Music services still dance around wireless play

This was supposed to be the year of the music phone, but as the holiday season approaches the home stretch, on-the-go music lovers are still hoping to find dedicated MP3 players in their stockings.
U.S. sales of portable digital music players is expected to slow as the market moves beyond early adopters to mass-market users, according to a recent report from JupiterResearch. But the user base for such devices will increase steadily in coming years, the firm predicts, growing from 37 million customers this year to more than 100 million in 2011.
Apple Computer Inc.’s ubiquitous iPod will continue to account for the lion’s share of predicted sales, JupiterResearch said, but new offerings such as Microsoft Corp.’s Zune, which hit shelves several weeks ago, will help boost the overall MP3 market. And Sony Corp. is expected to make an aggressive move on the playground, with the company hinting last week it may offer a digital audio player and music service by next Christmas.
The increasingly crowded playground underscores the glaring inability-or unwillingness-of the wireless industry to fully tap the portable music market, JupiterResearch analyst David Card said.
The side-load snub
“Impulse, over-the-air music purchases will be a tough challenge for both wireless devices and phones due to infrastructure limits, incompatibility, pricing tensions and user interfaces,” according to Card. “U.S. mobile-phone carriers are underemphasizing or ignoring altogether the necessity of enabling users to ‘side-load’ existing music collections onto a phone because they can’t charge for it.”
Interestingly, music-enabled phones already out-ship standalone MP3 players by more than 2-to-1, according to a report from iSuppli Corp. released last month. But carriers looking to cash in on mobile music services would do well to heed a lesson from camera-phone sales: selling a feature-heavy phone doesn’t necessarily mean consumers will use the features.
Camera phone success
The roaring success of camera phones has been as well documented as it was unexpected. Worldwide sales of camera phones have almost tripled since 2004, according to Gartner, and will account for nearly half of overall mobile-phone sales this year. The Consumer Electronics Association, though, has found that cell phones account for 9 percent of “primary still image capture”-a surprisingly low figure, perhaps, considering that 47 percent of camera-phone owners don’t own a digital camera-thus the cell-phone could be their primary way to take digital pictures.
“Consumers have yet to significantly engage in the practice of substituting devices, but rather use devices in a complementary manner,” CEA executive Tim Herbert concluded. And as digital camera manufacturers add features like Wi-Fi and Bluetooth functionality, “consumers may very well decide no single device is sufficient for all their needs.”
That may be especially prescient if music-friendly phones continue to stumble. Sony Ericsson has been lauded for its flagship Walkman phone, the W810i, but most other music-friendly phones have been overhyped and underwhelming. Critics have slammed Motorola Inc.’s Rokr and LG Electronics Co. Ltd.’s Chocolate, for instance, complaining of everything from limited memory to cumbersome user interfaces.
And there may be more trouble on the horizon for mobile-phone makers. Apple has long been rumored to be working on an “iPod phone,” and some analysts expect the company to unveil the new handset in January.
Cingular steps out
Analysts see encouraging signs for wireless players, however. The Zune, which has been derided as a “me too” effort, dropped from second place to fifth in the U.S. market for digital media players in its second week in stores, market research firm NPD Group Inc. said last week. And handsets are slowly becoming more music-friendly, allowing users to store hundreds of songs, and battery life is constantly improving.
Moreover, Cingular Wireless L.L.C. has drawn praise for its new music offering, which works with online music services from Napster, Yahoo Inc. and eMusic. The effort encourages users to side-load tunes from their personal libraries, contrasting starkly with over-the-air download services from Verizon Wireless and Sprint Nextel Corp. that are designed to compete with online services.
ABI Research analyst Ken Hyers called the service “an absolute differentiator” from those offered by Verizon Wireless and Sprint Nextel, and predicted that while Cingular won’t generate much money from it this year, the offering “will allow it to realize a significant portion” of the market in coming years.