In December 1942, Bing Crosby’s White Christmas blared out from a simple gramophone. Now, instead of huddling around a phonograph, music fans are downloading the seasonal favourite on to their mobile phones.
The change owes mainly to the arrival of the Apple iPhone, which has set off an avalanche of traditional mobile phone operators into the music market. They fear that a vital source of revenue could be seized from under them.
The market has huge potential: consumers could be spending as much as $32 billion (£15.5 billion) a year buying music on their handsets by 2010, analysts believe. And the success of the iPhone - Orange sold 30,000 in five days – has served to focus Vodafone and its rivals on trying to snare a chunk of the revenue.
Paolo Pescatore, director of operator strategy at CCS Insight, the telecoms research group, says: “The awareness of the iPhone as a device, and its powerfulness, has forced the mobile companies to react and consider their own initiatives.”
In September Vodafone, the world’s biggest mobile company, offered subscribers access to a vast catalogue of music for less than £2 a week. It dubbed the service, which lets consumers download the latest tunes regardless of their location, a “completely new movement within mobile music”.
Last week Nokia, the world’s biggest mobile manufacturer, went further by promising buyers of its handsets free access to millions of songs for a year. One analyst described the service, offered jointly with Universal, as a potential “game changer”.
Meanwhile, a study by Informa Telecoms & Media found that both the mobile operators and the music industry were “staking much of their future in this market”.
Music has long been on the radar of the mobile operators, as emphasised by their sponsorship of events including Virgin Mobile’s V Festival and O2’s Wireless Festival.
Since splashing out £22.5 billion on 3G licences the phone companies have tried desperately to coax users into more lucrative data services – such as music, games and e-mailing – instead of only calling and texting.
Music, with its wide-reaching appeal, has been singled out as the most likely route to success. Consumers have been able to download and pay for tracks and ringtones over their phones for some time, but inadequate handsets and slow downloading speeds have limited demand.
Mark Mulligan, of Jupiter Research, says: “To buy tracks on a phone, users have had to click through maybe five steps. The battery life of the phone has been an issue and it has basically been an inferior experience to buying music off the internet.”
Cost has also been an issue: the ability to access music instantly, irrespective of location, merits a premium price, according to mobile operators. Orange, for example, charges 99p a track compared with 79p charged by Apple’s iTunes store. As a result, many users simply transfer their music catalogues from their PC on to their phone rather than shop in the “record stores” run by phone operators.
Jupiter calculates that, across Western Europe, mobile downloads have generated only €105,500 (£70,700) this year. Separate research from M:Metrics, the mobile data group, found that, of the 36 million people who listened to music on their mobile phone from April to June in the US and Europe’s five largest markets, fewer than 14 per cent had downloaded tracks from their phone company.
The slow take-up has also troubled the music majors, which are struggling with their worst year. The industry is desperate to boost digital sales, which, though rising, have yet to make up for fast-falling CD sales. The mobile phone, with its huge reach, could be its saviour.
Edgar Bronfman, the chairman and chief executive of Warner Music, has described the mobile platform as “by far and away the biggest opportunity for entertainment generally and music specifically”. But he also said that if phone companies did not smarten up their act and offer more competitive services, they would be forced to “watch their share of the opportunity diminish” as the likes of Apple cash in.
Rob Lewis, the chairman of Omnifone, Vodafone’s music partner, insists that they are up to the task. “All the pieces of the jigsaw are now coming together,” he says. “An entire album can now be downloaded on a mobile in less than one minute.”
He is confident that his service can give Apple “a run for its money in digital music provision”.
Critics point out that Nokia has not said how much users of its free service will have to pay for one of its “Comes with Music” handsets. But analysts are confident. As Mr Pescatore says: “If Nokia is true to its word about this service, this will be the breakthrough which will fundamentally transform the mobile music market.”
Source: http://business.timesonline.co.uk/tol/business/industry_sectors/technology/article3026165.ece
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