According to a study by eMarketer, the global retail market for full-track downloads and master ringtones will be worth about $1.3bn in revenue this year. That’s about 44% of all digital music sales worldwide. By 2010, the total value will have gone up to $7.75bn – and that will represent around 65% of all digital music revenues.
Mobile music is going to be big business – very big business.
At least, that’s what the music business would have us believe: they like the way mobile downloads provide better security, more protection against unauthorised file sharing, and higher prices than digital music on a PC – the same eMarketer research suggests consumers might be willing to pay as much as $2-3 per track for a CD-quality download, which looks pretty good against the $0.99 of a PC download from iTunes.
Besides, mobile music yields a degree of independence from Apple Computer and the iTunes store. 

Apple has sold something over 42m iPods, but just about everyone in the Western world has a mobile phone – and many of those phones include a music player. Could mobile music be the salvation of a business faced with a saturated market and the need to recoup huge investments in 3G?

The networks like the idea of mobile music too. Music looks like the first non-voice high bandwidth service where the consumer is demonstrating it’s willing to pay. Music, rather than video and MMS, looks like the immediate justification for all the big bucks spent on 3G licences.

It’s not exactly paying that investment back yet, but it is pointing towards a brighter future.

Both the music industry and the networks are also attracted by the idea of over-the-air music delivery services as an alternative to internet-based downloading. Wireless music services offer mobile phone users a convenient way to buy music, especially on a one-track-at-a-time basis. And of course they represent an exciting (for which read “lucrative”) new distribution channel.

So nearly all the major operators already have a full-track download service or will have such an offer in the very near future. Orange and O2 have been particularly active in the UK, and O2 was voted ‘Best Digital Music Service’ in the Music Week Awards; but it’s probably 3 that is setting the pace – a million audio downloads on its award-winning music service in just four months, average sales of over 200,000 tracks per month.
Sales of music tracks through 3 have accelerated dramatically since it reduced its price per track (as part of a promo which it has since extended) from £1.50 to £0.99. That appears to be an attractive price point and most of the over-the-air services have adopted it at least for some of their tracks.
But it doesn’t have to be a lowest-possible-price business. Here’s Phil Taylor, director of Wireless Internet Applications for Strategy Analytics: “We think that if mobile operators want to compete effectively in the music market, they need to offer web based retail stores which can compete on price with the likes of iTunes while adding a mobile element (at higher prices) for those that really do want to buy tracks while on the move.”
Stefan Möller, Content & Media analyst in LogicaCMG’s Telecoms arm, agrees. “This year we’re already going to see the very first innovative operators coming to the market with integrated music offerings to bundle full-track downloads with other types of music-related content.”
A fixed-price offer can help, too. Back in the spring we saw the launch of an off-portal service costing £1.50 per download with no hidden charges for the amount of data transferred. It was built by mBlox (underlying technology), New-Visions (content provider) and Vodafone, and for the first time it enables record labels and others to sell full tracks directly to a customer’s phone.
The big plus there is the absence of the data charge, usually hidden in the GPRS call’s cost but frequently substantial.

Handset makers queue up
For the handset makers mobile music is a no-brainer: some kind of music player is a must-have if they want to compete. Almost all new mobile phones coming to the market have a music player integrated, showing that the handset vendors are already rushing to incorporate digital music capabilities, even though only some of the handsets are specifically positioned as music phones.
The software isn’t too difficult to provide, the electronics are widely available and cheap, technology for small speakers and compact headphones is improving, memory cards can supplement on-board storage. Easy.
Richard Dorman, UK and Ireland marketing manager for Sony Ericsson, argues that this isn’t just a case of manufacturers putting together products simply because they can. Does the consumer really want music on the mobile phone? “To date we have sold over 5m Walkman phones worldwide, so I would say that appeal is pretty strong. The whole music mobile sector is one that continues to grow at a good pace. Our Walkman range is now 10 strong and there is a product for every budget, so for those who want music on the move, there is something for everyone.”

Richard Dorman, Sony Ericsson: five million Walkman buyers
can’t be wrong
 Hardware matters
Currently it’s a series of hardware constraints that are holding back the mobile music market. On paper it looks good: in practice most phones don’t have enough storage for a decent selection of tracks, their loudspeakers are necessarily tiny and therefore usually tinny, the headphones provided in the box are relatively crude and poor at reproducing a full range of frequencies while cancelling out extraneous noise, and the user interface is frankly variable.
Some of these questions are being addressed, but not necessarily with complete success.
Take storage: it’s currently difficult to get gigabytes into solid-state memory, even on slot in memory cards (1Gb is the maximum on most formats). Miniaturised hard drives look like the answer, providing 3Gb on the Samsung 300i for instance and a whopping 8Gb on the 310i. But hard drives can’t fit into a slim, svelte, lightweight design, so you end up with something that verges on the ugly. And they soak up power, so they’ll always be hamstrung until battery technology improves.
The need for a phone to be a phone will always constrain the size and shape of the thing. The form factor of the phone can’t be optimised for music-playing; it has to accommodate a loudspeaker and a microphone, and the layout has to have one near the ear and the other near the mouth. Until someone comes up with a radical redesign that works, we’ll always need a keypad that is big enough to take sausage-shaped fingers and a screen that is big enough and bright enough for text messages to appear clearly.
The user interface isn’t going to be too clever either. The average MP3 player or iPod has an elegantly simple approach to selecting and playing music. But mobile phones that play music also do a million other things, and music listeners often have to deal with a multi-use interface and additional layers of navigation. Putting some basic controls on to dedicated buttons on the outside of the phone helps,
but it doesn’t compare with the flexibility and control that the iPod’s thumbwheel
selector gives.
There’s better news on the sound reproduction front. More phones are shipping with a usable graphic equalizer; that can genuinely alter the sound to suit different conditions and different styles of music. Speakers and headphones are getting better. And Bluetooth’s A2DP stereo profile means that wirefree headsets are entirely feasible.
It looks a lot like a phone, but the Samsung SGH-i310 has Windows Mobile 5.0, a 2mp camera – and an 8GB hard disk, stereo speakers, digital amplifier and support for Bluetooth-connected wireless stereo headphones. Still a way
to go to beat a 60Gb
iPod for less than
£300, though.

Taking on the iPod
Stefan Möller of LogicaCMG thinks the storage issue is preventing music on the mobile phone from seriously taking off. He also cites the software issue – “consumers need the right tools to get the content onto their mobile phones as easily as possible”.
But once these two key issues have been tackled, he predicts that subscribers will no longer need to buy iPods or similar gadgets – they will simply use their mobile phones to store and play full-length music tracks.
“An MP3 player is simply an MP3 player,” he says. “A mobile phone, on the other hand, can offer the end user much more functionality and interactivity and will be a much more powerful product proposition.”
Two thirds of people in key mobile markets around the world say a music-enabled mobile phone will replace their dedicated MP3 player, according to research from Nokia.
With a music phone consumers can browse and buy content, recognise music, share music with friends and the potential for interactivity and content marketing are endless. Subscribers who are already heavy consumers of ringtones, wallpaper and other paid mobile content are prime candidates for such services.
There’s certainly growing awareness among consumers of phones such as the Sony Ericsson W810 Walkman, thanks to aggressive (and effective) marketing.
Phil Taylor of Strategy Analytics says competition is becoming intense, particularly at the bottom end of the music player market. “We don’t see the market for dedicated music players such as the iPod disappearing overnight. However, even people that own and use top end iPods are beginning to also use phone players to supplement their listening experiences …”
He reckons that Apple itself will move into the cellphone business to counter this, probably within the next 18 months “possibly during the MacWorld conference in
January 2007”.
This makes sense if Apple really does want a mobile strategy. The high profile joint-venture between Apple and Motorola failed to move iTunes into the mobile domain, partly because of an apparently arbitrary limit of 100 songs on the ROKR E1 and RAZR 3i m (imposed by Apple) and partly because the mobile iTunes implementation is so obviously inferior to the PC or Mac version.

Matching music to the market: Christina Aguilera shows us what she’s got (a couple of Sony Ericsson phones, by the look it ).
The pacesetting music phone – Sony Ericsson’s W800 set new standards for usability when it comes to handling music. There are now ten Walkmans with the same basic music capability but targeted at different market segmets.


Sony Ericsson’s Richard Dorman thinks that music consumption is changing – “and it is important that consumers are given as much choice as possible”.
He’s thinking of choice in handsets, but there are also differences emerging in terms of what and how music is consumed.
The youth market in particular seems to be characterised by change – handsets are changed frequently, preferences in musical artists and styles change, single tracks are preferred to whole albums and they aren’t retained for frequent relistening over the years.
That scenario is a perfect fit for the mobile phone with a music player – enough storage and enough reproduction capability to satisfy the musical grazer, no particular problem about losing music when the handset is replaced after a few months, instant access to singe track downloads to satisfy spur-of-the-moment appeal.
The music-enabled mobile looks a good bet for the casual user, and that means the mass market.
And there will be over-the-air services that suit their needs. Already we’re seeing a much more sophisticated approach from the music services, with easy payment and easy downloading of interesting (and sometimes exclusive) music or simply music tracks that the user wants there and then.
Maybe music will be the salvation of the mobile business after all.
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