Cell Phones' Hard Drives Could Doom MP3 Players

Cell phones and smartphones with hard disks will eventually significantly cut into sales of MP3 players, a study released Thursday by ABI Research claims.

The author of the report said in an interview Friday, however, that that won't happen until prices come down.

"We're seeing the start of the trend now with some cell phones that have hard drives," Alan Varghese, principal analyst for ABI Research said. "But they're extremely expensive -- about $800. The vendors need those price points to start coming down so we can have adoption by consumers."

Another sticking point is that the cellular operators have started offering music services with which users can download music directly to their phones. However, like phones with hard drives, those services also are too expensive.

"The operators are most interested in the over-the-air download model," Varghese said. "But that model is still about three times as expensive than if you just get the music off of iTunes or something like that. With the move to 3G (faster cellular data access), the operators should be able to make sending music over the air without charging so much. But they'll also need to think in terms of not charging as much but charging for other related services. They need to be thinking about follow-on revenue instead of first-engagement revenue."