Music companies are rushing to bring streaming music services to U.S. wireless users, but while the technology exists to provide radio-like offerings to wireless users, the viability of a radio-like business model in wireless is far from clear.
Clear Channel Communications Inc., the top U.S. radio station operator, announced plans last week to offer programming to cell-phone users by the end of the year. The Texas-based company said it is talking with carriers to create content specifically for handsets and is considering offering a subscription service as early as this summer for online radio services.
Mobile media startup MSpot beat Clear Channel to the punch earlier this month, launching 13 live and on-demand channels of music and talk for Sprint PCS Vision subscribers. The service, which is offered at $6 a month, includes content from National Public Radio, The Sporting News and Market Watch.
Sprint users with one of five multimedia phones can access the service today; MSpot is developing a version that will be supported by J2ME handsets. While the sound quality may not equal that of satellite radio-MSpot Chief Executive Officer Daren Tsui said the sound quality is “probably as good as FM”-the offering is seen by many as competition for satellite radio providers XM Satellite Radio and Sirius Satellite Radio.
While there’s no questioning the strong market for mobile music, what form consumers want their music to take is unclear-except, it seems, in the case of the iPod. Several years ago, the wireless industry failed to gain traction with handsets that were equipped to receive FM broadcasts. It’s too early to tell if more recent efforts, such as Virgin Mobile’s launch of a streaming audio service for its 3G phones, will catch the attention of mobile music lovers.
Even if the demand for any type of streaming audio exists, though, real revenues may not. Some analysts believe the key to a sustainable mobile music service lies in packaging radio-type offerings with a storefront, exposing listeners to new music and allowing them to purchase content immediately.
“People don’t want to pay a high price for radio,” said Lewis Ward, a senior research analyst with IDC. “Where this is going to get interesting and valuable is where you can bring it down to less than $5 per month, per subscriber, and be able to cross-sell” CDs, digital downloads and ringtones to consumers.
However, it’s not likely that single-song purchases will drive the market, Ward warned. Rampant file-sharing on the Internet has resulted in razor-thin margins for providers like Apple’s iTunes, leaving operators with little appetite to compete by undercutting its online competition in a pay-per-song business model.
“There’s going to be a larger price tag associated with getting a mobile track downloaded onto a cell phone, and that may be a sticking point,” said Ward. “To (replicate) the online business model does not make sense. There’s just no margin in it.”
That’s part of the reason MSpot hopes its new music service is just a stepping stone toward marketing more lucrative offerings. Tsui said the company is looking to deliver both audio and video content based on blockbuster Hollywood films, creating an entertainment experience with retailing possibilities.
“Part of the process is figuring out what is the best way to offer that content,” Tsui said. “In the next six months, hopefully, we’ll have a lot more clarity.”
