Finally, some solid competition for Apple’s iPod, iTunes Store, and iPhone. All others have failed. Why do I think Omnifone has a chance to compete against Apple’s music might? Omnifone is different, priced right, and has a huge customer base.
I know what you’re thinking: “Wait a minute. How is that possible? Everyone has failed to dent Apple’s iPod machine, right?” Right. So far. But the winds are changing.
To date, the only online music service that’s done a fair job of coming in at #2 behind Apple is eMusic, which sells non-copy protected MP3s. Apple dwarfs eMusic in size and customer base and has thrashed all wannabe iPod, iTunes Store killers.
What’s different with Omnifone? Apple tipped their hand to the future by pre-announcing the iPhone, a slick-looking multi-function device with built-in iPod, wireless internet browser and email, and a cell phone. And a big price tag.
There is little doubt that even at the higher price points Apple has created a great buzz for a new product and will sell millions of iPhones (the bad-mouthed Motorola RAZR plays a weak imitation of iTunes and they sold a million units).
Apple needs to have music on a cell phone to protect the iPod revenue stream as tens of millions of cell phones are being sold with MP3 music playing capability. Still, Apple’s competition hasn’t figured out how to keep the music playing simple—until now.
Enter Omnifone, a startup with plenty of money, 23 cell phone operators in 40 countries, a subscriber base of nearly 700-million customers, and a over a million songs from all the major record companies. Even Apple doesn’t have all that going into the iPhone launch.
Omnifone has something else that will prove to be attractive to cell phone users who don’t want to ditch their cell phones for Apple’s high priced luxury phone.
All the music a cell phone user wants for a flat monthly fee, from about $3.50, simply added to the cell phone bill. Plus, the songs can be downloaded straight to the cell phone.
While Apple may expect to get one or two percent of the cell phone market in the next couple of years, Omnifone’s MusicStation software works with 75-percent of the music playing cell phones, literally hundreds of millions of phones.
That combination will begin to turn the tide of music away from Apple toward Omnifone and the hundreds of millions of cell phones that can download and play music. Yes, it’s subscription music and priced right, delivered right to the phone, with a huge market to start.
The music industry loves Omnifone, the cell phone carriers love Omnifone, and I’m willing to say that within a couple of years, more people will be listening to music on their Omnifone-playing cell phones than listen to music on iPods.
iTunes Store could very well be the second largest music store online by the end of 2009.
Sorry Jeff, it’s probably not going to happen for a very simple reason:
until phone manufacturers makes the experience of buying music directly to their phone as easy as the iPod / iTunes model via a better phone UI and cheaper service rates, MusicStation will not stand a chance. (BTW the service costs ca. $3.50 per WEEK, not per month.) The phone carriers will most definitely tack their own service charges onto that what Omnifone will already charge, and that won’t sit well with customers. Many phone carriers already offer direct music download services (at least here in Europe), and the experience is horrible. I can’t imagine MusicStation being any different. At the end of the day, it’s nothing more than another subscription model, which has failed many times over in the maketplace. The subscription model didn’t even work before iTunes came into the game. Regardless of how pro-subscription model advocates try to spin it, they are consumer unfriendly and are only beneficial to the labels, which is why they’ve been advocating it for the last 12 years. I’m an indie record label owner, so I have a good idea what the industry thinks.
Your piece also assumes that Apple won’t eventually offer a way to download to the iPhone directly via a mobile version of the iTS. They’ve already filed a patent for a system to do just that.
Finally, Omnifone’s service seems to suffer from the same problem that other direct-to-mobile services have: you can only play the music on the phone, nowhere else. What happens when your phone memory fills up? where will you store your tracks that you download, if you decide to download?
The music industry loves Omnifone, the cell phone carriers love Omnifone, and I’m willing to say that within a couple of years, more people will be listening to music on their Omnifone-playing cell phones than listen to music on iPods.
iTunes Store could very well be the second largest music store online by the end of 2009.
You may very well be right, especially as cell phone carriers add the music component to their sales packages. In this case, it isn’t so much that they’re offering a better product or experience—Windows vs. the Mac OS proves that a better experience doesn’t result in market share domination—it’s the sheer numbers of the marketing universe. If, after two or three years, only 5% of cell phone users pick up a carrier’s package for music, that’s tens of millions of users.
It’s a stretch to think that iTunes and iPod will be toppled soon, but two or three years goes by fast, and there’s far more users of $49 cell phones that play music than there will be of $499 iPhones with pretty screens.
Finally, some solid competition for Apple’s iPod, iTunes Store, and iPhone. All others have failed. Why do I think Omnifone has a chance to compete against Apple’s music might? Omnifone is different, priced right, and has a huge customer base.
You’re on a limb, Jeffrey. But probably not alone. The sheer number of the potential user base with phones that will already play music means a measure of success.
One thing you’ve overlooked, though I suspect you fully understand it, is the user experience managing music—iPod, iTunes, vs. Omniphone. Managing music on iTunes, Mac or Windows, is actually enjoyable, and Apple has eliminating synchronization as an issue. Plug in the iPod (soon, the iPhone) and sync is done. Nobody else has made that experience worth more than crap. Omniphone may well sell lots of music but it will take them a few years to get there, and Apple’s not standing still, right?
One nice thing about going out on a limb on a web site forum is we can check back in a year, then two, and see how the prediction holds up.
There seems to be some dispute as to the monthly fees, and they may vary from carrier to carrier and country to country, but whether the fee is $3.50 a week or month or $15 a month, carriers will build it into their monthly packages, which makes it attractive to many cell phone users. Most of those inexpensive cell phones won’t hold much music, certainly not as much as an iPod, so it will be interesting to see how the interface and download experience compare to iTunes.
Wishful thinking
Yes they will sell some songs but:
Lets see I RENT songs for my phone then go and by a CD or itunes song for my home or laptop. I always love paying for things twice! What every cell phone bill needs is another $15 a month. On top of that for most phone I’d have to put on my glasses (yea I’m over 40) and push tiny buttons, working threw long and tedious menus to find a song that I want, wait as it downloads and PRAY that no one calls me and disturbs the mental gymnastic it takes and then have to start all over again. They will sell a few top ten hits that people can’t live without for more than a day but in my book the user experience will be more torture than fun
Lets see I Rent Songs for my phone then go and by a CD or itunes song for my home or laptop…...... I always love paying for things twice. What every cell phone bill needs is another$15 a month. On top of that for most phone I’d have to put on my glasses ( yea over 40 ) and push tiny buttons, working threw long and tedious menus to find a song that i want wait as it downloads and PRAY that no one calls me and disturbs the mental gymnastic it takes and I have to start all over again…. They will sell a few top ten hits that people can’t live without for more than a day ...
In my book the user experience will be more torture than fun
We don’t always agree on every issue, though Jeffrey makes a good argument and the sheer numbers of potential music users on current cell phones spread over many cell phone carriers may provide some large sales numbers. I’m not convinced that market penetration will be rapid—in fact, probably very slow—perhaps a couple of years before anything notable happens. Those cell phone companies love their PowerPoint shows, Excel spreadsheets showing profits, and Word documents explaining how it all will work.
They just don’t pay much attention to the customer’s needs and wants and Apple does.
Simply put, people love their iPods for multiple reasons—they’re cute, fashionable, work very well, and they’re just damned easy to use.
Compare that to the standard cell phone experience when trying to buy and manage music. “Tortue” is being kind. If Apple gets the next generation of iPods with WiFi and multi-touch screens, and gets the iPhone price tag down, the juggernaut will continue.
The music industry loves Omnifone, the cell phone carriers love Omnifone, and I’m willing to say that within a couple of years, more people will be listening to music on their Omnifone-playing cell phones than listen to music on iPods.
iTunes Store could very well be the second largest music store online by the end of 2009.
You may very well be right, especially as cell phone carriers add the music component to their sales packages. In this case, it isn’t so much that they’re offering a better product or experience—Windows vs. the Mac OS proves that a better experience doesn’t result in market share domination—it’s the sheer numbers of the marketing universe. If, after two or three years, only 5% of cell phone users pick up a carrier’s package for music, that’s tens of millions of users.
It’s a stretch to think that iTunes and iPod will be toppled soon, but two or three years goes by fast, and there’s far more users of $49 cell phones that play music than there will be of $499 iPhones with pretty screens.
1. iPod/iTunes vs. Plays For Sure or Sony Players + SonyConect proves that a better experience DOES result in market domination.
2. Cell phone carriers in Europe have been offering similar services already for at least 2 years with little or no success. MusicStation will not be much different, because even though many carriers are supposedly on the MusicStation bandwagon, they will not play ball with each other. I doubt very seriously that MusicStation will offer true interoperability either.
You talk about what could happen in 2 to 3 years time. It is foolish to assume that Apple won’t within the same time frame:
1. make a version of the iTS that will allow direct downloads to the iPhone (the patents on the system have already been applied for);
2. make more than one iPhone model (which Steve Jobs already said Apple will do), like a low-cost version without the internet stuff, with a smaller form factor, or less memory (think iPhone mini or nano);
3. reduce the price of the iPhone after a while, which is bound to happen.
I think many might be underestimating how much of a dent Apple will make in the cell phone market.
1. iPod/iTunes vs. Plays For Sure or Sony Players + SonyConect proves that a better experience DOES result in market domination.
False. It “can” result in market domination. Look at the Mac vs. DOS vs. Windows.
2. Cell phone carriers in Europe have been offering similar services already for at least 2 years with little or no success. MusicStation will not be much different, because even though many carriers are supposedly on the MusicStation bandwagon, they will not play ball with each other. I doubt very seriously that MusicStation will offer true interoperability either.
Cell phone carriers in Europe have not been offering an ubiquitous service. Ever. The key difference with MusicStation is there is one shop for most cell phones, bypassing the fragmentation of each carrier going their own way.
You talk about what could happen in 2 to 3 years time. It is foolish to assume that Apple won’t within the same time frame:
1. make a version of the iTS that will allow direct downloads to the iPhone (the patents on the system have already been applied for);
2. make more than one iPhone model (which Steve Jobs already said Apple will do), like a low-cost version without the internet stuff, with a smaller form factor, or less memory (think iPhone mini or nano);
3. reduce the price of the iPhone after a while, which is bound to happen.
I think many might be underestimating how much of a dent Apple will make in the cell phone market.
That’s more of an emotional view of Apple’s techno prowess than an analysis of opportunity or capability. Cell phones are a different market than portable music players and digital downloads. There are entrenched players, established customer expectations, built-in loyalties that Apple did not have to contend with in music.
I suspect Apple knows this already, hence the ‘modest’ target of a 1-percent objective in the first full calendar year for US sales.
There’s a reason the iPhone is priced so high. It would cannibalize sales of the existing iPod line. Apple has to transition to the multi-touch technology and the only way to do that is to start high and move down through the entire line.
I wish them well, but Apple’s playing in a different field than PCs or music. Apple’s modest success in PCs was dwarfed by Microsoft and the PC box makers. Apple was successful in portable music players. There are few reasons to believe Apple will have the same success in cell phones.
First, the most important criteria is you have the costs wrong - Microsoft, Yahoo, napster 2.0 and Rhapsody (and others) have already proven that subscription music is a business but a very limited business - there are about 2-3 million customers that are interested in paying for music they like enough to listen to but not to own - yes, it’s enough to sustain a couple companies and because of royalties savings, record labels are eager to push it but it’s clear after all these years and all these attempts, the market has not grow much larger in the last 3 years.
You’re also talking about an audience that knows exactly how to download music and or add music to their phones - the raw numbers means nothing - just like Nokia claiming they sold more phones with music capabilities than Apple sold ipods, what does it mean? Nothing if no one is willing to pay extra - as most European companies & US companies already know with an advanced services subscription rate of 3%.
As Europe is more social, if they implented a song sharing feature WITHOUT DRM, it would be a huge success but without that, again, the interested already kow how to share songs.
As you also point out, these are people interested in cheap phones so why would they pay nearly 20 Euros a MONTH or 160 Euros (about $220 dollars a year EXTRA) when for that price, they can buy an ipod and fill it with itunes or their own, or pirated songs and have enough for a plane ride to Goa?
This is about the 19th attempt. It will also fail because it was designed by bureaucrats who designed every selling aspect, DRM and max ad revenue - and at the very last minute dropped in the music element.
I lean more with C. Simmons. Overtake iPod/iTunes in 2 years? I’ll make another equally likely prediction: within that same time period, Paul Thurrott will be running Apple.
No, subscription music services just makes repeat buyers out of us all. Renting our music. Music that we listen to hundreds, if not thousands, of times. This is stuff you buy, not rent.
I have had the honor of owning a few cell phones over the years. They are difficult enough to operate making a call, let alone functioning as a music device, or other dreamy multi-function gadget. A great interface, even today, is not something easily understood and applied.
But… two or three years is a long time. If we’re lucky, Apple will show how powerful ease-of-use can be, forcing cell phone manufacturers back to the drawing board to create some better products.
But there’s another problem. $3.50 / week or $15-$20 a month, whatever it is, is just the start. Add in local, county, city, federal, galactic, and bio-identical taxes, and it’s going to be a lot more. And forever increasing, as these taxes seem to do. It’s why my $79 plan costs over $100/month.
This could all change. Nothing is static. But they have a loooong ways to go in the cell phone industry to match the iPod/iTunes experience.
Those cell phone companies love their PowerPoint shows, Excel spreadsheets showing profits, and Word documents explaining how it all will work.
They just don’t pay much attention to the customer’s needs and wants and Apple does.
Simply put, people love their iPods for multiple reasons—they’re cute, fashionable, work very well, and they’re just damned easy to use.
Compare that to the standard cell phone experience when trying to buy and manage music. “Tortue” is being kind. If Apple gets the next generation of iPods with WiFi and multi-touch screens, and gets the iPhone price tag down, the juggernaut will continue.
Ouch! I gotta agree with kate mac again! Apple will succeed in this market because they understand that to succeed they must deliver something people want to use… no what people *enjoy* using. The cell phone carriers seem to think that to succeed they can deliver worse quality at twice the price and 1/10th the utility as iTunes. Witness Verizon’s Vcast. Cost - double iTunes. Usefulness - only on cell phone. Can’t burn to CD. Can’t use on iPod or other MP3 player. And if you change cell phones, like people do every 2 years or so, you lose it all and have to buy it all over again. No wonder it is a failure.
your constant reference to the PC wars are not relevant here. Anybody who knows the history of Apple vs. Microsoft knows how and why Microsoft got ahead, and it had very little to do with a good product or even clever marketing.
It’ll be interesting to see if Apple will get similar terms with European and Asian carriers as they did with Cingular (and now Rogers in Canada, reportedly), if the iPhone is successful, we’ll witness something in the cell phone market that has never been there before; phone manufacturers being on more level terms with the carriers. This should be fun.
your constant reference to the PC wars are not relevant here. Anybody who knows the history of Apple vs. Microsoft knows how and why Microsoft got ahead, and it had very little to do with a good product or even clever marketing.
It’ll be interesting to see if Apple will get similar terms with European and Asian carriers as they did with Cingular (and now Rogers in Canada, reportedly), if the iPhone is successful, we’ll witness something in the cell phone market that has never been there before; phone manufacturers being on more level terms with the carriers. This should be fun.
Sorry, Nubee, but that reference is fully relevant here. Do you think that the cell phone carriers and manufacturers will simply buckle under to Apple’s new toys, regardless of how user friendly they are? Of course not. They’ll play as dirty as Microsoft to hold on to their turf, good product and clever marketing notwithstanding. The carriers want more subscribers, either new ones who’ve never had a cell phone before, or current users from a different company. They want to charge for bandwidth, phones, access, whatever they can to maximize revenue and retain customers. Everyone assumes that Apple will disrupt the cell phone market (mature, established, deep penetration) the same way they disrupted the portable music player market (imature market, fragmented products, no established or dominant players).
It just ain’t Apples to apples. To paraphrase, “IF” the iPhone is successful, we “may” witness a few changes in the cell phone market, but not the wholesale changes that occured in the portable music player market.
1. iPod/iTunes vs. Plays For Sure or Sony Players + SonyConect proves that a better experience DOES result in market domination.
False. It “can” result in market domination. Look at the Mac vs. DOS vs. Windows.
2. Cell phone carriers in Europe have been offering similar services already for at least 2 years with little or no success. MusicStation will not be much different, because even though many carriers are supposedly on the MusicStation bandwagon, they will not play ball with each other. I doubt very seriously that MusicStation will offer true interoperability either.
Cell phone carriers in Europe have not been offering an ubiquitous service. Ever. The key difference with MusicStation is there is one shop for most cell phones, bypassing the fragmentation of each carrier going their own way.
You talk about what could happen in 2 to 3 years time. It is foolish to assume that Apple won’t within the same time frame:
1. make a version of the iTS that will allow direct downloads to the iPhone (the patents on the system have already been applied for);
2. make more than one iPhone model (which Steve Jobs already said Apple will do), like a low-cost version without the internet stuff, with a smaller form factor, or less memory (think iPhone mini or nano);
3. reduce the price of the iPhone after a while, which is bound to happen.
I think many might be underestimating how much of a dent Apple will make in the cell phone market.
That’s more of an emotional view of Apple’s techno prowess than an analysis of opportunity or capability. Cell phones are a different market than portable music players and digital downloads. There are entrenched players, established customer expectations, built-in loyalties that Apple did not have to contend with in music.
I suspect Apple knows this already, hence the ‘modest’ target of a 1-percent objective in the first full calendar year for US sales.
There’s a reason the iPhone is priced so high. It would cannibalize sales of the existing iPod line. Apple has to transition to the multi-touch technology and the only way to do that is to start high and move down through the entire line.
I wish them well, but Apple’s playing in a different field than PCs or music. Apple’s modest success in PCs was dwarfed by Microsoft and the PC box makers. Apple was successful in portable music players. There are few reasons to believe Apple will have the same success in cell phones.
1. If the system is a “one-stop” shop for the carriers or not does not negate the fact that it’s based on a model that has, for the most part, been rejected by the vast majority of consumers who purchase music online.
The bandwidth charges alone will in the end make Omniphone’s service more expensive than it needs to be, since the carriers will almost definitely tack extra fees or hidden charges onto any music related service plan. They always have.
2. The points that I made are not an “emotional view of Apple’s technical prowess” as you state; they were based on statements made by Jobs himself at the Macworld, recent patent filings, and the pricing histories of the iPod.
3. If Apple is able to get the same kind of deal with other carriers worldwide that they did with Cingular, they could very well become a dominant force in the cellular market. Granted, maybe not the dominant force, but a major player nonetheless. It only took Samsung 4 years to become the 3rd largest cell phone maker in the world, and that was acheived with products that are far less compelling than the iPhone.
Major European carriers are already hot for Apple’s business. The bidding wars have already begun. Apple might very well do better business in Europe than in the US, especially if the iPhone version they bring out over here is 3G, since 3G is far more widespread here than in the US, and the carriers don’t have the same kinds of restrictions that US carriers have; i.e. I can buy unlocked versions of any phone from any carrier without major hassles.
4. The price of the iPhone may well have been set such as not to cannibalize iPod sales, but it’s not the only reason. Why is it so hard for many to grasp that the iPhone isn’t just another phone with a built in music player, like the vast majority of music phones out there, but a phone with a full featured video iPod? Most music phones have horrible interfaces, aren’t so easy to use, and the sound quality of a lot of players is less than great. The iPod features of the iPhone alone are worth at least $200, and if you factor the iPod component out, then the iPhone is priced very competitively with every other smartphone out today.
I don’t see the same complaints about the price of Samsung’s F700 or LG’s Prada, which will reportedly start out at approx. $700 and $800 respectively, which have no where near the functionality or ease of use as the iPhone, according to reports coming out of the 3GSM convention in Barcelona.
I love armchair quarterbacks. Sorry, Jeffrey, I’m not predicting the absolute failure of Omnifone, but I really want to know what they bring to the market that is new. So far, they bring promises. That’s great, but every new electronic music venture has launched with great sounding promises. No, what they need is something compelling. Please tell me how asking customers to pay two to three times as much for music that they might already own, is a market winning strategy. Right now, there is already a very good way to load music onto your cell phone and it is much cheaper. It works like this: Take your Nokia, Motorola, Samsung or Sony-Ericsson phone and connect it to your computer. Transfer your existing mp3 files over. Unplug and enjoy. That is the easiest and simplest method for loading music onto your phone right now. You can do that already through existing services like iTunes (for Motorola & the iPhone), or through Rhapsody.
What does Omnifone bring to the table that is easier, cheaper and more efficient? Nothing that I can see. Everyone acts like consumers really want to buy their music over the phone networks, but the reality is that most phone networks are not getting as much traffic as they would like. Why is that? It’s because their services cost too much. Omnifone isn’t going to fix that. No, instead, they’re suggesting that you pay an additional $15-20 more per month in order to get a service that is already available to you for much cheaper. How is that a strategy for success? How is that “priced right”? With Apple or Rhapsody, I don’t have to pay any extra for the songs I’ve already purchased.
And sorry, Danny Boy, your Mac vs. DOS vs. Windows does not apply here. When the Mac was launched, Apple did not have a majority of the market, DOS did. The Mac was prohibitively expensive compared to several other solutions out there. In fact, the only thing the Mac had going for it was elegance and ease of use based on a metaphorical approach. In this market, iTunes is the new DOS. It’s not the best service out there, but it’s good enough. Is it elegant? Yes, but it’s not the most full-featured service. Is it easy to use, yes, much more than most of its competitors. And the iPod, iTunes, iPhone platform has one other thing going for it that didn’t exist back then, popular mindshare. The Mac was neat, but the average person in 1984 was not in the market for a computer, especially not one at the prices Apple was asking. But iPods are ubiquitous these days, not just in real life, but in popular culture. That is something that did not exist in 1984.
In fact, the entire market is simply too different. There is no real grounds for your comparison between the existing online music market today and the computer market in 1984-1995. Back then computers were largely aimed at business, and that’s exactly how the PC won. MS and the PC manufacturers focused on the business market and sold computers that were within the budgets of most businesses. Apple was very pricey, and unproven in the business world. MS was partnered with IBM and that gave them credibility.
The electronic music market is entirely a consumer market. There are very few points of similarity in order to make the kind of comparison that you are trying to make.
And as someone who lived in Europe for 9 years until just a few months ago, I can tell you why most of my friends didn’t have a lot of music on their music capable phones. That’s because the networks tried to dictate how they could put their music on, usually involving paying a second time. I knew several people that were willing to pay for a new ringtone, but most were not willing to pay for music they already owned. Most of them had both cell phones and mp3 players for that very reason. (Or they had Sony-Ericsson phones, which offer a very good music experience without even needing MusicStation.) MusicStation does not change that. Will MusicStation fail? Probably not. Just as Rhapsody has not failed, and the whole Plays4Sure ecosystem has not failed. But will it be a huge success? The picture doesn’t look as good as the marketing hype from my perspective. I know that I would never use MusicStation. And I don’t even own an iPod. I have a Treo. I alredy have a free way to load my already purchase music on my phone, thank you very much.
