Verizon, Sprint pass on iTunes phone

Posted:
in iPod + iTunes + AppleTV edited January 2014
Most major wireless companies, including Verizon Wireless and Sprint, have reportedly balked at carrying the iTunes phone Apple has been codeveloping with Motorola.



According to an international cover story in the April 25th edition of Business Week, the cell phone carriers, along with Cingular/ATT, have very different perspectives on how digital music stores should work and are expected to charge between $2 and $3 for wireless music downloads when they introduce their services.



"They figure they can charge a premium for the convenience of getting songs anytime, even though customers most likely won't be able to listen to those songs anywhere but on their phones, at least initially," wrote Business Week's Roger Crockett. He cites a source close to Apple who says wireless operators are "simply being unrealistic" if they expect customers to pay $2 or $3 for a song, especially with restrictions.



Instead the operators want customers to download songs over the air, directly to handsets. But the iTunes phone would allow customers to download songs to a PC or Mac and then copy them to the phone. "It's hard for people in any industry to support something that cuts them out of potential future revenue streams," said Graeme Ferguson, director for global content development at Vodafone Group PLC.



Still, Motorola told Business Week it expects at least one carrier will begin selling the iTunes phone this summer. With Verizon, Sprint and Cingular protesting Apple's distribution model, the remaining US-based major wireless carriers include Nextel and T-Mobile. Of the two, insiders believe the latter is the most likely candidate to adopt the phone and drive its customers to iTunes rather than build its own music store.



But is this an immediate concern for Apple? It could be. According to the article, the telecom approach has several strengths Apple can't match. "For starters, a quarter of the world's population already has a mobile phone. That's 1.4 billion people, compared with 10 million iPods sold to date. Most of those cell-phone toters pay a monthly phone bill, making it a snap to add a music charge. Perhaps most important, wireless technology could provide access anytime, anywhere to millions of songs."



Research firm Strategy Analytics estimates that in 2008 half of the 860 million cell phones sold will be able to store and play songs, compared to about 8% today.



Already technological advances in storage, compression, battery life, and wireless networks are making it easier to receive and store high-quality music on phones. The Business Week article notes that Korea's Samsung Electronics just introduced a phone with a 3-gigabyte hard drive, enough to store 1,000 songs, and says a 10GB phone could hit the market "within two years."



Meanwhile, International wireless operators are already providing a sense of what's possible at the edge of the digital music frontier. Says Crockett, "Korea's SK Telecom Co. offers a $5 a month music subscription that allows customers to download any of 700,000 songs to a phone, PC, or music player. That makes the subscription much more convenient than similar services in the U.S. because Korean customers can get any song they want, wherever and whenever they want it." Since its launch in November, a reported 300,000 people have signed up. "We are not yet making money, but we see a big potential for profits from music," said Shin Won Soo, a senior manager in charge of SK Telecom's music business. His company is expected to exit the red by the time it hits 800,000 subscribers. "That conjures up the possibility that with music phones, consumers around the world could opt to pay a monthly fee for all the new music they desire, rather than buying individual CDs when they debut."



Wireless operators in the US have to look no further than ringtones to know the proof is in the pudding. According to Business Week, these song snippets which go for $1 to $3 per download have evolved into a $5.8 billion business that is expected to reach $9.4 billion in 2008.



"Because [wireless companies] bill mobile customers each month, they wouldn't have to pay credit-card charges to Visa or MasterCard. That's not much of an edge over iTunes when customers buy a $9.99 album," wrote Crockett. "But if they buy single songs for 99 cents at iTunes, the fees total a significant 17 cents to 20 cents. Bottom line: Verizon, Cingular, and Sprint could end up lowering their prices to $1 a song and still make more profit than Apple does."
«134

Comments

  • Reply 1 of 67
    Quote:

    Originally posted by AppleInsider

    "Because [wireless companies] bill mobile customers each month, they wouldn't have to pay credit-card charges to Visa or MasterCard. That's not much of an edge over iTunes when customers buy a $9.99 album," wrote Crockett. "But if they buy single songs for 99 cents at iTunes, the fees total a significant 17 cents to 20 cents.



    Okay, I'm not sure if I'm reading this correctly, but this seems to state that the credit card charges are 17 to 20 cents per song purchased individually. There is no possible way.



    Average Visa/MC charges are between 1.5% and 3%. Amex is always a bit more at 3.5%-ish. Something is missing here or the analyst is talking out of his ass.
  • Reply 2 of 67
    None of these carriers are gonna offer the iTunes phone as long as there are incompetent morons who have no brain power and an IQ below 75 willing to pay 3 dollars a song that they can ONLY listen too on their small-ass little cellphones..



    This phone will only work if all these idiots die.. I mean how stupid are these people that download $5.6 billion dollars worth of HORRIBLE sounding ringtones for 3 dollars each.. I mean it surpasses all logic and common sense.



    Idiots
  • Reply 3 of 67
    wnursewnurse Posts: 427member
    Quote:

    Originally posted by webavatar

    None of these carriers are gonna offer the iTunes phone as long as there are incompetent morons who have no brain power and an IQ below 75 willing to pay 3 dollars a song that they can ONLY listen too on their small-ass little cellphones..



    This phone will only work if all these idiots die.. I mean how stupid are these people that download $5.6 billion dollars worth of HORRIBLE sounding ringtones for 3 dollars each.. I mean it surpasses all logic and common sense.



    Idiots




    hmm, where did that strategy of calling people idiots worked before (let me think here.. thinking... thinking.. thinking..) oh never mind.



    Customers may be idiots but verizon, sprint and cingular are not. People do indeed pay a lot for ringtones and if people decided not to pay a lot for ringtones, verizon, cingular and sprint can always lower the fee to $1 and not pay a cent to apple and still make more money than apple per song. So if i was an executive with any cell phone company, i'd ask myself why would i even consider using an itunes phone?. The problem apple has with persuading cell companies to use their phones extend to any other music company. I doubt Napster, microsoft, etc could persuade the cell companies either (if they made corresponding phone product). I think this is a losing proposition for apple. Personally, i can't believe Motorola, a veteran in the cell phone industry, allowed apple to talk them into this. Apple is a neophyte when it comes to dealing with the cell carriers.



    I can't believe someone thought the cell companies would be interested in being a conduit for apple to make more money. Anyway you look at apple proposed itunes phone, the cell companies would be idiots to adopt it. Which makes me wonder, who is running T-Mobile? Yeah, lets see... hmmm. provide a phone where customers no longer need to buy your ringtones, they would buy their music from itunes store, use itunes software to load to phone thereby significantly reducing your revenue and causing you to subsidize phones even less (all cell phone companies subsidize their phones)... yeah, brilliant business strategy (not!!).
  • Reply 4 of 67
    trevordtrevord Posts: 85member
    Quote:

    Which makes me wonder, who is running T-Mobile? Yeah, lets see... hmmm. provide a phone where customers no longer need to buy your ringtones, they would buy their music from itunes store, use itunes software to load to phone thereby significantly reducing your revenue and causing you to subsidize phones even less (all cell phone companies subsidize their phones)... yeah, brilliant business strategy (not!!).



    Or, there'll be a whole bunch of people who want the phone, because it offers more flexibility, and the music costs so much less. Customers flock to T-Mobile, leaving the other carriers in the dust. By the time the others catch up, T-Mobile is way out in the lead.



    While offering customers something they want doesn't always guarantee business success, it also doesn't guarantee failure.
  • Reply 5 of 67
    junkiejunkie Posts: 122member
    Hopefully Apple got better terms than 17¢ per $1 transaction. If that was really the rate, you'd see Apple doing more to encourage customers batch charges larger quantities of charges.
  • Reply 6 of 67
    splinemodelsplinemodel Posts: 7,311member
    Quote:

    Originally posted by audiopollution

    Average Visa/MC charges are between 1.5% and 3%. Amex is always a bit more at 3.5%-ish. Something is missing here or the analyst is talking out of his ass.



    When you're talking about the quantity of transactions that Apple facilitates with iTunes, you bring yourself into the realm of "micropayments." That is, they're not paying much of a transaction fee at all. In all likelihood, it's less than 1%.



    I know this to be true because my company deals directly with credit cards, merhcant services, and the like.
  • Reply 7 of 67
    Quote:

    Originally posted by Splinemodel

    When you're talking about the quantity of transactions that Apple facilitates with iTunes, you bring yourself into the realm of "micropayments." That is, they're not paying much of a transaction fee at all. In all likelihood, it's less than 1%.



    I know this to be true because my company deals directly with credit cards, merhcant services, and the like.




    Absolutely ... I was just stating the average rates that are charged to merchant accounts. I'd agree with you that Apple negotiated a much better rate than is offered to the typical business, especially considering that a large portion of the sales are going to be for single tracks at 99 cents.



    Either way, it's not going to be anywhere near the percentage that the analyst quoted. That would be insane.
  • Reply 8 of 67
    e1618978e1618978 Posts: 6,073member
    The most desirable customers buy their own unlocked phone anyway - it does not matter if the cell phone services "support" the phone or not.



    Cingular does not support the SE P800, does not stop me from buying and using one.



    Also, 2-3 dollars per song is a no-go. Remember the GTE $3/minute phones on airplanes? Ever seen anyone use one?

    Me neither. 0.99 is in "spend without thinking", $3 triggers the "wait a minute, I am getting ripped off" neurons.



    Motorola phone suck, though - I wish that Apple would make their own phone (maybe a taller version of the mini).
  • Reply 9 of 67
    wnursewnurse Posts: 427member
    Quote:

    Originally posted by TrevorD

    Or, there'll be a whole bunch of people who want the phone, because it offers more flexibility, and the music costs so much less. Customers flock to T-Mobile, leaving the other carriers in the dust. By the time the others catch up, T-Mobile is way out in the lead.



    While offering customers something they want doesn't always guarantee business success, it also doesn't guarantee failure.




    Trevor, have you ever paid full price for a cell phone?.

    I don't think verizon, sprint or cingular have to worry about that.
  • Reply 10 of 67
    wnursewnurse Posts: 427member
    Quote:

    Originally posted by e1618978

    The most desirable customers buy their own unlocked phone anyway - it does not matter if the cell phone services "support" the phone or not.



    Cingular does not support the SE P800, does not stop me from buying and using one.



    Also, 2-3 dollars per song is a no-go. Remember the GTE $3/minute phones on airplanes? Ever seen anyone use one?

    Me neither. 0.99 is in "spend without thinking", $3 triggers the "wait a minute, I am getting ripped off" neurons.



    Motorola phone suck, though - I wish that Apple would make their own phone (maybe a taller version of the mini).




    Which planet are you people from?. The most desirable buy their own unlocked phone?. You guys sure have significant amount of disposable income. Over 90% of the population do not buy their own unlocked phones. Only if a cell company is trying to get less than 10% market share would they consider folks who buy unlocked phones most desirable.
  • Reply 11 of 67
    19841984 Posts: 955member
    A wireless carrier that goes with it's own service rather than iTunes will have to maintain that service. That can be costly and cause them to spread their resources too thin. I just wonder if they've done the math. I'd rather see the carriers let Apple do the dirty work. They could share in the profits and concentrate on improving things like the range, reception and reliability of their wireless service.
  • Reply 12 of 67
    wnursewnurse Posts: 427member
    Quote:

    Originally posted by TrevorD

    Or, there'll be a whole bunch of people who want the phone, because it offers more flexibility, and the music costs so much less. Customers flock to T-Mobile, leaving the other carriers in the dust. By the time the others catch up, T-Mobile is way out in the lead.



    While offering customers something they want doesn't always guarantee business success, it also doesn't guarantee failure.




    curious, how does an itunes phone offer more flexibility.

    What if verizon came out with their own product and offered songs for a buck. How is the itunes phone offering more flexibility. There would be only one way to get music to the phone and that's through itunes. How exactly is that flexible?. Have you read how this phone is supposed to work?.

    For apple, it makes sense to offer the itunes phone, for verizon, it makes no sense. Verizon is not a subsidiary of Apple. They are not in the business of expanding apples business model. Motorola on the other hand is in the business of expanding the business of whatever cell carrier they deal with and vice versa. Apple has to offer value to the carriers and the itunes phone offer no value at all. In a mp3 player, a consumer might care where their music comes from or what player they are using because they are buying total experience. Cell phones are different. Consumers would not care exactly where their music comes from so the fact it does not come from itunes is not a penalty in this field. All consumers care about is that the phone can download music. That's it. If they wanted to expand their music collection on the computer, they'll sign up for an itunes account and download there. Apple should know better. This is one reason they have resisted marrying their computer with tv. They know consumers think of a computer differently than they think of a tv. Why would they think a regular consumer (my mother, father, grandmother, the kids, etc) would be interested in playing around with a computer to get songs on their phones?. If apple doesn't currently think this demographic is ready for a tv/computer combo, why would they be ready for a phone/computer combo?.



    Do you know how few people even use their bluetooth phones to sync with their computer?. Heck, i am a techie and i don't know how to do it and don't even care to know. A phone is a phone. I don't want to hook it up to a computer!!.
  • Reply 13 of 67
    wnursewnurse Posts: 427member
    Quote:

    Originally posted by 1984

    A wireless carrier that goes with it's own service rather than iTunes will have to maintain that service. That can be costly and cause them to spread their resources too thin. I just wonder if they've done the math. I'd rather see the carriers let Apple do the dirty work. They could share in the profits and concentrate on improving things like the range, reception and reliability of their wireless service.



    I'm betting apple is not sharing the profits else verizon might have jumped on board. That's the point i'm trying to make. Why would verizon do something that only benefits apple?. You should read about this issue elsewhere, you'd realize that it would be ludicrious for verizon to use this phone. Apple has to share the profit. They have to. Until then , few carriers will be interested
  • Reply 14 of 67
    nagrommenagromme Posts: 2,834member
    "a quarter of the world's population already has a mobile phone. That's 1.4 billion people, compared with 10 million iPods sold to date."



    Yes, but more than 10 million have computers (not to mention CD players)... and that's all you need to enjoy iTMS. You don't need an iPod.



    So $2 to $3? No way.



    As for mobile carriers being able to make more profit at $1 than iTMS does... sure, but who cares? iTMS is a successful part of a whole system for Apple. It doesn't need to make another 20 cents per song in order to compete. All it needs to do is sell iPods
  • Reply 15 of 67
    Quote:

    What if verizon came out with their own product and offered songs for a buck. How is the itunes phone offering more flexibility. There would be only one way to get music to the phone and that's through itunes. How exactly is that flexible?. Have you read how this phone is supposed to work?.



    Yeah, but aren't they planning on charging two to three times that much (i.e. much more expensive, especially if you've already bought the song elsewhere)? And aren't they planning on tying the songs to the phone (i.e. not very flexible at all)?



    And I can't imagine it would be easy to navigate a music store on the typical cell phone. Once in awhile, maybe, if I hear a song I just have to have, but on a regular basis? Sounds like a pain to me.
  • Reply 16 of 67
    This is why I hate phone/wireless companies. Why can't they charge the consumer for voice/data service, and nothing else? The whole process is totally convoluted. They shouldn't receive any payment from Apple. They should be making their money from the data transfer. That's it.
  • Reply 17 of 67
    I have thousands of songs on my computer that I would like to listen to on my mobile phone. I bought many of them using iTunes. There are millions more like me.
  • Reply 18 of 67
    tednditedndi Posts: 1,921member
    or apple can always repackage another cell carrier's services under the apple moniker and go it from there.



    Virgin does it with Sprint.



    Apple/Moto cell phones with the apple logo perhaps.



    And as a matter of fact I do buy unlocked phones so that I can use them with whichever carrier I want worldwide.
  • Reply 19 of 67
    I wonder if the fact that the other big three (Sprint, Verizon and Cingular) passed on the idea made it more appealing for T-Mobile to pick it up. With all the huge telecommunication mergers that have been going on lately T-Mobile is kind of stuck in the 4th spot with nowhere to go really. Maybe they see this as their chance. Ecspecially now that the others have passed this is their way to make a big move in the cellular world if the mobile ITMS is a success without having to spend all the big bucks of implementing their own infustructure. T-mobile already has the Entertainment peeps using their sidekicks and phones. I think it will work in their benfit to be the sole carrier jumping on to use the ITMS phones. Especially if they could eventually offer the phone for free with new signups.



    Oh and I buy my phones unlocked as well.
  • Reply 20 of 67
    louzerlouzer Posts: 1,054member
    Quote:

    Originally posted by wnurse

    Do you know how few people even use their bluetooth phones to sync with their computer?. Heck, i am a techie and i don't know how to do it and don't even care to know. A phone is a phone. I don't want to hook it up to a computer!!.



    Actually the number of people who use bluetooth to sync to their computers is limited because, surprise!, the phone companies tend to disable bluetooth in their phones they offer their customers. They want you to use THEIR networks to get data on the phone. Its like a lot of camera phones. Many of them, which are offered by the phone companies, don't allow you to download the pictures to your computer. You have to mail them to yourself.



    And that's what truly parasitical the whole cell business is. They want you as a customer, but then attempting to force you to use ALL of their services. Airtime is money, so if you want to do something with your phone, they want to make sure they get their money.



    I know, I know, they 'subsidize' the phone, they can do what they want. That doesn't make them 'good'.



    Oh, and, yes, calling those people who spend money on ringtones (I mean, its freakin' ringtones!) idiots is a valid statement. Actually, most that money was probably spent by teenagers (and pre-teens) who's parents pay for it, so what do they care.



    As will be calling all those people who spend $3 on a song they can't play anywhere but on their phone 'incomparable idiots'. But, as we all know, big business was built on the concept of "The customer is a stupid, gullible person who'll buy anything you stick in front of their face if you make it seem like its a good thing".
Sign In or Register to comment.