to the Motorola RAZR. When it was first released it was expensive, chic, desirable and very up-market, yet within 2 years the device is so widely distributed that it is now considered “old news” and it has lost all its cutting edge fashion appeal. That simply is not a space Apple wants to occupy.

Finding a place in the market

In the broader mobile handset industry, Nokia will ship well over 300 million handsets in 2007 and 2008, Motorola should ship well over 200 million, Samsung over 100 million and SonyEricsson should also be aiming to reach close to 100 million. Compared to these, Apple’s target of 10 million should not be cause for any great concern. Where Apple will be causing major worries is in the high end smartphone and PDA market. Manufacturers such as Palm, RIM, Dell, HP and i-mate have every reason to be concerned, and devices such as the Motorola Q, the Samsung Blackjack and the Blackberry range from RIM now face serious competition from the iPhone.

Apple has a number of challenges ahead, not least the lawsuit launched on January 10th by Cisco for infringement of its copyright name, iPhone. Beyond that legal dispute, Apple needs to ensure it has sorted out hardware issues that have plagued iPod. While most consumers can suffer having no portable music player for a few days or even a week or two, while there iPod is being repaired, such breakdowns are totally unacceptable with a $500 Dollar smartphone. The kinds of consumers who pay top-Dollar for a fully featured smartphone don’t like to be parted from their device for an hour, let alone a week. Hopefully such hardware issues will not be a problem. Apple computers have always met high standards of quality and reliability, and as a niche product hopefully the iPhone will also be built to industry leading standards.

OK Xen, I'll tell you more about the iPhone next Thursday, so stay tuned!

Thank you John!