Wired on Friday: This week Apple unveiled its new, sleek G5 iMac. The Paris trade show crowds wowed at the all-in-one computer, which appears to be just a flat-panel display but in fact contains a hard drive, DVD player and screen.
But behind the scenes, Apple's real success story, the ubiquitous iPod digital music player, faces a new threat that even changing shape like the iMac won't help it.
Apple's iPod has been a smash hit. Because of its simple form, intuitive software interface and formidable storage capacity, it commands more than 50 per cent of the market for mobile digital music players. Apple's twin-pronged attack on digital music has been bolstered by its iTunes music store, which integrates seamlessly with the iPod and has helped Apple lay claim to more than 70 per cent of music purchased legally online.
More than four million of Apple's iPod music players have been sold worldwide, helping push Apple past the 100 million tracks sold by the iTunes store in the United States since it was set up in April last year. This week the company said five million songs had been sold on the European iTunes store.
Not bad for a store open for only 10 weeks.
ITunes faces a raft of competition from digital music retailers in the form of RealNetworks, Napster, Virgin Digital and affiliates of On Demand Distribution such as mycokemusic.com and MSN Music Club - to name just a few.
But all of those could pale in a year's time when a new threat emerges in a shape of a small, thin bit of plastic.
The mobile phone industry is starting to turn to the secure digital (SD) card as a way of increasing a phone's ability to store digital files. Because mobiles can now take photos, carry music and even record video, they are fast filling up their internal memory. SD cards are needed to boost memory, but it is more efficient to make it removable and let the consumer decide how much they want.
Last month the SD Association, the body which governs standards for cards, said the technology had reached such a stage that soon the SD card memory capacity in mobiles could exceed what was normal for a desktop computer less than five years ago. And all this on a new format developed for multimedia phones called the miniSD card.
From the first quarter of next year, miniSD cards will go up to 256 megabytes. But later in the year, that will be followed by cards capable of carry a whopping two gigabytes of data. Not only that but the new cards are projected to have transfer rates of 120 megabytes of data per second - roughly 10 times faster than the speed of the current SD cards and will consume less power.
About the size of a fingernail, they will be backward compatible with ordinary SD cards. MiniSD cards will appear inside the next generation of mobiles, including Orange's new SPC C500, the world's smallest smartphone.
This development prompts a question. What happens when a mobile phone can carry as much memory as an iPod?
Apple's iPod mini has four gigabytes of storage and can play 1,000 songs. A phone with half that memory could play perhaps 500 songs. Not only that but compression algorithms are expanding the number of songs that can fit onto a mobile phone. The AAC Plus format shrinks MP3s by four times without loss of audio quality.
But Apple seems to have already answered this question: it's partnering with a mobile phone company.
This summer Motorola announced that Apple would be developing a new version of the iTunes music player to be included on forthcoming Moto handsets from the first half of next year. Motorola is the second-largest maker of mobile phones after Nokia.
Importantly, the phones will be able to synchronise content on the phone, making it more attractive to consumers.
Admittedly, mobile phones will not be able to match the massive 40-gigabyte iPods for a while yet. So Apple's strategy is to put the iTunes store on as many platforms as possible as a way to help sell more iPods.
Apple chief executive Steve Jobs said the relationship would give consumers a "a small taste of what this digital music revolution is about," hinting that for a bigger taste they should get an iPod.
Certainly, there is speculation about a wireless-enabled iPod as a result of the deal. Motorola chief executive Edward Zander even said that "it would be great if we could just figure out a way to bring these two devices [a phone and iPod\] together".
What MP3 players like the iPod do offer, however, is ease of use and the ability to synchronise songs between the player and the PC. Having storage is not enough when you are trying to juggle 500 songs on a mobile phone with no synchronising software.
Music-capable phones tend to offer poor audio quality, limited storage and short battery life. And multimedia phones remain scarce. Consumers will buy 10.8 million multimedia phones worldwide this year against 21.5 million dedicated digital audio players, according to Informa Media Group.
But it really is just a matter of time before mobiles take over the market through sheer weight of numbers. The number of digital music players is 2 per cent of this year's expected global market of 600 million handsets. The worldwide market for mobile phones is projected to grow from 536 million in 2003 to 745 million in 2007.
Informa predicts sales of MP3-enabled phones will more than double, to 25.3 million next year, and reach 116 million by 2008. The iPod would have to work very hard to keep up with those figures.
So, perhaps we'll see the long-predicted Apple mobile phone appearing next year.
