Making Business Sense out of Mobile Music

By Susan Murray Music is growing in the mobile space. In 2006, revenue associated with mobile music nearly doubled, according to iSuppli. While ringtones still capture the biggest piece of the revenue pie, the market is shifting. Radio, according to mSpot CEO and co-founder Daren Tsui, is showing the most growth in this space. As the market expands and operators and developers jump into the segment, they must sort out which business strategies to pursue, including whether to adopt a per-song download model or a subscription-based offering. Players in the space also must decide whether to deliver music via sideloading or stick with a carrier-controlled model. Market research firm M:Metrics has found that sideloading is gaining momentum. "From my perspective, one of the things the music space is forcing operators and manufacturers [to consider is sideloading] given that people want to integrate the mobile phone into their digital lifestyle," says Mike Donovan, M:Metrics senior analyst. Three times as many customers are opting to side-load content compared to those who download content from operator stores, according to Donovan, who notes sideloading is even more popular in Europe. In terms of sideloading growth, from January to March a million more people were sideloading music than buying from an operator store; an increase of 17.5 percent in the three-month period. "At least in the U.S., the subscription-based model really hasn't taken off," Tsui says. "I think that the music industry as a whole is going through a drastic decline in revenue, but music has never been more popular. They are trying hard to figure how to address this falling revenue issue." One important thing for the industry to realize, according to Tsui, is that there are so many different ways for people to get music, many of which are illegal. The sector must understand “the pains and the ecosystem” so they can start developing solutions, he says. Donovan adds that pricing still needs to be worked out. "There would be more growth in operator music stores if pricing more aligned with online pricing schemes," he says. Tsui believes it is best to tie all mobile music offerings together by sending the consumer to one place to gain access to all of his music services. It was this holistic philosophy that prompted the company to develop a music center, a portal that ties various music services together. mSpot, according to Tsui, develops its applications in BREW, Java and native, but one thing the company finds compelling about BREW is that since a single company controls the platform, developers can innovate very quickly. Through uiOne, BREW also is exploring surfacing features on the phone tops. "Anything that helps the user get to music faster on a phone, we love," Tsui says. BREW is also making strides in the mobile space with consumers, according to M:Metrics: 5.1 percent of BREW handset owners listened to music (both sideloaded and from an operator music store) on their mobile phones in March. This compares to 3.4 percent of Java handset owners. Overall, consumer awareness of mobile music is increasing as operators promote devices as music capable. Donovan likens the uptake in music phones to the rise of cameraphones, saying at first consumers thought the idea of taking pictures with their phone was crazy. M:Metrics estimates that two-thirds of people who listen to music on their phone already own a dedicated music player, such as an iPod or an MP3 player. Donovan expects music to drive multimedia use in mobile forward, just as it did on the Internet. He also believes that while it is unlikely that Apple's iPhone will take over the market, its arrival will make people more aware that their phones can do more than just make calls or sent text messages. The hour-long “Mobile Music: The Obstacles, Benefits and Trends” session will feature Tsui and will focus mainly on the business and marketing side of the market, although technology issues will be weaved into the presentation. The session, scheduled for Thursday, June 21 at 1:30 p.m., will delve into the growing mobile music trend and discuss how to overcome obstacles to extend a company's reach into the market.

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