Off-deck revenue chain broken

It was an intimate gathering of sorts last week as dozens gathered at the Beverly Hilton in Beverly Hills, Calif., for the Off-Deck Mobile Content conference.
“Off deck, on deck, it’s all a growth story,” Levi Shapiro, director of audience metrics at Telephia, said in opening remarks.
Comprising more than 40 percent of mobile game downloads, 29 percent of all full-track music downloads and at least one-third of all ringtone purchases, off-deck content already accounts for a $3.5 billion market annually, he said.
Despite the rising popularity of off-deck purchases worldwide, the industry’s seemingly fluid business model still presents many challenges for each party in the supply chain-most importantly, who gets paid what, how and when.
Chris Black, director of mobile marketing and interactive media at Cingular Wireless L.L.C., spoke at length about the overwhelming number of refunds the No. 1 carrier was doling out to its subscribers for disputed off-deck charges until only six or seven months ago. Not only was the carrier refunding most of the disputed charges, it was usually still on the hook for paying the off-deck content provider.
Cingular is in the process of putting new measures in place to keep disputed off-deck charges to a minimum, he said. Among multiple internal checks, cellphone users will be prompted with a confirmation page and terms that must be agreed to before they proceed with the purchase, he said. Despite the improvements on Cingular’s end, an overall hesitation and unease about the economics of off-deck content for carriers wasn’t lost on the conference attendees.
It was a recurring theme throughout the show. While many of the attendees were from the off-deck content side, the big players that each of them relies on kept pushing their concerns up to the surface. The chain remains broken, they reiterated.
Thomas Gewecke, senior vice president of the digital business group at Sony BMG, spoke rather frankly about the challenges facing the music industry and the digital forces that must be reckoned with in order for it to survive.
“The decline in CD sales every year is dramatic and momentous,” he said.
Almost half of Sony BMG’s digital music revenues, which accounted for 10 percent of music revenues worldwide in 2006 and 20 percent of music revenues in the United States, came from mobile distribution channels.
Mobile accounted for at least $1.3 billion in revenue for Sony BMG, he added.
“Fundamentally we’re committed to selling our content through every available channel,” he said. “No matter what we do, we will sell fewer CDs this year than we did last year. We want all of our music available through every available distribution channel.”
While about 25 to 35 percent of Sony BMG’s digital revenues come from off-deck distributors, he said “the off-deck economics really don’t work for us. We think there’s quite a long way to go.”
Gewecke expects at least 50 percent of the music industry’s revenue to come from digital channels by 2012. It is already the dominant distribution channel for the company in Asia and Latin America, while it accounts for nearly half of all sales in the United States and Europe, he said.