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By creating a synergistic relationship between online music downloads and its iPod hardware, Apple Computer (Nasdaq: AAPL) has made it very difficult for competitors to pry market share from the Cupertino, Calif.-based company. A growing shift in the music buying habits of consumers could give those coveting a bigger slice of Apple's pie a chance to outflank the king.
According to a study released last week by IDC, a research firm in Framingham, Mass., wireless music downloads are on pace to outstrip their online counterparts by 2010.
By that time, IDC predicted, wireless music users will exceed 50 million and revenues will be some US$1.2 billion.
"The way to run after Apple is not to compete with them where they're strongest, but where they're weakest, and through something people already use and which could be used for music," Rob Enderle, president and principal analyst with the Enderle Group in San Jose, Calif., told TechNewsWorld. "The most likely device for that is the cell phone."
Rokr on Rocks
Moreover, Apple, which has exhibited a knack for making all the right moves in the markets it has entered, has shown itself vulnerable in the mobile
area. For example, Apple's attempt to bring iTunes to the mobile crowd through the Motorola (NYSE: MOT) Rokr was less than the stunning success the company has grown accustomed to.
"There was a lot of fanfare around the introduction of the Rokr last fall, but consumers were put off by the hundred song limit," IDC Program Manager for Consumer Audio Markets Susan Kevorkian told TechNewsWorld.
"We think there were some issues in conceiving that product," she continued. "They put the cart before the horse in some ways and didn't initially have the carrier buy-in on the handset at a time when the carriers themselves were developing their full-track downloads which effectively compete with something like iTunes."
Doesn't Play Well With Others
"If Apple does have a weakness, it's through a cell phone attack," Enderle asserted.
He explained that cracking the cell phone market requires partnering, not one of Apple's strong suits. "Apple does not play well with others, which is why the Motorola thing didn't work out," he maintained.
Before the existing landscape changes, however, mobile music downloading needs to reach a critical mass, and that isn't going to happen until there are more music-playing phones on the market, IDC noted.
"However," the report said, "the shift towards a greater variety of music-enabled mobile phones at various price points is already in motion. IDC expects music-enabled mobile phone shipments to reach nearly 60 percent of all handsets shipped in the U.S. by 2010."
Mobile music storefronts are emerging as one of the most important new channels for fans to discover, purchase and enjoy full-track music, Lewis Ward, IDC research manager for wireless and mobile communications entertainment, observed.
He added that $2 a track will be a sustainable price point for carriers "as long as mobile storefronts are well-designed and offer a wide selection of music, and the music listening experience on the device is comparable to MP3 players."
Four Million Downloads
One of the first carriers to jump into music downloads was Sprint Nextel (NYSE: S), which has sold nearly four million tracks since it introduced its service in October 2005.
Sprint has a library of some 400,000 tunes from all four major music labels, according to spokesperson Aaron Radelet.
For $2.50, a listener gets two copies of a track. One optimized for cell phone use -- recorded in AAC+ format at 32kbps -- and one for PC and portable player use -- a WMA-DRM file at 128 kbps.
Radelet told TechNewsWorld that the service appears to have appeal to a broad spectrum of Sprint customers. "It appeals across the board even to some people who might be intimidated by using an MP3 player," he said.
"This is a new and exciting way to receive music," he added. "Not only are we seeing the popularity of song downloads growing, but we're seeing growth in the popularity of entertainment and music across the board on mobile phones."
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