While Verizon Wireless and Sprint Nextel Corp. lumber around the nascent mobile music playground looking to “own the customer,” Cingular Wireless L.L.C. hopes to attract music lovers by playing nice.
The nation’s largest wireless operator last week finally joined the full-track wireless music arena, unveiling a service that allows users to side load tunes from online partners including Napster, Yahoo Music and eMusic. The subscription-based offering includes all-you-can-eat access to full tracks from each service-at roughly $10 to $15 a month, depending on the music service provider-and allows users to transfer downloaded songs from their computer to a handset.
The service, which goes live next week, stands in direct contrast to offerings from Sprint Nextel and Verizon Wireless: not only does it not include an over-the-air download component-a feature Cingular hopes to add in the next six months-it is designed to work with existing digital music services instead of competing against them. T-Mobile USA Inc. has yet to offer a full-track music service.
The offering “is our answer to a fragmented marketplace that until now has not fully taken into account the user experience,” said Jim Ryan, Cingular’s vice president of consumer data services, in a prepared statement. “We are offering our consumers one-click access to their music, their way.”
Features of the service vary according to the content provider. For instance, users of Napster’s service-which is powered by L.M. Ericsson-can listen to 30-second clips and buy tunes at $1 each, while XM Satellite subscribers can access 25 channels of commercial-free music for $9 a month. Offerings from other providers, including AOL Music, RealNetworks Inc.’s Rhapsody and MTV’s Urge, could be supported as those services become wirelessly enabled.
Cingular tapped Microsoft Corp. to provide digital rights management technology for the service, installing the developer’s PlaysForSure software on five phone models. The move marks another big mobile music win for Microsoft: Sprint Nextel’s offering uses the company’s Windows Media technology, and Microsoft provides DRM software for Verizon Wireless’ Vcast Music.
While it seems curious to launch a mobile music service without over-the-air download functionality-even for only a few months-Cingular may be taking a longer view of the mobile market than its competitors. While both Sprint Nextel and Verizon Wireless claim their music services are gaining traction, it’s unclear how lucrative the full-track mobile music space can be.
Sprint Nextel, which charges $2.50 for a tune, claimed last week that users have downloaded more than 8 million songs in the last year through its music store. But that figure could be misleading given the promotional giveaways the operator has offered to tout the service. Verizon Wireless offers mobile downloads at $2 a song, double the price of its PC download service.
Whether most consumers are interested in paying such a premium to download songs to their handsets remains to be seen, however. Analysts generally agree Apple Computer Inc.’s iTunes has helped to establish a $1-per-song price point in consumers’ minds; other online retailers sell songs for even less. But Apple has said profit margins from iTunes are “razor thin”-the company opts instead to focus on its lucrative hardware business-and it’s unlikely any network operator can match online pricing models for an extended period.
Subscription services may not be the key to overcoming the pricing hurdle, though. Convincing consumers to “rent” access to vast libraries of tunes rather than own their music is a tall order, and per-month digital music offerings have struggled to gain users.
Onlookers praised Cingular’s experimental approach, though, noting that network operators have much work to do in finding the keys to success. Few doubt the potential of the mobile music market, but the wireless industry has yet to offer a service and device that capture the attention of mass-market consumers. More important-and, perhaps, less probable-is that network operators and content providers must stumble upon a business model that benefits every player in the value chain.
Cingular’s service “is an absolute differentiator from their competitors,” ABI Research analyst Ken Hyers said. “While Cingular will see very little of (projected mobile music) revenue in 2006, its new service will allow it to realize a significant portion of that in coming years.” RCR
