iPod Still the KING of Portable Music

Tue, 03/31/2009 - 8:17pm
Luke Simpson


Try as they might, cell phones with music capabilities have not managed to knock
MP3 players out of the No. 1 portable music device spot. At least, not yet.

After its launch in 2001, the iPod became the symbol of the digital music revolution. Mobile phone manufacturers, carriers and the music industry are now gearing up for the shift to phone-based music players, but the stand-alone MP3 player isn’t dead yet.

In fact, Apple sold more iPods in the final quarter of 2008 than any other quarter in history.

Ross Rubin
Rubin: iPhone hasn’t impacted MP3 player sales in the U.S.

Ross Rubin, director of industry analysis at The NPD Group, has been tracking the MP3 player market. “It doesn’t appear as though the iPhone or the growth of music phones in general has had much of an impact on the (MP3 player) category in the U.S.”

Apple’s exclusive deal with AT&T for the iPhone may actually be driving sales of the iPod Touch. “The Touch is selling very well, and consumers would not be buying it if they were all opting for an iPhone. A lot of those Touch buyers are probably not on AT&T. Nevertheless, the success of the iPhone has created tremendous attention around iPhone applications, almost all of which also work on the Touch,” Rubin says.

Despite its association with the iPhone, AT&T is only marginally ahead of the other carriers when it comes to customers using their handsets for music. A report by comScore indicates that the amount of subscribers listening to music on their handset once to three times per month for AT&T is 5.1 percent, followed closely by Verizon Wireless at 4.8 percent. T-Mobile USA and Sprint come in with 4.4 percent and 4.3 percent, respectively.

However, there are substantial differences in the way that the music is being sourced. The comScore report shows that 6.9 percent of those surveyed transfer music directly to their phone from a PC, clearly the most popular method. The direct-to-phone music download services were used by 1.5 percent, while direct-to-phone music streaming was even less popular at 0.5 percent.

iPod sales rise in the fourth quarter, and they’re still way ahead of iPhone sales.
Source: Apple

Music downloads in the United States are dominated by iTunes, but the mobile space has some new competitors stepping up. In mid-2008, Rhapsody made its catalog of more than 5 million songs available to Verizon customers through the V Cast service. Traditionally a subscription-based, digital rights management (DRM)-controlled service, Rhapsody began offering DRM-free songs which can be transferred between phones and computers. As a result, the same songs can be used on MP3 players, opening Rhapsody up as an alternative source of music downloads for iPod users.

These new age digital music retailers are making the music industry take notice. The National Association of Recording Merchandisers (NARM) recently added Verizon, Nokia and AT&T to its board in an effort to link labels and distributors with the mobile community.

Source: ComScore

Jim Donio, president of NARM, sees the carriers as the central player in the mobile music market. “Carriers will use brand partnerships and social media relationships to deliver music, like what we’ve seen with Verizon and Rhapsody.”

Donio acknowledges the role that the iPod played in the shift to digital music. “Early forays into digital music by record companies were hindered because the process was device agnostic. The marriage of content with a device was mass-adopted due to the iPod.”

Will the stand-alone MP3 player become extinct due to its integration into mobile devices? “It’s speculative at this stage. It depends on consumer migration and consumer behavior. Behaviors don’t change quickly,” Donio says.

The mobile music market is taking on different forms in different parts of the world. In places like Latin America and Asia, where fewer people own PCs, direct-to-mobile music downloads are proving to be popular. Motorola’s Chris White, senior director of Global Product Marketing, sees mobile music exploding in these markets.

“Mobile music has been a focus for the last few years, but more so in Latin America and Asia where there is a huge demand for mobile downloads.” In this region, Motorola also provides its own music download service, a contrast to the carrier partnerships it has with AT&T and Verizon in the United States.

Search through the specs for any music-specific handset and you’ll be lucky to find any reference to sound quality. In fact, a lot of music-specific handsets are sold on their user interface and other functionalities such as Bluetooth.

Take the LG Chocolate 3, described as a Bluetooth Music Phone. At a glance, the interface resembles the iPod Classic due to the circular pad used to select and change songs. Dedicated keys and an external screen allow control of the music while the flip is closed, but the closest thing to an endorsement of sound quality in the specs is the stereo sound function.

Most phones also use specialized headphone jacks that restrict you to the earbuds that are bundled with the handset. Even the iPhone was originally released with a recessed headphone jack, making it difficult to use other brands of headphones. This was, however, addressed with the 3G iPhone.

ComScore’s list of the top 15 handsets for listening to music illustrates that music is only one of the functions that users are demanding on their phones. Not surprisingly, the top three spots are made up of the original 8 GB iPhone, the 8GB 3G iPhone and the 16 GB 3G iPhone. Research In Motion’s BlackBerry Curve 8330 comes in seventh, proving that the popular handset is not just for business anymore.

It’s worth noting that 40 percent of those surveyed by comScore own a stand-alone MP3 player. LG’s marketing for the Chocolate 3 uses the integrated music functionality as an excuse to “kiss your old MP3 player goodbye.” But with nearly 23 million iPods sold during the recession-hit final quarter of 2008, it looks like the opposite is happening, as more people than ever embrace the iconic music player.


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