Apple - Moto ‘iPhone’ deal full of promise...

... and unanswered questions

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Apple and Motorola left a lot unsaid as they jointly announced this week that they will work together on an iPod-style player for Motorola music phones, due next year.

The two referred to the device as a new iTunes mobile music player, and the fact that Apple chose Motorola to work with comes as no surprise to anyone who has studied the two companies over the past few decades. Apple’s architecture has been reliant on Motorola chipsets since the early days of Apple II, up to and including the PowerPC chips that drives the current generation of Apple Macs.

Taking that old alliance into the digital media era, now the iTunes capability will be included in all of Motorola’s mass market music phones, the two companies said, though they did not say what proportion of Motorola handsets that covers.

The first question the deal raises is just how much memory on the phone will be allocated to keeping Apple music onboard? The iPods go from 4Gbytes to 40Gbytes, holding between 1,000 and 10,000 songs. A phone is more likely to offer around 500Mbytes, so perhaps will hold only 100 to 125 songs.

Another option is for these phones to be among the earliest to use a one-inch disk drive inside the mobile, which would open the way for far more storage and perhaps images and video as well as music.

More partners?

The second question is, since Motorola itself represents only 16.5 per cent of global handset sales, why would Apple want to limit itself to doing a deal with just one partner? Could it be that the two will work together on the device and then license the knowhow to Nokia (31 per cent market share), Siemens, Sony Ericsson and others, to create a real shut-out on the mobile phone in the future? This would fit well with Apple’s aim to make iTunes the dominant music platform, and with the trend among cellphone makers to seek influence and revenue by setting de facto standards and licensing key technologies to their rivals.

Another interesting suggestion is that Motorola could put the new interface on its Microsoft Windows Mobile products. In which case the irony of Apple giving Microsoft a leg-up in phone markets would not be lost on the Apple CEO Steve Jobs, a seasoned veteran of wars with Microsoft.

With the inclusion of a piece of memory in a phone that has a link to the outside (PC) world through a USB or Bluetooth link, there are also new issues raised around the protection afforded by existing phone digital rights management (DRM) software, which is currently unified around OMA 2.0 standards and just being rolled out. Operators will not be happy with a phone that doesn’t use OMA 2.0, because it will undermine the burgeoning standard, so will Apple perhaps create a gateway between its Fairplay DRM and OMA?

Surely a logical next move would be a similar tactic from Sony, with its Sony Connect iTunes rival. We should expect a connection between Connect and its DRM, and Sony Ericsson phones, sooner rather than later.

Walled garden

But yet another question is - what operator in its right mind will allow music on and off a phone that it controls, to a PC? So far, music offerings from carriers, such as MMO2’s dedicated music player, have been focused on keeping users within the walled garden. In the PC environment, the operator has no chance of making a margin on the music or on the download data communication time.

And yet, the idea of an iPod-style interface on a phone is superbly compelling and perhaps Motorola and Apple can come up with a business model, like fitting an iTunes music store to an mobile operator service, that will recompense the operators for letting the music in from the PC.

The companies did not release details on specific features of either the stripped-down version of iTunes or the new handsets, including how many songs the phones will be able to store. Jobs said: “The mobile phone market—with 1.5bn subscribers expected worldwide by the end of 2004—is a phenomenal opportunity to get iTunes in the hands of even more music lovers around the world and we think Motorola is the ideal partner to kick this off.”

If Motorola is just going to kick it off, it sounds as if Jobs is creating a path for every other phonemaker to come knocking at his door between now and the launch of the first iPhone. Apple currently claims to have 70 per cent of the online music market and a 50 per cent market share at the top end of the portable music player device market. But at a mere 3.5m devices, this is but a drop in the ocean compared to the two billion mobile phones that will be in circulation by 2008.

Copyright © 2004, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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