Apple's iGamble

Tom's Hardware polls analysts to provide a comprehensive look at the impact of Apple's launch of the Motorola ROKR iTunes-enabled phone and the iPod Nano, which caught many analysts pleasantly surprised.

Michael Gartenberg at JupiterResearch said, "The nano really breaks new ground in terms of combining form and function at a very compelling price point, with a very compelling category, and it looks like that's going to be a very hot product this holiday season. Apple has once again shown that they know how to maintain their own leadership position in this marketplace, and there's really no other product on the market quite like the nano."

Added Harry Wang at Parks Associates, "I do think the iPod nano was the shining product at the show, [more] than the iTunes phone. The phone is basically what people expected: low storage, no direct-to-download ability, and basically it's the iPod Shuffle plus a phone with a screen."

Gartenberg concurred with Wang's assessment and stated, "I think there was a lot of buzz about the ROKR, and in the absence of information, people sort of filled in their own blanks, and it turned out to be pretty much what Apple and Motorola said it would be: a phone that was capable of playing back iTunes songs and integrating with iTunes."

Stephanie Guza at In-Stat wondered how any of the players, especially Cingular would make money off the ROKR. She said, "Think about how much an Apple iTunes song is - 99¢. They have to give 70¢ to the music labels, there's probably another 10¢ that goes into the cost of marketing of iTunes, so they're not making a ton of money off their iTunes downloads. If you look a little bit further into it, Motorola gets $250 for the phone, but you have to sign a two-year commitment with Cingular."

Wang commented that the lack of OTA music downloads revealed the business model for revenue sharing had not been worked out which "prevents such nice features from showing up on this latest device, [and] says something about the convergence trend in the marketplace...I think [Apple] sent a signal that it is willing to move into convergence area, but I sense that it's going to be a slow process...[to evolve into] a device that has all the functions that the consumer desires," Wang opined.

On the otherhand, Ross Rubin at NPD TechWorld, thought the ROKR was a smart play for both Apple and Motorola. He stated that "The way the cellular industry works is that, over time, we're going to see greater subsidization, new [cell phone] models will come out, and this phone may very well be free next year, or given away or priced very promotionally for new contracts. It's really powerful to offer a phone for free, or fifty bucks, if you want that next step up, and I think a phone like this has a potential to get into that bracket in a short term," Rubin added.

On the nano, Rubin said it "recaptures that leadership in terms of form factor. While the Shuffle was a very minimalist device, it kind of looked like a pack of chewing gum...[iPod nano] is evocative of the original iPod Mini design, but obviously much sleeker and really re-establishes their leadership in the form factor."

Gartenberg also added, "I don't think we're going to see form factors much smaller than the Nano. At a certain point, the device becomes too small, becomes unusable. Cell phones have gotten to the point, for many people, where some phones have gotten to their smallest point, that we haven't seen them shrink beyond that. It's likely we'll see an increase in capacity, but of course, with Apple, they have shown a remarkable ability to continue to refine both form and function, so I would hesitate to speculate what we might see from Apple in 2006 and beyond."

Looking forward at the future iPods, Rubin predicted "I think you'll probably see 60 GByte iPods that look more like the iPod Mini, perhaps a year from now. Today's wide iPods could undergo a dramatic form factor shrinkage, and still retain their high capacity."