iPod, Therefore, iPhone?

In The iPod Phone Myth, I took apart the idea that mobile phones are a threat to Apple's iPod. In Why Mobile Phones Make Bad iPods, I presented why mobile phones and music players are not the obvious match many analysts like to imagine. Here, I'll examine how likely it is that Apple will turn their iPod into a phone.

FrankinPod

Consider the features that make the iPod competitive as a music player: its simple and elegant design, compact size, light weight, high audio quality, large storage capacity, and competitive price. Now, make it a phone.

An iPod with mobile phone features would require mobile and bluetooth radio circuity and dialing controls. Those additions would make the iPod phone more complex, bulkier, shorten its battery life, and make it more expensive. Such a device might be a better compromise than a phone trying to be a music player, but it would still compete poorly against standalone music players or dedicated phones.

Additionally, such a hybrid device would be undesirable to mobile phone service providers, because it would allow users to avoid using their network. It would kill the additional network fees mobile providers are trying to bill for services like photo sharing and network sync, and their paid downloads like ring tones. Without service providers interested in subsidizing the cost of the phone, the iPod Phone would have to compete against free or very cheap phones.

That might force Apple to risk entry into the competitive phone service provider industry. That would turn their successful hardware-centric business upside down into a service-centric business: selling the iPod Phone at a loss, and trying to recoup profits by billing service fees. That would also negate a key aspect of Apple's current positioning that I talked about earlier. Selling great hardware that is well integrated with the "free," included software makes Apple more attractive to their customers.

¿Por qué?

How does Apple benefit from making their iPod a more complex, less competitive product that is riskier to sell? Would customers buy both an iPod and an iPod enabled phone, or would the iPod Phone just cannibalize their existing iPod market in exchange for sales of an inferior and less profitable hybrid product?

Unlike Microsoft, Apple hasn’t run out of steam in its existing markets, and so has no need to speculatively enter new market segments in a desperate bid to find new business. Apple also can’t afford to copy Microsoft’s strategy of throwing away billions on new markets in a scattershot aim to own and control them.

Additionally, how would consumers benefit from a merged iPod and phone device? The lack of overlap between what makes a good music player and a good phone means a hybrid device would in most cases be a less attractive option that buying one of each. An all-in-one product that is not really very good at anything is not a great deal.

The iPod Nano and Shuffle are so small that consumers wouldn't even be dropping any weight; they'd just be gaining a slightly different type of inconvenience, trading two devices for one hybrid, complex device that requires two different sets of headphones and is far more fragile. People sweat on their iPods in the gym; they can’t sweat on a phone.

If customers were really interested in a complex device that did lots of things, but none very well, then the PDA phone market would be booming. It is not. Sales figures clearly indicate that many users of Palm Treos and WinCE smartphones don't use them for music playback, but buy an iPod or other music player instead.

Getting the iPod

Apple didn't just stumble upon a good music player when designing the iPod. Instead, they created a product expressly engineered for listening to music, and they carefully avoided glutting it with frivolous features that would detract from or complicate its core functionality.

Lazy analysts seem to think that the value in Apple's iPod has something to do with Apple owning the online music business. While the company did manage to do that, it really only needed to set up a good enough alternative to Microsoft's WMA encumbered music stores. Apple didn't actively seek to slaughter Microsoft's WMA business; Microsoft and their partners simply failed spectacularly in an sloppy effort to rip off consumers, and left Apple's iTunes and the iTMS as the remaining alternative.

What makes the iPod a successful product is not really its ability to play music, nor its wholly optional relationship with a music store owned by Apple. The iPod is selling because it is well designed to accomplish a specific purpose, and it can be productively used by a lot of people with various needs. That makes it both targeted and flexible, and gives it an enormous market.

Hold the Phone

Mobile phone makers are doing just the opposite: selling complex, catch-all products that only work well for very few people: users who like to diddle with tech toys. For everyone else, existing mobile phones are often poor at being phones, poor at being entertainment devices, poor at being organizers, and their extra features are often so badly implemented that they are effectively useless.

If Apple were interested in entering the competitive, low margin world of mobile phones, would they introduce a phone stuffed with the unrelated music features of their flagship iPod? Their pilot test with Motorola's ROKR really demonstrated that Shuffle features are not a killer feature for a mobile phone. Notice how Apple carefully distanced itself from that failure from the very start, offering their new iPod Nano under their own name, while leaving Motorola to sell the ROKR as their own product.

It’s no secret that current mobile phones are largely disappointing; could anyone design a better phone than Apple? It seems reasonable to think that, if Apple wanted into the mobile phone market, they’d start with a good phone design, not simply shoehorn phone features into the iPod.

Apple could apply a number of the iPod's outstanding design features in a new phone that would make a good, competitive phone, and then sell customers both a good phone, and a good music player. The next article describes options Apple can take to deliver such a phone, as well as the entrenched challenges they face entering the mobile industry.

An iPhone Worth Talking About

This Series

Tech: Mobile Phones and VoIP Telephony

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