Dialing in Demand for TV Via iPhone

Jun 24, 2007  •  Post A Comment

It is the most anticipated cell phone launch in the history of the modern communications device.

On June 29, Apple plans to introduce the iPhone, its first foray into the cell phone business, in partnership with AT&T. The iPhone combines a phone, a widescreen video iPod, a music player, Web browsing and e-mail.

Analysts are predicting the iPhone will unleash consumer demand for cell phone TV. Apple CEO Steve Jobs said earlier this month that Apple expects to sell 10 million iPhones in 2008, representing 1 percent of a 1 billion-unit market.

The device purports to do everything: The user can make a call, play a video, listen to music or take a picture.

Being a jack of all trades could be a double-edged sword, though, if phone quality is poor.

Also, consumers will have to shell out from $499 to $599 to get their hands on the phone, a steep price that may be a barrier to entry for many consumers.

But Mr. Jobs knows consumers and how to whet their appetites.

The company has not released many advance versions, so the ease of use of the iPhone will remain unclear until it hits the streets next week.

“Steve Jobs creates an aura of forbidden fruit and ‘here it’s coming, you can’t get it,’ and it just builds up the hype,” said Kevin Burden, senior manager for mobile devices at Telephia, a mobile phone research firm.

But despite the unknowns, analysts are betting the iPhone will be a game-changer.

It will spur competition in the mobile marketplace, said Cynthia Brumfield, president of research firm Emerging Media Dynamics. The “crystal-clear, wider-screen iPod display” will lure consumers to buy mobile video packages and drive other handset makers to introduce similar video-friendly phones, she said.

“It looks like the iPhone is going to change the rules of the mobile video game by offering a decent viewing experience,” Ms. Brumfield said. “In contrast, most mobile video options right now consist of poor-quality video snippets that are too expensive for most consumers, assuming that consumers are even aware of these options in the first place.”

The number of mobile video devices in the U.S. could increase from 50 million at the end of 2006 to nearly 200 million by the end of 2012, according to a recent Emerging Media Dynamics report.

Also, the number of customers purchasing mobile video could grow from 5 million at the end of 2006 to nearly 80 million by the end of 2012. Revenue from mobile video sales could rise from $180 million last year to $10.2 billion in 2012.

But the iPhone’s potential reaches beyond video. If successful, the iPhone could crack the code on mobile search, said John du Pre Gauntt, analyst with new-media research firm eMarketer. “The game-changer with the iPhone is not whether it’s a better music player or can order pizza or let the cat out,” he said. “It’s the chance you have to possibly change the rules of how people interact with the device, with the cell phone, through the interface.”

By Design

That’s because the design of Apple’s phone is unusual. The iPhone relies on a touchscreen rather than a traditional keypad. Viewers tap in names or numbers with their fingers on a screen, rather than using buttons.

Apple is likely to let users customize the screen and incorporate search capabilities, Mr. Gauntt said. If the iPhone can mesh search into the mobile video experience for the first time in a meaningful fashion, then Apple can open the floodgates for mobile video, Mr. Gauntt said.

“At that point it becomes a lot more plausible to make more mobile video. Imagine the mobile video universe—you make it easier to find video and there will be more video,” he said.

The bar is high for the iPhone, but that’s because Mr. Jobs is pursuing the average consumer and not just tech-savvy folks, said Damon Brown, who’s written “The Pocket Idiot’s Guide to the iPhone,” slated for an August release.

Apple has sold more than 100 million iPods since the music player was released in 2001. Apple wants to convert the iPod faithful into iPhone users.

“This is really the first time when early adopters will be mainstream consumers,” Mr. Brown said. “Literally millions of people are waiting for this phone, and it can’t just be techies. It’s an extension of the iPod brand.”

Consumers should expect some bugs in the first release, he said, although the product should be a hit if users are willing to stick with it.

Some consumers are worried about the phone quality, said Adam Guy, wireless analyst with Compete. They’re concerned the device might tilt too heavily toward multimedia features, to the detriment of basic voice quality.

In a Compete survey, 29 percent of consumers said they would buy the iPhone at an AT&T store and only 17 percent would buy the phone at an Apple store. “That shows they want to make sure the phone works,” Mr. Guy said.


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