Apple and Motorola's Music-phone Deal Full of Both Promise and.

Apple and Motorola left a lot unsaid as they jointly announced that they will work together on an iPod-style player for Motorola music phones, due next year.

The two referred to the player as a new iTunes mobile music player, and the fact that Apple chose Motorola to work with comes as no surprise to anyone that has studied the two companies over the past decade.

Apple's architecture has been reliant on Motorola chips for some time, including the PowerPC chips that drive the current generation of Apple Macs. Although they come from an IBM chip design, originally in the early 1990s, Apple gave them their first design win and Motorola was a second source and helped in the design.

This new music capability will be included in all of Motorola's mass market music phones, the two companies said, though they did not say what proportion of Motorola handsets that was. But speaking at an analyst event last week Ed Zander, freshly installed CEO of Motorola, showed off the devices and previewed a number of new devices that will be capable of carrying the service due out later this year and early next.

The first question the deal raises is just how much memory on the phones will be allocated to keeping Apple music onboard? The iPods go from 4GB to 40GB, keeping between 1,000 songs and 10,000. A phone is more likely to offer maybe half a gig, so perhaps will only hold 100 to 125 songs.

Well that one was actually answered at an analyst event by Motorola, pointing out that the current phones only had 128KB now, but that they would all be launched with either half a gigabyte or one gig and that this would give a capacity of 170 tracks or about nine hours of playback time.

Another option is for these phones to be among the earliest to use a one-inch disk drive inside the mobile, which would open the way for far more storage and perhaps images and video as well as music. But no mention was made of this at the analyst event.

And as Motorola itself represents only 16.5% of global handsets, why would Apple want to limit itself to only doing a deal with Motorola.

Steve Jobs attended the event by videoconference and said that Zander and he were friends and that as soon as Zander landed the job at Motorola, he called him up and said, "I'm sure there's something we can do together." Jobs also let slip that iPods had just passed the four-million mark in sales.

Could it be that the two will work together on the device and then license the know-how to Nokia (31% market share), Siemens, Sony Ericsson and others, to create a real shut out on the mobile phone in the future, or will it stay Motorola only? Perhaps this simply the first of many phone deals announced by Apple? Our guess would be that this is a single opportunistic deal right now and Jobs will watch how well it goes and move on from there.

Will Motorola put the new interface on a Microsoft Pocket PC phone edition or any of the other Microsoft Windows Mobile operating environments?

In which case the irony of Apple giving Microsoft a leg up in phone markets will not be lost on the Apple CEO Steve Jobs, a seasoned veteran of wars with Microsoft.

Well that one was partially answered too, with demonstrations of music capable phones by Motorola that were indeed based on one or other variant of the Microsoft platform, bundled with lots of enterprise goodies like e-mail, calendaring, PowerPoint and Word, which at the same time had a camera and removable flash storage. But it clearly isn't only on Windows phones, so it cannot be a straightforward implementation. It seems this iTunes version will run on all Motorola music phones.

The link to iTunes will be made through a USB or Bluetooth link, and this access may well compromise the protection that is afforded by existing phone digital rights management software, currently unified around OMA 2.0 and just being rolled out. How that is going to be managed was not a question anyone was prepared to go into.

Operators are not going to be happy with a phone that doesn't use OMA 2.0, because it will undermine the burgeoning DRM standard, so is Apple perhaps creating a gateway between its Fairplay DRM and OMA? Another unanswered question.

This looks like a service that is going to be on every Motorola phone capable of music.

If Apple wanted to create such a link, one of the most sensible ways to go about it would be to work with the codec and player supplier that leads the way on putting content on the mobile phone - RealNetworks.

RealNetworks recently launched a link between its own DRM and Fairplay, which was created without Apple's knowledge or help. After a few days of thinking about it Apple came out with a statement that said that it was stunned by the RealNetworks tactics and ethics and described the move as a "hack."

Since it is now illegal under the Digital Millennium Copyright Act to bypass copy protection, for whatever reason, RealNetworks will almost certainly end up in court with Apple. But that's just the weakness of the DMCA idea of making bypassing illegal. If it had just stuck to making copyright breach illegal that would have been fine.

Now a move that RealNetworks parallels to creating "plug compatible" PCs from the original IBM design, has become technically illegal. Apple also said, "We strongly caution Real and their customers that when we update our iPod software from time to time it is highly likely that Real's Harmony technology will cease to work with current and future iPods."

The RealNetworks answer was "Consumers, and not Apple, should be the ones choosing what music goes on their iPod," a statement we have some sympathy with, but a DRM should not be forced to cooperate with another DRM, that just tells consumers that it is breakable.

So a perfect opportunity for Apple to get onto an established OMA DRM has passed by. There are two other routes though. Apple could make Fairplay, or a version of it, compatible with the OMA 2.0 standard, or it would work with (or acquire) one of the smaller OMA 2.0 compliant DRM software makers (of which there are plenty). Which has it done? No answer yet.

Sony is another company that has all the elements of this deal in its own hands. It has the Sony Connect online music service, the Sonic Stage jukebox, its MagicGate DRM and Sony Ericsson phones. Expect a competitive announcement to follow very soon.

Apple has wasted an opportunity to become friends with RealNetworks, which has huge influence on the mobile phone industry.

But another question is, what operator in its right mind is going to allow music to move on and off a phone, which it sells, from a PC? The operator has no chance of making a margin on the music or on the download connection time. The operators are now trying to exert more and more control over handsets, and Nokia has suffered a lack of deals from companies like Vodafone simply because it dictates function to the operator.

And yet the idea of an iPod style interface on a phone is superbly compelling and perhaps Motorola and Apple can come up with a business model, like fitting an iTunes music store to a mobile operator service, that will recompense the operators for letting the music in from the PC.

Some music could come from the PC, other music direct over the airways.

But it's not a question that was answered. We know the consumer will like it, but that doesn't make the operator richer. Perhaps it is simpler than we realize and the consumer just might create enough pressure to have an iPhone, and force operators to "allow them" on their networks.

In the official release Steve Jobs said "The mobile phone market, with 1.5 billion subscribers expected worldwide by the end of 2004, is a phenomenal opportunity to get iTunes in the hands of even more music lovers around the world and we think Motorola is the ideal partner to kick this off." But that approach is a little too anarchistic for operators perhaps.

If Motorola is just going to kick it off, it sounds like Jobs is creating a free for all, whereby every other phone maker will come knocking at his door between now and the launch of the first iPhone (shall we call them that?)

Apple currently claims to have 70% of the online music market and a 50% market share at the top end of the portable music player device market. But at a mere four million devices, this is but a drop in the ocean compared to the 1.5 billion phones that are out there now and the two billion mobile phones that will be in circulation by 2008.

Motorola also previewed more phones and innovations at the analyst event, some of which are relevant to digital media. It showed its Dynamic Portal that works with any protocol phone, whether it is CDMA, Edge or 3G to give access to live TV, sports items and breaking news, which it is putting in most of the phones it announced.

It showed its first combined VoIP phone cell phone that connects to Wi-Fi either at work or at home and then seamlessly drops into cellular, complete with handoff, when the speaker moves out of range of the Wi-Fi. This will help a push into enterprise and will be out at the end of 2004, and given that Motorola was one of the companies that helped British Telecom produce its "Bluephone," service which does exactly the same, it looks like the work was pioneered in that deal.

Also on show was the Ojo videophone, designed and built by WorldGate Communi-cations that works with any broadband line, which Motorola took exclusive distribution rights to in May. Earlier this month it placed its first $5 million order for the product.

Zander rigged up a videophone call to Wimbledon tennis champion Maria Sharapova and yes you could recognize her on it. WorldGate bills the Ojo as the first consumer videophone that provides jitter free video and synchronized audio and video.

Zander finished off the show with a preview of the RAZR V3 slim phone, which he called the Razor, and which he said did everything except help you shave.

The V3 is an ultra-slim, metal-clad flip phone made from a combination of metals, including "aircraft-grade" aluminum, an internal antenna and a chemically-etched keypad, with a 2.2-inch diagonal screen, due in the fall. It has a big "I want one," cool factor, and add iTunes to it and it may well become irresistible.

Something tells us that however well that particular phone does this year is how well Motorola will do in the era with Zander at the helm.