The reality of the mp3 player market
Posted on September 23rd, 2006 by Jackie Danicki
To think that today’s iPod isn’t the leader in the market is to be in denial.
Actually, it’s to have access to the facts and actual data; the iPod is by far not the market-leader in portable mp3-playing devices. Their global market share is under 19%. Tomi Ahonen, mobile expert and member of my non-profit’s advisory board, blogged about this back in March.
Filed under: Life
The article you link to makes the assumption that people actually use the music features of their mobile phones. An iPod or a Creative MuVo or any “MP3 player” specifically designed for music is bought and used for just that: playing music and “MP3″’s. A mobile phone with some music playback features is primarily bought because it is a mobile phone, and will be used as such.
It’s just like saying Notepad has the world’s largest market-share of word processing because its on everyone’s Windows PC pre-installed. The reality is, next to no-one would use Notepad as a word processor, yet happily buy Word to get the job done. Even so, by the methodology proposed in the article you linked to, and seem to agree with, Notepad has the largest market share in word processing.
Philip, are you familiar only with how mobile phones are used in North America? Just asking.
Hm, I could play music on my i-mate, and although downloaded some of my favourite pieces on it, somehow I never do. I have an iPod that I use a lot, especially on my frequent travels.
But this is just my humble use, I have no idea what the larger picture is. I have seen a few teenagers playing music on their mobiles but that number is dwarfed by those I have seen with iPods.
I have always been sceptical about mobile devices coming from telephony rather than internet. Just recently I have given up on my i-mate that has been letting me down big time (as well as the service provider Vodafone) and going to go for blackberry, the original reason why I got my imate in the first place. All the other groovy functions are either unreliable or not up to scratch yet.
I’m just not sure what personal preferences have to do with the hard data of market share. (BTW, I don’t listen to mp3s on my mobile…I use my iRiver. :D) But I know there are populations of millions in Asia whose habits are quite different and whose purchasing and usage accounts for a huge percentage of market share.)
Sure, that’s in Asia and I am sure that’ll show different numbers. Just not sure how that helps me to understand the trends here and now. I still need to delve to ‘personal preferences’ at some stage to make sense of why they are happening and how. Market statistics do not necessarily point to a long term shifts or developments. I am always beware of such metrics as they can be used to make any point, depending on who is yielding them as a weapon.
It may be that Asia is the front-runner and what goes there comes here eventually. That’s Tomi’s argument. I only go by what I observe and do think that different markets behave differently. For now, I’ll stick with what I understand and I still haven’t made sense out of the mobile market trends…
Mobiles were a bit crap for MP3s, but Nokia and Sony have got it pretty much sussed now. When I use an MP3 player, it’s my phone.
I don’t think market share data is “hard” at all. To be obvious, it depends on how you define the two words “market” and “share”, and neither is unambiguous. Are we talking the percentage of total numbers of players capable of playing MP3s, percentage of players regularly used for playing MP3s, percentage that have been used a minimum of once, percentage of total hours of use on this class of device, or what? All these things are useful for purposes of comparison, but you *do* have to define your metric. I think that other than in straightforward numbers, Apple scores very highly on most of these, and I do not believe they are in serious decline in any of them. (Analysts and journalists spent a good portion of the first half of 2006 claiming they were. Apple said nothing until it released its mid-year final results, showing iPod sales way above expectations).
As for Asia, the continent is at least three distinct markets in terms of mobile phones and other electronic devices. The Japanese market is very sophisticated in mobile phones terms, but iPods sell well there regardless. Korea is very sophisticated in mobile phone terms (and iPods are not popular there), but is so insular in its habits that it is very hard to tell how it relates to the rest of the world, and in China (which leads pretty much everywhere else) the iPod share of the MP3 player is relatively low in terms of purchases but high in terms of aspirations. That is, people want to buy an iPod but cannot afford to, so they buy a cheaper local brand of dedicated MP3 players. I really do not see people using phones as MP3 players there to a significant degree.
And I agree that Sony-Ericsson are producing better MP3 players on phone (the Walkman line is doing well) but I still don’t find the experience to be anywhere near as good as an iPod. (I have both devices, and I use the iPod). I do think there is a lot to be said for devices that do one thing right. (The iPod and the Blackberry are the two best examples).
It belatedly occurs to me that being market leader may arguably involve more than market share. The fact is that a lot of the MP3 players that are doing well are doing well because they’re copying the iPod. That’s one way of leading. Not a directly profitable one, mind.
Hi Jackie, Philip, Adriana, Squander Two and Michael
Thanks Jackie for mentioning my blog about this.
I like the discussion in the thread here. Let me help with some of the numbers and sources.
The iPod market share (as of June 30, 2006, down to 14%) was my analysis, from official Apple numbers, official Nokia, Motorola, Samsung, SonyEricsson, LG numbers, Creative Labs; and some analyst numbers from Gartner and Informa.
Before I started to discuss this view point, all analysts kept the iPod and music phones as separate markets. Since I started to make noise about it, very many major sources have now come to the view that musicphones and the iPod are part of the same market, including the Financial Times, Business Week, Fortune, Economist etc. Apple’s own CFO Peter Oppenheimer says that Apple tracks musicphones and mentioned the SonyEricsson Walkman phone by name as a direct rival to the iPod, in Apple’s quarterly conference call in July.
But yes, its a valid position to consider the population of devices that can be used this way, and their usage.
Here we first have to remember that not all iPods are used for music! Many iPods are used for lectures, podcasts, etc. They are now for example used by some major corporations as induction tools for new recruits, where the company policies etc are recorded as podcasts. All new employees get the iPod. Much like memory sticks are becoming very common business gifts having a bunch of brochures, white papers, presentation etc on them.
Not to mention, that of the total installed base of iPods, many Nanos and Shuffles are now with owners of older iPods who wanted a smaller and slimmer new model.
But yes. Its a very valid question to wonder, do people actually listen to music on phones. The first global survey of music consumption, that covered expressly both iPod usage and musicphone usage, by TNS at the end of 2005, reported that 10% of adults use iPods, but 19% use musicphones to consume music (worldwide). The only country where more consumed on iPods than musicphones was the USA. So even last year - when most of the existing population of musicphones were the very early and quite primitive musicphones by the manufacturers (including the much derided Motorola Rokr) - twice as many people did consume music on phones than on iPods.
Many newer studies to follow up on this are now under way as this is a very hot topic for the music industry, and I am hoping to hear of some early results before the end of the year.
Incidentially, Apple itself, in April of 2006, in its first quarter results conference call, revealed selected best international markets by iPod market share. No surprise that USA was best at 75%. The six countries with the next best market share were Australia 58%, Japan 54%, Canada 45%, the UK 40%, Germany 21% and France 11%. All other countries were “much worse” than these, according to Apple.
If you do the math on a global population count (and yes, GDP and purchasing power parity) - the iPod market share is certainly below 20%.
Now, if “we” don’t see the big usage of music consumption on musicphones here in the UK - or obviously not in the USA - then where is it happening. Two markets are worth looking at. iPod was launched in late 2001. While we had had ringing tones since 1998, only in the summer of 2003 was the idea of full track MP3 file downloads to musicphones invented, in South Korea. Today South Korea continues to lead in this area.
45% of all South Koreans download music directly to their mobile phones (source NIDA Nov 2005). The music services are very user-friendly, typically allow music consumption both on mobile phones and PCs. South Korea has a very good technical environment for this, as it is the world’s leading broadband penetration country (or actually neck-to-neck with Hong Kong) and also South Korea is by far the highest adoption of 3G phones, nearing 60% penetration. Japan is a distant second having just passed 50%. For contrast, the UK has 9% penetration of 3G phones. (source for penetration rates Informa)
The South Korean mobile content world is similar to Japan’s in that the content owner gets about 90% of the content dollar (in Europe and America this is typically only 70% which annoys the content owners). And a very advanced mobile phone market, very advanced and customer-oriented mobile operators help make this country most supportive of such innovations. Depending on which provider and network - three networks have five music services - you can buy full track songs for as little as 50 cents per song.
Today, out of all music sold in South Korea, 45% is sold directly to mobile phones (source Telecom Korea May 2006). For contrast, in America even today, iTunes does not even sell 10% of all music sold in the USA.
The other market to consider is Sweden, the most advanced mobile music market in Europe. Sweden has already one of the big mobile operators - Tele2 (Comvik) - offering full track MP3 songs of older hits for download at a cost of 8 euro cents per song! And the SMALLEST of the mobile operators, Tre/Hutchison, on its 3G service based music store, already sells more songs than iTunes in Sweden.
Is it happening, absolutely. Today Nokia has released its second generation musicphones, the N-series phones all with MP3 players, and the music-optimized phones with up to 4 GB of storage (iPod Nano capacity, more than iPod Shuffle). Nokia is seeing such a hot demand for its musicphones, it will double its musicphone sales this year to over 80 million - likely to be double the total shipments of iPods. Motorola has released its Razr V3, and says it is Motorola’s bestselling model. Samsung has released 6 GB storage musicphones. SonyEricsson’s second generation musicphones, which SonyEricsson says drive their sales this Spring. And LG has its Chocolate iconic musicphone. Europe’s largest phone retailer, Carphone Warehouse, says the Chocolate is its bestselling phone of all time.
Yes, the demand has shifted to musicphones. iPods will not disappear. Apple makes good money on them and those very seriously into their music will continue to use iPods. But a very revealing stat was at an Apple discussion board this July, related to a hot debate about my posting. They asked if anyone used musicphones. Note this was an Apple fans website with a clear American focus. Even there, nearly one in five who answered their survey admitted to either sometime or regularly or even exclusively listening to music on a phone, not an iPod.
Worldwide it was four times as many devices and twice as many users on phones than iPods at the end of 2005. By now the sales are tilted to be 7 to 1 in favour of phones to iPods. And the music consumption will also continue to shift into the phones’ favour, as ever better phones (and music services by mobile perators) appear.
Oh, one more interesting view point. Each of the four giant global music labels, EMI, Warner, Universal and Sony BMG - have had their senior management comment on iPod vs mobile phone. EACH have said that mass market music consumption will definitely belong to phones, not the iPod.
More at my blogsite on actually five very long postings on this topic between October 2005 and July 2006.
Thanks Jackie for bringing the discussion also here, and thanks all for commenting
Tomi Ahonen :-)
website http://www.tomiahonen.com
blogsite http://www.communities-dominate.blogs.com
[…] Mobile expert/influencer Tomi Ahonen has chipped in on the debate I started here when I noted Tomi’s contention that Apple’s market share of the portable mp3 player market is less than 20 per cent. Tomi’s remarks and data do illustrate just how insular our views of how ‘people’ do things can be. Some highlights: The first global survey of music consumption, that covered expressly both iPod usage and musicphone usage, by TNS at the end of 2005, reported that 10% of adults use iPods, but 19% use musicphones to consume music (worldwide). The only country where more consumed on iPods than musicphones was the USA. So even last year - when most of the existing population of musicphones were the very early and quite primitive musicphones by the manufacturers (including the much derided Motorola Rokr) - twice as many people did consume music on phones than on iPods. […]
Interesting comments by Tomi,
However your figures are quite wrong in that neither the Motorola V3 nor the LG chocolate can be considered MP3 players, except by stretching the definition quite far.
First the V3 is probably incapable of playing anything else than MP3 ringtones, Motorola doesnt list MP3 playing capabilities anywhere besides its capacity to play such ringtones.
This does NOT qualify it as an MP3 player, especially since the meager 5 MB memory couldn’t hold more than one song and they do NOT feature a memory card slot.
Only the more recent V3i, V3x and V3c do feature a memory card slot.
However they use the quasi microscopic microSD format, a sub-standard that has the most restricted memory capacity. Every ipods, but the shuffles have enormously higher storage capacities.
Concerning the LG Chocolate, likewise they do NOT feature a memory cards slot and their minuscule 128 MB of memory is dynamically devided amongst every storage needing function, including pictures, video, MMS and SMS messages and numbers/adresses, etc.. That would probably leave less than 64 MB for MP3, a tiny fraction of even the entry level Shuffle. 64 MB of storage only represent a unique CD.
Yes it could be considered an MP3 player, however I bet most people would so quicky outgrow its capacity and get a “real” MP3 player featuring up to thousands of percent more storage capacity.
Today just about EVERY music phone only has a small fraction of most of your average MP3 player, for which I would say 4 GB is a good average.
So the top capacity of probably 95+% of music phones only touches the entry-level dedicated MP3 player capacity.
And we all know that whatever your storage capacity at hand, you quickly end up filling it, therefore making you search a higher capacity device.
> So the top capacity of probably 95+% of music phones only touches the entry-level dedicated MP3 player capacity.
If that’s true, it shows that the entry-level part of the market is huge and possibly even dominant over the more advanced parts of the market, not that it doesn’t count for some reason.
> And we all know that whatever your storage capacity at hand, you quickly end up filling it, therefore making you search a higher capacity device.
No, we don’t. We know that that’s how a certain part of the population behaves, but not everyone: for lots of people, 1 or 2 GB is plenty. Not everyone wants or needs to carry their entire music collection with them at all times. I, for instance, love music, am a musician, and have a CD collection so huge that I have storage-space problems, and a 2GB card in my Nokia E70 is more than enough memory in a more than good enough MP3 player for me.
Just as the biggest, most important sector of the car market isn’t Ferraris, you might have to consider that what you consider to be sub-standard, low-capacity, crappy MP3 players might well be the most popular.
Dave Winer is right. If anyone thinks that the iPod is not the market leader in virtually every way, they are in denial. Stuff that comes with your phone is “nice to have” but it doesn’t replace whatever dedicated device you use for whatever you want to do. I’ve had cameras in my last 3 phones, but have still gone out and bought two digital cameras. Someone who wants an iPod (and that’s what people ask for, iPods, not MP3 players) is not going to not want one because his phone is technically able to store a few songs. The iPod experience is one of seamless integration of the iPod, iTunes, and iTMS. No phone can offer that. The vast majority of people who are satisfied with their phone’s MP3 capability would never have bought an iPod (or any other MP3 player) anyway. To count them as part of the “MP3 player market” is to indulge in dishonest semantics. It’s like saying that the world’s airlines are dominant players in the cinema industry because all of their aircraft seats have a screen in front of them that can show movies.
I believe Stephens comment is a little narrow. It is correct in that for many people they couldn’t give a crap about the mp3 capabilities of their phone. These people don’t count. However anyone choosing a phone because of its mp3 capabilities (for instance I chose a Sony w800 over a Motorola Razr) is part of the MP3 player market. As several other people have commented, now media phones are getting better at this there will be more people deciding its one less device to carry and their walkman phone is going to be good enough.
Hi Jackie, Yelpy, Squander Two, Stephen and Citizensmith:
Good comments and I see many of your points. But the tide has irrevocably turned. It doesn’t matter one iota what we - techie geeky nerdy types who blog today - think. If you - like Stephen - confess to buying 2 digital cameras over the past few years - then obviously we in this thread are in the very high-end of the specialist niche market(s). Sure, if you are a DJ or semi-professional musician, you will get SEVERAL iPods.
But - I was talking about the mass market. You cannot argue against it, if even Apple’s own CFO - Oppenheimer - in the Apple July conference call openly admits they now count musicphones - he mentions the Walkman branded SonyEricsson phones by name - as being in the same market as the iPod.
Who cares about 40-60-80 GB storage. Most people don’t have that kind of music collections. Apple itself has introduced the half gigabyte sized iPod shuffle. So don’t try to define the market that the mass market cannot survive on small storage. Incidentially, those miniscule memory cards for phones? We already have 4GB storage on these fingernail sized interchangeable memory cards. Any premium musicphone that has removable memory storage can now do a full iPod nano capacity - in EVERY memory chip that costs less than an iPod shuffle. Not only “limited” to 512 MB of storage like on a Shuffle, I can have a set of music collections in a couple of these memory cards and truly shuffle my music on my phones..
But I digress. Lets look at the numbers. The quarterly data are in. Apple reports its third quarter of stagnant iPod sales. After a record Christmas period of 14.1 M units, the three quarters in 2006 have all been between 8 and 9 million, ie 8.5M, 8.1M and 8.7M iPods shipped. The last slight rebound - 7% increase - was achieved - according to Apple CFO Oppenheimer - by severe price cuts across the model line and the introduction of the cheapest iPod ever, the 79 dollar Shuffle.
Well, maybe the whole industry is in a cyclical decline, eh? Not so fast. Since I last reported on this race in July, the phone industry has dramatically upgraded its shipments of musicphones for this year, up from 270 million to 309 million units during 2006. All of the big five phone makers - Nokia, Motorola, Samsung, SonyEricsson and LG - report that musicphones drive their sales currently. SonyEricsson CEO Svanberg was just on CNN last week telling us that demand for musicphones is so heavy, that SonyEricsson now charge a price premium not only for Walkman branded (ie top end) musicphones, but even their lowest end musicphones.
It doesn’t matter what we think. It matters what the mass market thinks. Lets start with the most doubtful market - USA. America discovered musicphones last year. Now all the reported numbers suggest a dramatic upsurge in musicphones and music consumption and demand. NPD says that by third quarter, 67 separate musicphone models are available in the USA, and already 19% of all phones sold in America are musicphones. Contrast with 32% worldwide, 60% in Sweden, 90% in South Korea.
IDC (the source quoted by Apple) says by end of 2006, the total user numbers downloading music direct to phones in the USA will be already half the size of iTunes users in the USA. RIAA (Recording Industry Association of America) numbers support this, as they find first half 2006 downloads of music to phones doubled, and already 11% of all digital music in America is sold to directly to mobile phones. I am not inventing these numbers… But for contrast - 85% of all digital music in Japan, 78% in Spain, 76% in Italy etc are sold direct to mobile phones. In Sweden the smallest of the four mobile operators (wireless carriers) already outsells iTunes Sweden.
And the first user-survey of Americans, by Instat, says that one third of all musicphone owners want to use their musicphone as their primary music consumption device.
Oh, and the near future? Look at South Korea where this was invented only three years ago - today 45% of all music - not of all DIGITAL music, but of all music - is sold to mobile phones.
Inevitable? You bet.
Tomi Ahonen :-)
Michael Jennings: You are wrong regarding China. I am from China; people in China do not have “aspirations”. They are just curious about it because ipod is so unpopular in China. “cannot afford to”? No, in China, iRiver is much more popular than ipod, “cannot afford to” is just an excuse.