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Study claims 'huge potential' for Apple iPod phone

post #1 of 45
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If Apple Computer were to release an iPod-based cell phone device with features in line with recent rumors, it would hold the potential to increase the company's customer footprint substantially, a new study has revealed.

According to market research results released by Solutions Research Group on Tuesday, 16 percent of Americans over the age of 12 -- an approximate 40 million people -- responded to a survey saying they thought an iPod phone would be a "great idea" for them personally.

The study, which polled over 2,600 people between June and October 2006, also found that just over 20 percent of Americans currently own an Apple product. However, it implies that Apple's footprint could grow to over 30 percent of Americans within 18 months of an iPod phone release.

Based on the study's findings, 53 percent of likely iPhone buyers would be female and 47 percent male. The average buyer would be 35 years of age and pull an income 10 percent higher than the national average.

In a summary of the results, Solutions said the Sprint/Nextel and T-mobile customers responded most enthusiastically to the idea of an iPod phone. Meanwhile, African-Americans and Hispanics were the two ethnicities that expressed "above average interest" in the device.

"Potential buyers are above average music and movie downloaders, suggesting significant incremental revenue opportunities -- for example, 29 percent of likely iPod phone buyers paid for music in the past month from a site such as iTunes or Napster compared to an average of 12 percent of the US online population," the firm said.

iPhone Appeal Study Results | Source: Solutions Research Group.

Apple's iPod image and user experience were reportedly significant appeal drivers in the cell phone study. Overall, participants waged as their primary concern the impact on battery life entertainment capabilities would have on such a device.

"Clearly, the rumored two-battery design would go a long way in addressing this significant perceived limitation," Solutions said.

The firm noted that it funds its own syndicated research in order to maintain an unbiased perspective.
post #2 of 45
These studies always bother me because how can we tell who is actually funding them? For all we know Solutions Research Group received a huge financial backing from Apple to produce this study. I think that they would be slightly motivated to push it towards Apple's side.
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post #3 of 45
Quote:
Originally Posted by jvb View Post

These studies always bother me because how can we tell who is actually funding them? For all we know Solutions Research Group received a huge financial backing from Apple to produce this study. I think that they would be slightly motivated to push it towards Apple's side.

That's an ad hominem. All that matters is that the sample size was large enough and fairly evenly distributed. It's not like the participants magically change their answers because Apple is funding the study.
post #4 of 45
SRG does do client-specific research but that shouldn't impact the validity of their findings. Why would a company like Apple hire a research firm and pay them good money to slew the data? Doesn't make sense.

About SRG

Lots of companies hire outfits like this to do product research and focus groups in an effort to gauge consumer reaction.
post #5 of 45
We don't need a research group, a market research firm, or any study for that matter, to tell us people would like an iPod Phone made by Apple. Common sense prevails!
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #6 of 45
My main question is whether the participants understood that an "iPod phone" was specifically referring to an Apple product, or whether many of them simply interpreted the term "iPod phone" to simply refer to any phone that plays music (i.e., do they just interpret iPod as referring to an MP3 player, similar to how "Google" has become a verb). Obviously the former would have even stronger implications for Apple than the latter.
post #7 of 45
Even if the level of interest were lower than the research implies, the number of new Apple customers could be quite sizable.

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post #8 of 45
40 million people x $400 per phone = $1.6B gross profit - 35% = 560M net profit
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post #9 of 45
Quote:
Originally Posted by solipsism View Post

40 million people x $400 per phone = $1.6B gross profit - 35% = 560M net profit

That's not taking into account the songs people buy as a result of them buying an iPod Phone, the halo-effect (the one that made me switch), the possibly of the service being provided by Apple. That 560Million could be worth a heck of a lot more in the long run.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #10 of 45
Quote:
Originally Posted by Ireland View Post

We don't need a research group, a market research firm, or any study for that matter, to tell us people would like an iPod Phone made by Apple. Common sense prevails!



The question is: Does the phone complement, or substitute for, the iPod. The effect of cannibalization on the "non-phone" iPod has to be considered.
post #11 of 45
Quote:
Originally Posted by anantksundaram View Post

The question is: Does the phone complement, or substitute for, the iPod. The effect of cannibalization on the "non-phone" iPod has to be considered.

Well not exactly, if you used your powers of deduction, you would work out that not only will both products be made by the same company, but the phone will cost more, which means more money for them, not less.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #12 of 45
Quote:
Originally Posted by Ireland View Post

Well not exactly, it you used your powers of deduction, you would work out that not only will both products be made by the same company, but the phone will cost more, which means more money for them, not less.

You're right. Everyone forgets that Apple is a company trying to make money...it just turns out that to make money you have to make the consumers like your products. Not all companies have realized this, or they just suck at accomplishing it
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post #13 of 45
Quote:
Originally Posted by Ireland View Post

That's not taking into account the songs people buy as a result of them buying an iPod Phone, the halo-effect (the one that made me switch), the possibly of the service being provided by Apple. That 560Million could be worth a heck of a lot more in the long run.

Though the profits from songs aren't large enough to make much of a dent I do agree that the "halo effect" will certainly be in full effect. I can think of many people who have NOT used a Mac, don't have much need for an iPod, but would be willing to get an iPhone if it's truly that much easier than the typical cell phone. It's easy to imagine the iPhone doing for Mac sales what the iPod did for Mac sales.

Quote:
Originally Posted by anantksundaram View Post

The question is: Does the phone complement, or substitute for, the iPod. The effect of cannibalization on the "non-phone" iPod has to be considered.

Is a camera phone a substitute for a digital camera? Not to most people. There will surely be some cannibalizing, the same way there was whenever Apple released a new product to it's line up, but these numbers pale in comparison to additional market reach.
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post #14 of 45
Quote:
Originally Posted by solipsism View Post

Is a camera phone a substitute for a digital camera? Not to most people.

Sadly, I think that's probably a yes.

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post #15 of 45
Quote:
Originally Posted by Ireland View Post

Well not exactly, it you used your powers of deduction, you would work out that not only will both products be made by the same company, but the phone will cost more, which means more money for them, not less.

I am not quite sure what you mean by "powers of deduction" (I think I was, indeed, using the said powers).

Anyhoo..... the fact that something "costs more" does not necessarily imply "more money for them." That is a bit simplistic.

It depends on a number of factors such as the cost of production, costs of distribution, costs of marketing deals with service providers, the stage in the product life cycle, and on and on, of one type of product versus another. (Recall for instance that MSFT chose to lose $50 on each Zune sold -- that is negative margin).

The mobile handset market is waaaaaaaaaay more competitive than the iPod market, and it won't be very long before prices start to get close to marginal costs for a new entrant such as Apple. Companies such as Nokia and Samsung aren't exactly a bunch of wall-flowers.
post #16 of 45
Quote:
Originally Posted by anantksundaram View Post



The question is: Does the phone complement, or substitute for, the iPod. The effect of cannibalization on the "non-phone" iPod has to be considered.

Consumers may also pay for an additional revenue stream for Apple using Apple-branded services made available through the phone service provider. Is this making sense? This would cannibalize, but also build out additional revenue for AAPL.

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post #17 of 45
Quote:
Originally Posted by SpamSandwich View Post

.... additional revenue stream for Apple using Apple-branded services made available through the phone service provider.....

Such as...?
post #18 of 45
Additional services that Apple can split profits with the phone service providers...

I don't know what that would be right now, but let's hear it from the peanut gallery.

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post #19 of 45
Quote:
Originally Posted by bigmig View Post

participants understood that an "iPod phone" was ... an Apple product, or ... the term "iPod phone" to simply refer to any phone that plays music


Bingo!
post #20 of 45
Quote:
The firm noted that it funds its own syndicated research in order to maintain an unbiased perspective.

Unbiased perspective, sure.

Why not tell us how of many of those surveyed who expressed interest in an "iPod phone" can also afford to purchase one (with service)?
post #21 of 45
Quote:
Originally Posted by bigmig View Post

My main question is whether the participants understood that an "iPod phone" was specifically referring to an Apple product, or whether many of them simply interpreted the term "iPod phone" to simply refer to any phone that plays music (i.e., do they just interpret iPod as referring to an MP3 player, similar to how "Google" has become a verb). Obviously the former would have even stronger implications for Apple than the latter.

If people think the term "iPod phone" refers to any phone that plays music, Apple could eventually find itself in the "Kleenex" or "Xerox" dilemma, whereas the top brand in their market segment has a name which eventually becomes generic for all products in that segment. I can see this happening since retailers will be more than happy to sell iPod-like product to unwitting consumers.

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post #22 of 45
Ask the question the right way, and you will get the answer you want most of the time.
post #23 of 45
Quote:
Originally Posted by Ireland View Post

That's not taking into account the songs people buy as a result of them buying an iPod Phone, the halo-effect (the one that made me switch), the possibly of the service being provided by Apple. That 560Million could be worth a heck of a lot more in the long run.

The real money is in phone accessories
cases, chargers, headsets, holsters, etc...
post #24 of 45
While I would most likely purchase an "iPhone" I am a bit nervous about tuning into T-Mobile or Cingular (now ATT wireless). Anyone in the NYC and northern suburbs area knows that these services suck in comparison to Verizon. The service needs to be as good as the phone itself.
post #25 of 45
Quote:
Originally Posted by anantksundaram View Post

Such as...?

I could make a few guesses...

- Instant 2-way language translation
- Speech-to-text/speech-to-fax/speech-to-email
- Phone control of your home computer/home controls
- Phone control of your rebranded iTV box (recording, etc.)
- Bill pay thru phone

...Anyone else?

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post #26 of 45
Quote:
Study claims 'huge potential' for Apple iPod phone

Meanwhile, a new study shows that brown bears have been shitting in the woods for as long as their existence.
post #27 of 45
Quote:
Originally Posted by anantksundaram View Post



The question is: Does the phone complement, or substitute for, the iPod. The effect of cannibalization on the "non-phone" iPod has to be considered.

Depends on the price-point but I think the vastly increased market the device addresses outweighs any negative sales through cannibalisation. Soon, please, soon.
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post #28 of 45
Quote:
Originally Posted by Feynman View Post

Meanwhile, a new study shows that brown bears have been shitting in the woods for as long as their existence.

Apparently recent research also suggests that the Pope may be a Catholic.....
post #29 of 45
Quote:
Originally Posted by McDave View Post

Depends on the price-point but I think the vastly increased market the device addresses outweighs any negative sales through cannibalisation. Soon, please, soon.

Yup. I've no need for an iPod since it doesn't work as a phone, but not having a music playing phone would annoy me immensely since I'd then have a need for an iPod and I'd miss calls on my phone. Since I'm on call all the time, I can't ignore the phone (officially).

If the luddites in America still think there's no market for camera phones or an 'iPod Phone' then they should hop on a plane (or perhaps a cruise liner if they don't like those new fangled flying machines) and visit Europe.

Quote:
Originally Posted by solipsism

Is a camera phone a substitute for a digital camera? Not to most people.

Actually it is. Especially now that most camera phones are coming in with 2-3 mega pixels and even some with 5 megapixels, zoom lenses and a flash. But aside from the specs, people don't like carrying around extra gear they don't have to.
post #30 of 45
Quote:
Originally Posted by gregmightdothat View Post

That's an ad hominem. All that matters is that the sample size was large enough and fairly evenly distributed. It's not like the participants magically change their answers because Apple is funding the study.

No it's not an ad hominem argument. That would be if the poster said "the study was bad because Solutions Research Group don't brush their teeth". The poster didn't say the study was bad because SRG was bad, he said he wanted to know who funded the study as it could influence the findings.

Back to your point - Yes sample size is important, as is it being a representative sample. However,
1) a survey can focus on one aspect accidentally or deliberately, ignoring other aspects.
2) results can easily be portrayed in misleading ways.
3) the questions themselves will lead the respondents to a certain degree. A good questionnaire should be written with that in mind.

It's all basic Psych.
post #31 of 45
Quote:
Originally Posted by solipsism View Post

40 million people x $400 per phone = $1.6B gross profit - 35% = 560M net profit


40 million x $ 400 per phone = 16 billion
post #32 of 45
Quote:
Originally Posted by umisch View Post

40 million x $ 400 per phone = 16 billion

Actually, the arithmetic (and assumptions) in the original post made no sense to me. (How could he take the revenue of $400 and call it "gross profit;" if so, yes, it should indeed be $16 billion - unless he meant a 10% "gross profit" ($40 per phone); but even if it is $1.6 billion, that minus the "35% tax rate" is 1.6*0.65 = $1.04 billion in net profit, not $560 million).

post #33 of 45
Quote:
Originally Posted by anantksundaram View Post

Actually, the arithmetic (and assumptions) in the original post made no sense to me. (How could he take the revenue of $400 and call it "gross profit;" if so, yes, it should indeed be $16 billion - unless he meant a 10% "gross profit" ($40 per phone); but even if it is $1.6 billion, that minus the "35% tax rate" is 1.6*0.65 = $1.04 billion in net profit, not $560 million).


I think he is assuming a 'profit margin' of 35%. Apple's margin is consistently in the 25 - 28% area. With new launches, particularly into a new market, Apple traditionally will accept margins in the 15 - 20% area until the production smoothes out and components prices fall.
post #34 of 45
Why are you all arguing aboujt the details? The relevant item for me is that 20% of Americans own an Appleproduct. What was their pre-Ipod marlet share?

I'd buy an Apple phone, if I had the $$ and it had good functions (scheduler, contacts, etc)

In light of the standard and poor's upgrade of Apple's buy rating to 5 stars (which I don't think is solely about the stock options scandal), and the buzz out here (and on their website), I think they have something big coming out. The release of this report only ups the expectation. Why wouold Apple release it only to disappoint us?

Ps Does it matter if one product competes with another, if they're based on the same production points? It all looks the same on the accounting ledger, especially if the same supplier makes it.
post #35 of 45
Quote:
Originally Posted by solipsism View Post

40 million people x $400 per phone = $1.6B gross profit - 35% = 560M net profit

This post makes no sense. First of all, 40 million x $400 is $16B, not $1.6B. Second, "gross profit" refers to profit before taxes...and the corporate tax rate is nowhere near 65%. I believe the term you want is revenue. Third, you mean times 35%, not minus 35%. Fourth, you seem to be implying that Apple's margins are 35%. They are not that high, and furthermore, you are ignoring the continuing R&D costs, marketing costs, etc. A more reasonable figure might be 40 million x $400 = $16B revenue. Assume net profits are about 15% of the revenue increase; then you are looking at around $2.4B in profit (presumably spread over at least 8 quarters, so maybe as much as $300 million extra per quarter...which would actually be pretty huge given that last quarter's earnings were $540 million - but this assumes little cannibalization of iPod sales).
post #36 of 45
More importantly, it'll be increasingly so that phones will eat into the iPod's market for music playing devices so it's better that Apple do that themselves than let Nokia or Sony do it.
post #37 of 45
Quote:
Originally Posted by Ptrash View Post

Why are you all arguing aboujt the details? The relevant item for me is that 20% of Americans own an Appleproduct. What was their pre-Ipod marlet share?

Considering Apple didn't make anything as cheap as an iPod, their pre-iPod share is kind of meaningless in comparison.

As for the poll, to me its pretty stupid sounding. Let's look at the top:

Quote:
responded to a survey saying they thought an iPod phone would be a "great idea" for them personally.

Wow. But what does that mean, it would be a 'great idea' for them personally? Does that mean "Hey, if I had that great idea, I could sell it, make a bundle, and live my life as a billionaire!"

It sounds like a great idea, but its not about the idea that gets people to buy something, its about cost, implementation, performance, abilities, features, etc, etc, etc. If the phone only works on Cingular's networks, or Apple has over-designed some new interface so doing anything with it requires actual attention, or the thing keeps locking up on you, or doesn't get a good signal (hey, I sure hope Apple's Airport reception foibles over the last 5 years aren't recreated here), or it only works with Apple comptuers, or anything else you can think of, it'll be just another cell phone on the market.
post #38 of 45
Quote:
Originally Posted by Louzer View Post

It sounds like a great idea, but its not about the idea that gets people to buy something, its about cost, implementation, performance, abilities, features, etc, etc, etc. If the phone only works on Cingular's networks, or Apple has over-designed some new interface so doing anything with it requires actual attention, or the thing keeps locking up on you, or doesn't get a good signal (hey, I sure hope Apple's Airport reception foibles over the last 5 years aren't recreated here), or it only works with Apple comptuers, or anything else you can think of, it'll be just another cell phone on the market.

Depends on how the question was asked and with what background. If the survey described what an 'iPod Phone' did and they responded positively then 'sounds like a great idea' bodes well for the idea at least.

Of course, the actual implementation details aren't known so the survey company is just guessing and so are you.
post #39 of 45
Maybe if they were asked to compare features with their own cell phone, and if they'd be willing to pay up to $400 for this replacement phone. Most people take the free phone with a restrictive multi-year service plan.

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post #40 of 45
Quote:
Originally Posted by aegisdesign View Post

More importantly, it'll be increasingly so that phones will eat into the iPod's market for music playing devices so it's better that Apple do that themselves than let Nokia or Sony do it.

Outstanding point.

If so, I would agree that the "cannibalization" is not an opportunity cost for Apple; indeed, it is a necessary and smart part of its product/market strategy ("if I don't cannibalize, my competitors would do so anyway - so I'd better get in front of it"). It would be the same logic that led Apple to kill its own Mini for the Nano.
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