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Saturday, March 26, 2005

The Clash Of The Business Models - The iPod Phone - When? If Only!!

(Via Businessweek) Mobile carriers such as Verizon and Cingular are hesitant to sell the Apple-Motorola gadget. Excerpts with edits and my comments added:

The iPod mobile phone looks irresistible than a device combining the digital-music prowess of Apple Computer with Motorola's expertise .The launch is delayed apparently due to lack of support from such giant cellular operators as Verizon Wireless and Cingular. The wireless companies are reluctant to promote the Motorola-Apple phone. Behind the clash are two very different views of the future of music on mobile phones. Motorola and Apple would let customers put any digital tune they already own on their phones for free. That would help Motorola sell more phones, and it would help Apple expand its dominance of digital music. Verizon, Cingular, and other wireless operators want customers to pay to put music on phones. The carriers have no interest in conceding the booming digital-music market to the tech players. Carriers are seeing, Apple as "a competitor not to be embraced, but to be rejected."

For the 99¢,paid by customers for iTunes,Apple only gets about 4¢ of that, after paying the record company and others- Apple says iTunes is only a breakeven business. Verizon and others typically subsidize the phones they sell to customers, One way would be for U.S. carriers to follow the in Europe where carriers such as Vodafone Orange, and O2 have set up their own digital-music stores, letting customers download music tracks over the cellular network to their phones. Carriers get a slice of the $2.80 customers pay per song. Wireless players also could offer customers subscription services, with access to thousands of songs for a flat monthly fee of $15 or $20.

U.S. carriers hope to position themselves as major players in digital music and swipe the spotlight from Apple. Their ideal scenario would be for customers to use their mobile phones as digital jukeboxes, plugging in headphones to listen on the go and dropping the phone into a cradle attached to stereo speakers at home. While Apple and Motorola may object, wireless operators can buy music-downloading handsets from phonemakers that are willing to play by their rules - perhaps aggressive Asian players such as Samsung and LG. "There is a sweet spot in mobility and music," says James Ryan, Cingular's vice-president for consumer data services.

Smaller rivals, such as T-Mobile, may peddle Apple to gain ground on the industry leaders. Motorola says it's working out ways for carriers to profit from digital music, and it expects to launch the phone with that support this summer. Motorola and Apple could also bypass carriers altogether and sell the phone via retail stores or their own Web sites.
My Take: Interesting battle ahead – battle of business models and we have to wait and see how the consumer pull factors weighs in here against aggressive push by dominant players – is there a role for any additional regulation here not that one asks for – but can wireless carriers be legally right in refusing to sell new models of phones that consumers may like? Consumers may also want to ask the question why should the wireless players want consumers to pay almost three times more than what Apple in charging for downloading music? Apple should get more aggressive and may be open its treasure chest a bit to muscle in. Apple should also try and penetrate non-US markets- Apple is traditionally late entrant in the the international markets - more so when mobile market is growing fast particularly in Asia - where music is also a very significant medium and it may be easy for Apple to tie up with different mobile carriers in the fragmented asian markets.

Category :Emerging Technologies, :Business Models
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