Major Hangups Over the iPod Phone

chadwick writes "It seemed like a sure thing: the iPod mobile phone. What could be more irresistible than a device combining the digital-music prowess of Apple Computer (AAPL) with the wireless expertise of Motorola (MOT)? Motorola sent its buzz machinery into overdrive in January when it leaked word that the product would debut at a cellular-industry conference in New Orleans in mid-March. Well, hold the phone. At the New Orleans confab, a frustrated Edward Zander, Motorola's chief executive, stood before a roomful of analysts and reporters and said the handset's debut would have to wait. "

Comments

Pre announcements

[BWJones]

At the New Orleans confab, a frustrated Edward Zander, Motorola's chief executive, stood before a roomful of analysts and reporters and said the handset's debut would have to wait. "

Showing precisely why pre-announcement of products only leads to problems, frustrations, and customer dissatisfaction.

Only announce products when they are done and ready to ship and you avoid this sort of garbage. Everybody is speculating on just what the hold-up is. It could be that the phone is not ready or that the wireless carriers are trying to extract every last cent out of somebody else's (Apple and Motorola) hard earned work. But the point is that there is now a consumer expectation and they are complaining to Apple and Motorola saying "why can't you get your $#!t together and release the product?" when it may actually be the fault of Verizon, Cingular et. al. The problem of course is that on sales of the songs themselves, Apple's profit is next to nothing. So having other companies try and muscle in on very thin margins means 1) either somebody has to take it in the shorts or 2) we all lose. Of course if the record labels would allow more access to the music for Internet delivery, it would be treated as the commodity it really is and there would be more room for profits from higher volume, but that is another post.

Oh, and it would be nice if people who are submitting articles would actually summarize the story rather than posting verbatim what the writer of the referenced article says.

Re:Pre announcements

[tha_mink]

"Only announce products when they are done and ready to ship and you avoid this sort of garbage. Everybody is speculating on just what the hold-up is. It could be that the phone is not ready or that the wireless carriers are trying to extract every last cent out of somebody else's (Apple and Motorola) hard earned work. But the point is that there is now a consumer expectation and they are complaining to Apple and Motorola saying "why can't you get your $#!t together and release the product?" when it may actually be the fault of Verizon, Cingular et. al. The problem of course is that on sales of the songs themselves, Apple's profit is next to nothing. So having other companies try and muscle in on very thin margins means 1) either somebody has to take it in the shorts or 2) we all lose. Of course if the record labels would allow more access to the music for Internet delivery, it would be treated as the commodity it really is and there would be more room for profits from higher volume, but that is another post."

But then you forget how the market reacts. You pre-announce a product, or an idea, and when it makes sense and gets buzz, your stock goes up. But when you announce you need more time, nothing bad happens. (or at least you don't lose your previous gains) So, when you need capital to do such a thing, you pre-announce. Nobody gets hurt...you'll get your iPod phone soon enough, if of course, you can spend the dollars.

Re:Pre announcements

[thparker]

Last I checked, apple pays 60c per song and resells them for 99c. That is approximately a 40% margin.... You can hardly say iTMS is next to nothing in margin.

You were pretty harsh for someone who is so totally wrong. While the exact numbers are not available, it is believed that 60-65 cents is what goes to the record label. There are additional costs associated with the song publisher and the technology infrastructure that's required. So your claim of a 40% direct margin doesn't come close to including all direct costs, and completely ignores indirects.

It looks like you don't have any concept of margins at all, e-commerce or otherwise, the different types of margins that get calculated, or how margin differs from net profit. But hey, you did get to make a nasty crack about Apple iPod fanboys, right?

Apple claims the music store is a breakeven deal, and others estimate they make roughly 4 cents a song. That's a pretty trivial amount flowing through to Apple's bottom line. To put this into a "real world scenario" for you -- iTMS downloads are now estimated at well over 1,000,000 per day. Your ridiculously inaccurate numbers would mean that Apple is netting over $100 million a year from music downloads -- nearly double Apple's entire net profit in 2003 and more than 2/3 of their incredible 2004 results. I find that scenario, um, unlikely.

To make this a little simpler for you: Apple's goal is to make money and increase its stock price. They benefit from hugely successful and profitable products. Believe me, if the iTMS store was profitable, Apple would not keep it a secret and deceive us all with a fabricated story that they're just breaking even.

Re:Pre announcements

[tbone1]

• Guess why the US lags in mobile phone use? - stupid monopolies doing stupid things and the customers having to take it as it's the only game in town - literally sometimes.

Actually, the real reason is that the land line infrastructure in the US isn't the complete crap it is in other countries. I've been to a lot of countries overseas and worked with quite a few foreigners here in the US. I know that, at one time, it would take up to six months to get a land line phone in Germany. The union got the government to make it illegal for anyone else to hook up a phone, and they would dig a new trench from the box to your house for every new hookup, then dig it up when you had it disconnected.

And from what I've heard, the situation in India was dire.

So if you're blaming government monopolies and stupid monopolies, you're partly right, but probably not in the way you thought.

Re:Pre announcements

[hey!]

That's a good point about the land lines. I should point out to be completely historically accurate though, that the land line system was already excellent in the US under the AT&T monopoly. If anything, once the break up was in full swing, the network suffered slightly in my opinion, although that was a temporary thing.

The thing that the breakup was supposed to do was to take an excellent phone system and make even more excellent. The idea was that providers would introduce digital services to compete with each other. In point of fact it was probably the worst thing they could have done to promote digital services. There was very little effort to promote digital services, since supporting them was expensive. People who insisted on getting ISDN soon found the telcos were terrible at provisioning and supporting the services because they hadn't made the investments in training and staffing needed to do a half way decent job.

The choice for a telco was simple -- spend money convincing people to buy into an expensive service they didn't understand and then spend tons of money to support it, or compete on price. Well, the rest as they say is history. We've had over a incredibly low prices on phone calls, and only recently had telcos competing to bring digital services to the home through DSL.

The thing is, while we clearly benefit from cheaper calls, and Internet technology is probably more flexible than ISDN, it has come at a price. Life is more complicated. Nobody had to understand anything like a "calling plan", unless you were a government regulator. The cost of figuring this out and managing telephone use in business has to be set against the direct cost savings. This is not to mention the horribly pushing telemarketers trying to get you to switch to some fly-by-night telephone company, which was the spam problem of the 80s.

There's a net benefit of course, but I suspect that most of us when we are on our deathbed would probably like to have the time we spent comparing calling plans back. Heck, I'll probably want my /. posting time back, I suppose.

Same issues as usual, actually

[Dancin_Santa]

Basically there are two opposing parties in any cellphone you see on the market. The first is the obvious one, the handset maker. The other is the operator (Vodafone, Sprint, etc). While it may seem like these two would normally be a happy bunch. But they aren't.

Handset makers want to stylize their phone as much as possible. Adding features and making their phone stand out from the rest of the pack. Operators want all the phones to support a certain set of basic functionality and fit into a certain form factor. They don't want to allow the handset maker's trademarks overshadow their own. On the other hand, the makers want it to be obvious to the user who the maker of that phone is.

Apple, and to a large extent Microsoft too, have very strong brands. They love branding. That's why we're talking about an iPhone and not an Apple-produced cell phone. But operators don't want that kind of power shifted into the hands of the makers.

So you get what we have here, which is the way he wants it.

uhhh

[Illserve]

A phone in my MP3 player? That's pretty easy to resist. I beat the living tar out of my phone. Most people do.

The ipod is pretty tough yea, but it wouldn't last a week in the chassis of my mobile phone.

Nor would I want my phone to have a net worth of $400 either.

Can we get over this fixation with phone/mp3/toaster oven/breadmakers already? Their day has come and gone. I want devices grouped by how I use and abuse them.

Re:uhhh

[Illserve]

Convenience? The more you cram into one device, the worse job it will do at all of them. Don't even try to convince me that the picture quality from some integrated widget is going to be within a mile of the quality of a $300 camera or $400 camcorder.

And I don't to have to push a few buttons to get my pda/phone/camera into phone mode to make a call. Nor do I want some kiddie to hack into my pda/phone/camera and download everything about me.

I want a phone that calls people, it should be lightweight, very very tough (no 5 inch touch screen!) and not have a camera lens that I have to worry about. Nor do I want to recharge it every day. Integrated devices sacrifice in durability and longevity.

I want an ipod with many gigs of storage so that I can just grab it whatever mood I'm in, and find a suitable playlist. Integrated devices sacrifice in storage (at least right now)

I want a camera that takes good pictures and has a big honkin lens to capture lots of light for decent night time pictures. It should have a variety of features that allow me to tailor my pictures to different techniques (exposures, focus settings, etc). Integrated device sacrifice in picture quality.

You get what you pay for.

Why not add a cell phone service charge?

[jkeyes]

The Wireless services are being stupid on this. They could just add a 'iTunes Phone Access Fee' that's $5.00 to everyone who gets the phone. Then no matter how many songs they add they get their $5.00 and I think that if meant you got the phone for free most people who read the terms after they sign wouldn't care or would just want the shiny new phone.

So?

[Locke2005]

I've got a Samsung Uproar cell phone that plays MP3's which is several years old (and which I don't even use any more). Seems to me combining a cell phone and MP3 player isn't exactly a novel idea... but wait, it's Apple, so that makes it special?!?

Don't release it untill it's ready for sale.

[Aqua OS X]

It depends on the product. In this case, I think Apple is right. Motorola doesn't have much experience with releasing consumer products that people lust for... Apple does.

If you announce an iTunes / Motorola Cellphone before it is ready to hit the market, you adversely affect current sales of iPods and Moto phones. People like to have the next best thing, and they hate buying something that's outdated in a month. Consumers will usually hold off on purchasing a new device if they can get a cooler device in a few months / weeks.

This is precisely why Apple usually announces hardware and sells it the very same day. If they don't do that, they have to liquidate a load of outdated hardware. Consumers won't buy a 15 gig iPod if they know a 20 gig with more features will be on sale for the same price next month.

The only time Apple doesn't do this is when they have a future product that doesn't directly compete against what they are currently selling.

Apple has one of the best inventory records in the tech industry. Motorola should listen them.

Re:Motorola should have known this

[serfx]

Well aside from the technical standpoint that apple and motorola have been working togeather for years. The whole other reason to partner with them over _ANY_ other celular phone maker is that much like Apple, Motorola makes the sexiest damn cell phones around. So why not combine that with the sexiest mp3 player in town?
Think from a design/marketing point of view.
I know you've been thinking about Motorola's M3 razor or whatever that damn thing i don't need but severly want is.

Re:Motorola should have known this

[Phleg]

I cannot understand why Apple is sodding around with Motorola on this. They should have partnered with Nokia.

I couldn't agree more. My Nokia ended up breaking after about four years, and I ended up getting a Motorola. I've regretted every minute of it. Whereas Nokia seems to have a smiliar mindset to that of Apple (a focus on usability), my Motorola is the most unusable piece of crap I've ever had the displeasure of dealing with.

I can store something like five minutes of voice on the cell phone, but I'll be damned if it runs out of space with twenty text messages. You can't turn the volume off without making more noise. Even when the volume is off, some buttons still make noise (and are conveniently on the outside of the phone, so it can beep in your pocket) making the vibrate feature nearly useless. The "Accept" and "Cancel" buttons are on different sides at different times. The dial and hangup buttons are permanently juxtaposed. The "Memory Meter" shows you a representation of how much memory is left on the phone, but you have no way of telling whether or not a full bar means it's full of space or filled up. Assigning a one-touch dial number to contacts is a pain in the ass. The power connector features two microscopic hooks which are so easy to break it's unbelievable. The phone takes five minutes after "booting" before I can place a call, view my contact list, check messages, etc. Switching the phone to "Silent" or "Vibrate" does not necessarily turn the volume off.

I swear to god if I ever meet the man who designed this worthless piece of shit, I am going to bludgeon him with a tractor.

Re:We need to change this

[SamDrake]

But but but ... you CAN already do that! At least with the GSM carriers, you can already buy any phone you want, from any source you want, stick in your SIM card, and away you go.

Of course - and this is the part you won't like - you'll have to pay full price for the phone. But that's fair - if Cingular doesn't like a particular phone then why should they pay more than half the price of it for you?

Darn - it would be convenient if this was a "big nasty corporation vs little guy" story. But it's just an "I don't want to pay for my own toys" story after all....