Lend them your ears: iPod has all the best tunes, but mobiles are coming to bury it

With the playing power of phones increasing rapidly, can MP3 players survive? Stephen Pritchard reports

Apple's iPod is the must-have gadget of this decade. Over 10 million have been sold so far, dwarfing sales of other MP3 players. Apple claims over half the digital music player market.

Apple's iPod is the must-have gadget of this decade. Over 10 million have been sold so far, dwarfing sales of other MP3 players. Apple claims over half the digital music player market.

But this pales into insignificance when set against that other iconic consumer device, the mobile phone. Worldwide mobile handset sales amounted to 652 million units last year. The race is now on to make the mobile phone the portable media player of choice. Nokia, Motorola, Samsung, Sony Ericsson and Siemens are all working on phones with better music functions, For Apple the worry is that, just as "camera" phones have made instant cameras virtually redundant, the iPod's days could be numbered.

Duncan Ledwith is a former Microsoft executive, now general manager for Europe at Melodeo, a company that develops music download technologies for the mobile market. He thinks it is the ubiquity of the mobile phone that makes it so interesting to the music industry.

"When you leave the house you take your phone, car keys and wallet," he says. "Would you have your MP3 player?" He says that the challenge for the mobile industry lies in persuading phone owners to get into the habit of using their handsets to play music.

Already, several million mobile phones can do that, with varying efficiency. The trend, though, is for the handset makers to launch "music-optimised" phones.

Motorola used the M3 Miami Music Multimedia conference last week to announce three phones designed specifically for the music market. The company says it is on track to launch a phone that works with Apple's popular iTunes music software in the first half of this year. It also plans to launch three to five phones a year with advanced music capabilities.

To qualify as a music player device, a phone needs to have three main features: a codec (software) for playing music, a removable memory card and support for stereo headphones. Around half of Motorola's phones will fit into this bracket by the end of this year. A smaller number of phones will be music optimised, for example with extra buttons for play, pause and volume, and an extended playback mode that boosts battery life by turning off the handset's other functions.

Sony has also announced its first phone to carry the Walkman brand, the W800, produced under its Sony Ericsson joint venture. The handset will store 130 songs, as well as PC software to help buyers copy tracks they already own on to the handset.

"We have had MP3-capable phones for some time but nobody has delivered a credible way of doing it," says Steve Walker, the global marketing director for Sony Ericsson. "Just as we have had to show people that the camera [phone] is credible, so we have to convince the consumer that it's a serious alternative to the standalone music player."

Phones such as the W800 are likely to sell at a premium to run-of-the-mill mobile handsets, at least initially. Sony Ericsson has yet to announce a price for the handset but it is expected to retail for about €500 (£350) without a contract.

The music industry appears positive about the idea of music on mobile phones: record companies think that if consumers can listen in more places, they will buy more music. The industry would, though, like to see greater compatibility between music players, computer software and download sites, so that consumers can play their music easily on their chosen device.

This view is not necessarily shared by the mobile phone operators. Although the trend in the mobile handset industry is to include music players and better headphones, this is mostly to make it easier for consumers to play tracks from their own collections. The mobile networks do not make any money out of this. Instead, they are betting on strong growth in full-track downloads of songs, directly to the mobile phone. Vodafone, for instance, already has some half a million tracks available to buy through its Live! portal.

To make these easier to set up, Nokia has teamed up with Loudeye, which runs online music stores for the likes of HMV. Nokia will supply a compatible music player and desktop PC software; all the operator has to do is build its design around the Loudeye portal. Research company Juniper estimates that the worldwide market for full-track downloads will be worth £5bn by 2009.

As yet, though, services such as Vodafone Live! do not allow music fans to download music to their phones, then play them from a PC. Vodafone is looking to add PC compatibility, but the network operators would far rather encourage consumers to download music on their mobiles and then move it to the PC.

Dr Windsor Holden, author of a recent Juniper report on the mobile music market, believes this ambivalence is why Motorola's iTunes phone has yet to be launched. "Network operators worry where their cut is coming from," he says. And mobile phones do not yet have enough power or storage capacity to truly rival a dedicated MP3 player.

"Phones are not a threat to MP3 players in the short term," says Dr Holden. "The core reason to buy a phone is to talk or text. The number of MP3 phones on the market is increasing, but playing music is an added value feature, not a core reason to buy a phone."

Not yet, at least.