In these early days of mobile entertainment, full-track download services are a bit like the weather: everyone complains about them, but no one seems to be doing much about them.
While carriers such as Sprint Nextel Corp. and Verizon Wireless have claimed success hawking tunes to subscribers, the number of U.S. consumers downloading songs from carriers remains miniscule. Only 2.3 percent of subscribers downloaded songs in the third quarter, according to Telephia, while M:Metrics claims only half of 1 percent of all U.S. users downloaded a tune in November. And while data on uptake is scarce, it’s not as if download services are taking off in other markets.
The mobile platform has several unique qualities that make it especially appealing to record labels, which are scrambling to deal with ever-dwindling CD sales. Because carriers control the networks, piracy is far less of a threat on wireless phones than it is on the Internet. Users might be able to swap songs between handsets using Bluetooth or memory cards, but Internet-based file-sharing services such as eDonkey and BitTorrent-which the music industry views as threatening-are implausible in the world of mobile. Most importantly, mobile music sales offer a built-in billing system that doesn’t require a user to break out a credit card or open a PayPal account.
As the music industry eyes mobile as its next great distribution channel, though, carriers, labels and software developers have substantial hurdles to overcome to take full-track wireless services from niche to mainstream.
“(Full-track downloading) is expensive, it’s complicated and it’s slow,” Warner Music Group CEO Edgar Bronfman Jr. told attendees at the 3GSM World Congress in Barcelona, Spain earlier this month. “It’s amazing we’ve generated as much revenue as we have in mobile music, considering just how cumbersome it can be. .. To be frank, we often get very frustrated because of user interfaces.”
Indeed, shopping for songs on a wireless handset is often a painful process. Finding, buying and downloading a specific tune can take 20 clicks or more; browsing through a carrier’s catalog of artists and titles is prohibitively time-consuming and often infuriating.
“It’s still confusing, it’s still difficult to find what you want,” said Greg Clayman, senior VP of MTV Networks’ Mobile Media Group, echoing Bronfman’s thoughts. “Frankly, I don’t know the answer to that.”
Digital rights management issues continue to shackle the industry, as well.
Biz model challenges
The biggest threat to the full-track download space, though, continues to be the business model itself. Operators are forced to charge a premium for over-the-air downloads-Sprint Nextel, for instance, demands $2.50 per tune whether the song is downloaded to a handset or a computer-and most consumers seem unwilling to pay more than the Apple Inc. tunes-established standard of 99 cents per song.
“Pricing has been an issue,” T-Mobile International CEO Humid Achaean said during the 3GSM conference. “I think the price for mobile music has been . a little higher than consumers are willing to pay.”
Operators are experimenting with other ways to cash in on full-track downloads. A handful of carriers have launched subscriptions services, hoping to entice users to pay a monthly fee to access vast libraries of music. Cingular Wireless L.L.C. has taken an altogether different tack, partnering with online music services and encouraging users to side-load tunes instead of downloading them over the air.
Perhaps the most promising business model in mobile music though-and maybe even for most wireless services-is an ad-subsidized model. Amobee Media Systems Inc., a San Francisco-based mobile advertising firm, is hoping to draw the eyes of consumers with a white-label offering that delivers display ads during music downloads and while songs are playing. If users don’t mind viewing the commercial messages, the ad revenue could allow carriers to match, or even beat, iTunes’ price.
“There are so many things about songs that lend themselves to advertising,” said Roger Wood, Amobee’s general manager for the Americas. “Music entertainment is a relatively easy form of entertainment to sell against.”