After the event... (iPod, iPhone revisited)

The announcement(s) are all done, and the analysts have said their stuff. So, with hindsight what have we learned?

First, let's deal with the iPod nano. It is a brave move indeed that kills off your most successful model and replaces it with something else, that appears to do a little less (less storage, slightly less battery life, incompatibility with a few accessories, etc). But, the nano really is incredible. It will certainly be a logical upgrade for Shuffle users, and most mini users would far prefer the new nano's size (many mini owners are "active" and flash is a better bet). And, for those with a larger iPod, the new nano would be an excellent second iPod. I think it will be a huge success. But most importantly, I suspect there are a lot of competitors sobbing in the corner today. They will have been caught off-guard by this announcement, and they don't have the products to compete. Competing products are considerably bigger (primarily hard disk based of course). Sony announced a new set of Walkman products today - http://playlistmag.com/news/2005/09/08/sony/index.php. According to this link, they are way off on pricing. Admittedly the article compares Yen pricing of Sony with Dollar pricing of apple and may or may not include taxes. But the differences are striking with Apple's 2GB player matching Sony's 512MB model!

If Apple's pricing has come about because of an exclusive volume deal with Samsung for the flash memory, then it is going to cause a lot of financial pressure on the competitors who are already hurting. Creative, iRiver and Sony will not be easily able to get similar pricing as their volumes will be lower. Yet, price will be the only thing they can fight back on with their current products. New products (even if they do get decent flash memory prices) will be a few months in reaching shelves at the least.

I think there will be some people disappointed with the nano - lack of voice recording capability, no photo transfer, and no photo playback to a video screen. But on balance, this is a competitor-killing move from Apple. (I'd bet a 6GB or even 8GB version will also be available just before or just after Christmas to round off the range).

Less covered, but notable nonetheless is the additional vehicle manufacturer support. Apple now has many major manufacturers offering iPod support for their cars. It is this sort of agreement that means for the consumer, buying an iPod is the only logical choice. Sure, I can find a device with a feature built-in that I particularly need, but with the iPod you know you can do that and better, even if it means buying an accessory. This interface and accessory market surrounding the iPod means an iPod can have a longer operational life. As people's usage and needs evolve, they know they'll be able to use their iPod differently. No other player/manufacturer can offer this. Sure, I'm a big apple fan, but I just can't see very many reasons why anyone would NOT choose an iPod over a competing device. The only ones I can think of are a) you are absolutely sure you need a very specific model with specific feature set that only X offers b) you are a linux user c) you hate apple/apple products for some specific reason.

Now, about the ROKR phone. I have to say I was impressed with SOME aspects of this announcement. I think the phone in the flesh is not a bad-looking phone and smaller than we might have expected from the leaked photos. So, it's similar in some ways to the Walkman phone. I am really glad to hear that they have got CERTAIN user interface aspects right. For instance, pausing of music when a call comes in with easy play after, and ability to send/receive texts while music is playing. Also, it's ability to work in non-radio mode on a plane for instance is good. If the talk of partners is correct, they also seem finally to have got some good outlets. But, some things still confuse me. Personally, I would always prefer to have a separate iPod with a smaller/different phone of my choosing. The iPod nano has just made that preference even more compelling. But, lets say this is just the first of a number of devices (eg perhaps they'll get a RAZR with this too), is it any more compelling a proposition than we thought before the announcement?

Well, reading between the lines, the presence of Cingular and what they said at the announcement presents some clues here. On the surface, it's presented as a 3-way partnership. But looked at today, it's not. Motorola have presumably paid something to Apple to license the iTunes client. And Motorola and Cingular have a deal to promote the phone. But there is nothing obvious in the relationship between Apple and Cingular, except perhaps the marketing and exclusivity. The software was referred to several times as an iTunes "Client". What we don't know is whether it is essentially the same as on iPod's or a cutdown iTunes. And, I couldn't find out whether the software could be updated either. So, today, it is basically an iPod shuffle with a display, connecting only via USB. It's not a mini-iTunes that can connect over the airwaves and buy/download music directly. But the Cingular COO said some interesting things. He made reference to the value offered by the iTMS and it's market share. I would take that to mean they believe that people will logically buy their music from Apple's store at 99cents or whatever. Extrapolating that, I infer that Cingular would not try to enter the download market themselves with a higher priced model. Instead, I think they are already hard at work ensuring that there is a business model that makes sense around this phone and it's derivatives. I'm sure Apple is part of that too. I can only surmise that they haven't jumped in more seriously yet for one or both of two reasons 1) The adoption rate for high speed services is not yet there. And therefore the downloading experience for most users is just not good enough. 2) They still haven't worked out the business model for who gets what. Let's assume that Cingular goes with the 99cent price on the iTMS, then how can they make some money, and how can Apple make money (remember, Apple does not look at the iTMS as a serious money-making proposition but as a way to sell iPods. So they'll need some incentive too)? If Apple/Motorola/Cingular can deliver on a higher speed service with an iTunes client that CAN connect to the music store, then I think there'll be two ways for Cingular to make money without upping the price of the 99cent purchase. One is the data charge for transferring it. If they come up with a per song fee, or some sort of guarantee not to exceed something, then they might make a good case to a user. I would imagine that fee to be in the 20-30cent range. Given a typical song is about 4MB, then that represents a significant saving over current per MB rates from mobile operators. But it is easily doable. It also represents one of the best ways to get people using data on their phones. I have a 1GB allowance on my new Nokla Orange phone for watching TV, which eventually will be charged at £10/month. That's just 1p/MB. The other revenue opportunity is in revenue collection. A 99cent download costs Apple about 15% to the credit card companies due to minimum charging. By Cingular collecting the revenue via the monthly bill, Apple makes that much more profit per song bought this way. They'll find some way to split that saving.

There are other models too. A subscription/music trial model would allow revenue to be split, but it might also create problems with data usage which would make using a phone for a subscription model expensive. Another way is to look at charges for things like podcasts which might otherwise be free or subscription models for podcasts (eg £1/month for Wall Street Journal podcasts). It was notable that podcasts were referred to several times when presenting the ROKR phone. I am convinced that it is this market as it matures that may provide the real compelling reason to have such a phone, and to pay for such a service. There may still be those operators who think they can charge ringtone prices for music downloads, but I think most are getting real to this. It just won't happen. A high percentage of ringtone revenue already go to marketing/advertising. A nice music download store operated by a phone operator might appear compelling when $2 per song or more is mentioned. But in reality, such a store will never get the volume to make it worthwhile to setup. Far better to get 10-20cents per download for just operating the network.

So, I think there is no rush into this yet until the firms know a bit more about the market (just as they haven't rushed since announcing this phone a year ago!). It's a similar reason why we've not seen the long-anticipated video iPod - the compelling use cases are not yet there. There's no rush yet either. Apple were not first with an mp3 player, and indeed they were almost LAST to market with a flash memory version. They will bide their time, perhaps experiment a bit on the outside, put a few more enabling bits and pieces into things like iTunes, mac OS X, QT, iTMS and home networking products, and be ready to pounce when they feel they can do it right.

Apple was daring where it needed to be with this announcement and boring where it could afford to be. The biggest danger for Apple (again) is that they won't be able to make enough of them.