Welcome to the fourth 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: Part I, Part II, Part III.
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 present the second part of iPhone…
Yes! Here’s what Portio Research has to say about it:
Top spec = top price
Many analysts and industry observers have suggested that the price tag Apple has set for iPhone is too high. We don’t agree with this, we think the prices set, USD $499 (for 4GB) and USD $599 (for 8GB version) are perfectly acceptably to the kind of consumers likely to be interested in such a top-spec handset such as the iPhone. As Jobs pointed out, the $499 price is approximately equivalent to the cost of purchasing an iPod and one of the current market leading smartphones, and we believe consumers will understand this value proposition. More importantly, Apple is only looking for 1% market share, and those 1% of consumers are likely to be in the very top tier of buyers – the kind of people who want a top spec handset and a top spec iPod are the kind of people who are not put off by a high price tag, they have the cash and they want the latest cool device, and we believe Apple will easily find 10 million such consumers in 2008.
Also, during that keynote address Jobs alluded several times to ‘the future’, to ‘more products’, to ‘changing the mobile phone industry’ and so on. Clearly Apple have plans to roll out a whole range of devices over the next few years, and just like the iPod this range is likely to include both high-end and mid-range devices, to broaden appeal to a greater selection of consumers. Two years from now we could expect to see a super-high-end 3G iPhone, perhaps boasting a 5 mega-pixel camera and a massive 60GB of storage and in-built VoIP capabilities.
Equally, at the other end of the spectrum the range may include an entry-level product with a slightly limited range of features priced lower, perhaps at only a couple of hundred Dollars. While even this lowest priced model will remain a premium product over many competitors, this is congruent with Apple’s brand strength and market positioning.
Market impact
As the months now pass after Jobs’ presentation on Jan 9th, the end-user is unlikely to notice any significant changes in the mobile handset market before 2009. Few of these devices will actually make it into consumer’s hands in 2007, at least few outside the domestic US market, and even when Apple achieves its target 1% market share – which we think it will easily achieve – still 99 out of every 100 consumers will not see any changes to the handsets they are using. However, the real significance of the iPhone will show through in the handsets made and shipped by other manufacturers, mostly those who DO ship hundreds of millions of handsets each year.
iPhone sets new standards and new consumer expectations of what a mobile lifestyle device can and should do, and while Apple defends its patents, other manufacturers will find new ways to deliver better devices with better user interfaces to the mass market. We await the 2008 handset ranges from Nokia, Motorola, Samsung and SonyEricsson with great anticipation. The challenge is there to be met, and if these huge players in the handset industry meet it, that can only be good news for everyone, especially consumers.
Thank you John!
This ends up this coverage of the Digital Music market in 4 parts, brought by John White of Portio Research Ltd. Tune in next Thursday for my next series! :)
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