Motorola licenses Apple's iTunes for mobile

Dario Betti, Senior Analyst

Apple has announced a deal to allow users to play music downloaded from the iTunes service on Motorola mobile phones. The company will create a new iTunes mobile music player, which Motorola will make the standard music application on all its mass-market music phones, expected to be available in the first half of next year. Users will be able to buy songs from Apple's iTunes service and port them to their Motorola phones by USB cable or Bluetooth.

Another sign of paranoia from Cupertino, but exactly what the company needs to survive in the market. Good move! Motorola is serious about getting back in touch with the youth market: it has chosen music as its focus, and so far its strategy seems to be working nicely. Choosing Apple as a partner is a no-brainer.

Apple is rightly worried about losing its dominance in its best-performing market, digital music players (a.k.a. the iPod), just as it did in desktop computing. iPod sales in Apple's most recent quarter rose 124% to $249m and accounted for about 13% of total revenue. In the short term, things should go even better, as the iPod is gathering momentum in Europe and a new generation has just been launched.

But gravity catches up with companies eventually, and Apple is already facing pressure on many fronts. First, the iPod is a product for fashion conscious people. It is sold at a premium, and therefore might not make it as a mass-market device. Competition is quickly emerging from companies such as Samsung, Creative, Phillips. Apple has therefore sensibly licensed the iPod to HP.

But the biggest threat comes from mobile phones. Right now, they are just a cheap gadget for music lovers, but performance improvements will make them a compelling entry-level to medium-tier portable music player within two years. So Apple wants to make sure that it can get revenues from licensing its software to mobile phone makers as well as through selling music through iTunes.

But Motorola has to sell this idea to network operators, who might not like the idea of having Apple sell music to their clients - they'd prefer to do that themselves! That might be a problem for Motorola in future: so sweetening the pill for operator community must therefore be a priority.

Dario Betti is a Senior Analyst specialising in the management and regulation of new media at WirelessMultimedia@Ovum. He can be contacted directly on dario.betti@ovum.com.