Sprint Nextel Corp. was the first U.S. carrier on the mobile music dance floor in October 2005, launching a full-track, dual-download service for its music-loving subscribers.
For now, though, Verizon Wireless is the belle of the ball. And Cingular Wireless L.L.C.’s new service may prove more attractive than either of the early entrants.
But whether any carrier can find riches as a digital music provider is far from certain.
Sprint Nextel has consistently trumpeted the success of its music offering, which in October notched its 8 millionth download. Critics were quick to point out, however, that download figures don’t necessarily equate to revenues: the carrier doesn’t differentiate between its regularly priced tunes-which go for a steep $2.50 whether downloaded to a phone or PC-and promotional efforts and giveaways such as its buy-two, get-one-free offering.
Verizon Wireless, which launched its Vcast Music service a year ago, already owns about 70 percent of the full-track market in the United States, according to M:Metrics. The carrier claims more than a million paid downloads a month through its two-tiered service, which delivers songs directly to a handset for $2 per tune or to a PC for $1 per track.
Analysts say that while Verizon Wireless’ price points are largely to credit for the carrier’s dominance in the mobile music space, an aggressive, music-focus marketing tack has helped substantially. “They really have a music focus in their advertising; they’ve done a lot of ads for the (LG Electronics Co. Ltd.) Chocolate,” said Jen Wu, an entertainment analyst with M:Metrics. “It all ties back to the phone as a music player.”
Market still miniscule by comparison
But while Sprint Nextel and Verizon Wireless each claim to be thrilled with the way their mobile music offerings are being received, the number of U.S. consumers downloading tunes from carriers is still remarkably small. Only 2.3 percent of all wireless subscribers downloaded songs in the third quarter, according to Telephia-a very slight increase from the 1.9 percent who accessed tunes in the first quarter of 2006. M:Metrics’ figures paint an even bleaker picture, with only half a percent of all U.S. users claiming to download at least one song in November. Indeed, the number of users downloading tunes is dwarfed by those who access their work e-mail (about 5 percent, according to M:Metrics), download a game (3.5 percent) or even buy a screensaver (3 percent).
And while many consumers are interested in using their phones as an on-the-go music player, few
appear interested in using it as a purchasing tool. More than 5 million smartphone owners listened to “side-loaded” music on their handset in November, M:Metrics data indicates, and 15 million wireless users say they are “very likely” to transfer music from a PC to their phone.
iTunes syndrome?
Those figures echo a recent Forrester Research study suggesting that although Apple Computer Inc.’s iPods continue to be wildly popular, Apple’s iTunes service may not be driving sales of the hardware. Apple sells about 20 songs for each iPod sold, the firm concluded, leading to “transaction fees (that) threaten to make iTunes unprofitable.”
“A lot of people are going to be side-loading music instead (of downloading it from a carrier),” Wu agreed. “That’s just what they’re used to doing. One-third of (all U.S. wireless users) have an MP3 player.”
Sideloading a hit
Which is why Cingular’s new service may be so compelling. The offering has yet to include an over-the-air download component-an odd omission for a mobile music service, to be sure-but encourages users to side-load songs from online partners including Napster, Yahoo Music and eMusic. The subscription-based service 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 tunes from their computer to a handset.
Both Verizon Wireless and Sprint Nextel offer side-loading functionality, but both services are designed on the iTunes-style digital music provider model.
Cingular has a substantial hurdle to clear in convincing customers to rent their music with a subscription rather than own it outright. But the tack avoids a major pitfall: pricing downloads at a price that creates a sustainable business model as it lures music lovers. Cingular plans to offer direct-to-phone downloads later this year, but the service’s success will hinge on its flexibility. And while the carrier may not cash in on per-song revenues, it has a chance to gain traction on the dance floor by luring users who seek a less restrictive mobile music service.
“It’s meeting the consumers where they are with the sideloading offering,” Wu said of Cingular’s service. “But at the same time . subscriptions are a little new to consumers. You don’t actually own your music, and when you unsubscribe, you lose your music collection. People aren’t used to that yet.”
