OYSTER BAY, N.Y.—Operators struggling with decreasing profits from basic services may want to look to mobile music, according to two new studies.
The worldwide market for full-track mobile music downloads increased 2,000 percent from 2004 to last year, according to new figures from ABI Research. The firm found that wireless users spent $251 million for over-the-air song downloads, up from $12.4 million in 2004.
ABI predicted the space will continue to explode into a $9.3 billion market by 2011.
Carriers looking to cash in on mobile music must have a 3G network, a practical DRM solution, a mobile music storefront with distribution capabilities and agreements with record labels, according to the firm. Also, operators must deploy handsets with sufficient memory and feature-sets to download, transfer and play tunes.
Perhaps the most important piece of the puzzle, though, is a workable business model. Operators must find price points high enough to deliver wide enough profit margins but low enough to lure users of iTunes and other bargain-basement digital music services.
“Over-the-air downloads will be relatively less successful in North America because of the high penetration of PCs,” said Ken Hyers, principal analyst of wireless connectivity research at ABI. “There wasn’t even a Japanese iTunes store until Q4 of 2005. That’s part of the reason KDDI sold 30 million mobile tracks last year in Japan alone.”
Meanwhile, a report from Strand Consult indicates that profit margins from voice and text-messaging services are continuing to decline. Mobile virtual network operators have successfully waged price wars for such basic services, the firm said, forcing network operators to partner with content providers to deploy value-added services.
“We cannot emphasize enough just how much operators will have to think in new and wise ways when defining the revenue-share agreements they will be using for future deals with external partners,” according to a statement from Strand Consult. “The paradigm shift in the mobile value chain cannot be stopped. This is especially due to (the fact) that the significantly falling profit margins on voice minutes and SMS messages (are) not the only comprehensive trend that is influencing today’s mobile market.”
