Tue, Aug 03, 2004 page12

• Music phones the next `big thing' for consumers

  • NY TIMES NEWS SERVICE
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  First there was the ring tone. Then the camera. Now the music player.

  In its relentless push to add features to cellphones, the wireless industry is preparing to make affordable new phones that can store and play full-length downloaded music files.

  Motorola's announcement last week that it is working with Apple Computer to make phones that can store and play iTunes music files is the first major indication that the convergence of the portable music player and the inexpensive cellphone is occurring.

  The Motorola music phone will be on the market next year.

  Yet the companies involved and industry analysts insist that the deal, which will give cell-phone buyers a new feature, will not alter the market for portable music players like Apple's iPod anytime soon.

  Under the Apple-Motorola agreement, iTunes users will be able to transfer songs stored on their PCs or Macs to their cellphones using a cable or Bluetooth wireless connection.

  The new phones will hold anywhere from half a dozen to a few dozen songs depending on the model, and could come with a variety of related features, including the added ability to display music videos and information about the artist.

  The ability to transfer songs downloaded from iTunes onto a phone "expands the market reach for both of us and drives new revenue for customers," the chief executive of Motorola, Ed Zander, said.

  While there are some high-end cellphones on the market now, Motorola executives said they want to make playing music a feature of mass-market phones.

  "The mobile phone market -- with 1.5 billion 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," Steven Jobs, chief executive officer of Apple, said at last week's announcement.

  In Europe, sales of multifunction phones have generally taken off quickly.

  But the American market for mobile phones that do more than make calls is only gradually catching up.

  The market for downloadable ringtones, the snippet of music that is typically 10 seconds to 20 seconds long, has reached US$2.5 billion worldwide, according the Yankee Group, a market-research firm.

  And today, 20 percent of all phones sold have integrated digital cameras.

  But will music-playing cellphones cut into the sales of portable music players?

  From Apple's perspective, the ability to play iTunes music on cellphones will create more customers for downloaded music, and ultimately persuade more people to buy Apple's music player, the iPod.

  "We think it will be complementary to iPods," said Eddy Cue, Apple's vice president for applications and Internet services.

  "For some people, their first experience with mobile music will be on their phone. But it won't have the interface and the storage capacity of an iPod," Cue said.

  Richard Doherty, president of Engineering, a consulting and market research company based in Seaford, New York, said the strategy should help Apple stay ahead of the market in mobile music devices.

  Because Motorola's agreement with Apple is not exclusive, Doherty said, Apple is probably working with other wireless carriers as well.
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