NMS Communications Corp. subsidiary LiveWire Mobile is hoping to gain traction in a very slippery space: full-track mobile downloads.
LiveWire, which was rolled out as a separate division in December, last week acquired Groove Mobile for $14.5 million – less than half the investment capital Groove had pocketed in its six-year existence. LiveWire aims to leverage Groove’s distribution channels and content portfolio, adding fulltrack services to its lineup of ringtones, ringback tones and other personalization offerings.
Groove, which launched in 2002 as Chaoticom and now claims 75 employees, has made impressive headway in both on- and off-deck mobile music. The company powers Sprint Nextel Corp.’s music service and boasts 11 other carrier customers including 3 U.K. and Bell Mobility in Canada; its content partners include EMI, Sony BMG, Universal Music Group and Warner Music Group.
Groove claims to have powered more than 38 million full-track deliveries and 600,000 music video downloads, averaging 3 million tunes per month, and claims 50% of the U.S. market and 80% of the U.K. market. The Bedford, Mass.-based startup reported 2007 revenues of more than $7.5 million.
Money trail
But the company’s bargain-basement price tag – Groove had racked up $32.5 million in funding – is just the latest piece of evidence that mobile is making little headway in convincing consumers to drop habit for Apple Inc.’s iTunes service in favor of wireless music services. The lack of progress was evident among tier-one carriers last year, as Sprint Nextel slashed the price for its downloads from $2.50 to 99 cents – matching iTunes’ price point – and Verizon Wireless said it would scrap its carrier-branded, stand-alone service in favor of a cross-platform offering with partners MTV Networks and RealNetworks Inc.
Impulse shoppers
LiveWire, which is quietly making steady progress with its ringback business, hopes to expand beyond Groove’s one-off mobile music download business, however. The company is looking to target consumers with bundled music offerings, dangling an entire song in front of a user shopping for a specific ringtone, for instance. LiveWire wants to be a one-stop shop for carriers’ music needs, integrating bumpers ticker-type content like ringtones, which generally are used to advertise a user’s personality, with entire songs, which are consumed on a personal level. And it plans to use some innovative marketing tactics to try to move the needle.
“It’s an impulse buy,” LiveWire VP of Marketing John Orlando said of the mobile music space, “and it will go hand-in-hand with a heavy dose of marketing. For a few dollars a month, a consumer could get access to content” based on a theme. Users could buy monthly access to the latest top 10 hip-hop songs, conceivably, or to tunes from the current season of “American Idol.”
LiveWire claims the acquisition will boost its services revenue by more than 50% this year, and will allow the company to be profitable by the fourth quarter. The company will market its new offerings to carriers and direct-to-consumer vendors as a way to move beyond siloed content offerings that require customers to make an individual purchase for every piece of content. And it will focus on the lucrative market of young, content-hungry users who are often pay-as-you-go customers.
“When they have money,” Orlando said of the company’s target audience, “they spend it in ways you would never even consider. They spend inordinately on fun stuff.”
