BusinessWeek:
Cellular carriers such as Verizon and Cingular are hesitant to sell the Apple-Motorola gizmo. Here’s why
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.
Why? Zander said Motorola and Apple want to hold off until the phone is closer to hitting store shelves. But three industry sources say a lack of support from such giant cellular operators as Verizon Wireless and Cingular Wireless was instrumental in delaying the unveiling. So far, the wireless companies are reluctant to promote the Motorola-Apple phone.
Behind the clash are two very different views of the future of music on mobile phones. Motorola and Apple would let customers put any digital tune they already own on their phones for free. That would help Motorola sell more phones, and it would help Apple expand its dominance of digital music.
SKIMPY PROFITS. Verizon, Cingular, and other wireless operators want customers to pay to put music on phones. They think getting a full song should be like getting a ring tone, snippets for which customers now pay from 99¢ to $3. The carriers have no interest in conceding the booming digital-music market to the tech players. “When carriers see this future, Apple is front and center,” says Andrew Cole, head of the wireless practice at consultant A.T. Kearney. Apple is “a competitor not to be embraced, but to be rejected.”
At issue is whether Apple and Motorola leave room for carriers to benefit. Their phone could be loaded with songs simply by dropping it into a cradle attached to a PC, so that music wouldn’t have to travel over carriers’ airwaves. There’s not a whole lot of profit to share, either. When customers buy songs from Apple’s iTunes music store, they pay 99¢ a tune. But Apple only gets about 4¢ of that, after paying the record company and others, says researcher Strategy Analytics. Apple says iTunes is only a breakeven business.
[posted with ecto]
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