By Nick Krewen
Will the mobile phone industry save the
music business, or is it just a bunch of
hype?
Consider some of these figures: In 2006, 2.6 million people have handsets. In
the U.K. and Italy, the penetration of the market is 108% and 117% respectively.
Ringtones are the most popular digital music format and in 2006, 96% of the digital
music revenue in Japan came from the mobile phone.
Jakomi Matthews, Director of London-based
Music Void Ent Society,
called the mobile phone "the iPod killer," partially due to the fact
that the mobile has a consumer model built in that allows you to purchase and
pay bills, and partially due to the fact that more and more wireless networks
are becoming available around the world.
And you couldn't find
too many people on the panel -- Seth Jackson, MD, Indie Mobile; Steve Mayall,
Director, music ally; Paul Strickland, Director, XwhyZ; Gary Schwartz, President,
Impact Mobile; Dave Ulmer, Director Marketing, Motorola Media Solutions; Upinder
Saini, VP, New Services Marketing, Inc. or Mike Carter, President,
MyThum Interactive Inc -- who would disagree with him.
"When we talk about
the competition between iPods and mobile phones, the hardware game is over," declares
Motorola's Dave Ulmer, the founder of Napster-era
digital music service provider Roxio.
"Mobile phones have won. I think mobile will the next radio. Mobile will
be the next MTV. Mobile will be the next
place where people can get their music out there and heard."
All panelists agreed that even though ringtone
and mobile phone download stats in North
America are a relatively minor contributor
to overall music industry economics, the
industry is still very much in its infancy.
"From a product life-cycle standpoint, we're talking about something that's
in the trial stage at the moment - not even trial, but in the awareness stage
at the moment," states Rogers' Upinder
Saini.
"A very small percentage of people have technically-capable phones, and
the numbers are so small they can't be
seen. As far as where the growth is going to be coming front, full track downloads
are certainly going to be the future."
Adds music ally's Steve Male:
"The digital carrier business is still predominantly based on ringtones.
"Ringbacks, iRadio, Vidtones -- which are video ringtones -- these other
formats are all kind of not really working.
I'm not saying they're dead models, but it's not really working yet and it's
got a long way to go."
Motorola's Ulmer agreed, stating that one
of the mobile industry's drawbacks so far
has been the technology. He said that until
recently, the priority of mobile carriers
had been on developing the product rather
than concentrating on the listener's experience.
"For the longest time, the experience -- and even to this day, the experience
on a mobile phone kind of sucks when it
comes to accessing, discovering, carrying and playing the music you really want
to listen to," says
Ulmer.
"That's all changing."
Music was used so strongly as a promotional
vehicle to sell mobile, but the phones
weren't quite there yet," says Ulmer.
"When I look at our Razors, which is the best selling electronic device
of all time, we promoted this as
a music solution. That first version, yeah,
you could play music, but you had to be
really choosy about the music you liked
because it only carried one song.
"Everyone's a little disingenuous about building this big hype around it," he
adds. "But shoot, the phones that
we're making now can hold 100 hours of
music at a shot. can play videos - it's
all changing so very, very fast."
The key, here, of course, is the music:
all the mobile carriers have been using
it to promote their product, but moderator
Mathews feels the phone companies are taking
too much of the pie.
"The breakdown in the U.K. for artists is that ringtones retail for
about 3£ (approx. $6.80 CDN)," says
Mathews. "The
mobile operator takes 50% of that three
pounds before it's broken down between
the artist, the aggregator, the label.
The aggregator gets about 17%, the label
18%, and the royalty rights/mechanical
royalty people get 15%.
"Personally, I think 50% of the cut
for the operators for something they have
no investment in is ridiculous. Don't get
me wrong, they should get a 20% to 25%
cut."
Surpisingly, the operators remained mute
on the subject of royalties, although XwhyZ
director Paul Strickland, who is based
in Beijing, says Chinese operators only
want 15% of the pie.
Rogers' Upinder Saini suggested that Rogers
is actually losing money.
"We hope one day, when you can download an entire song to your phone, to
attain critical mass and that's when we
hope to start making some money," said
Saini.
However, all the mobile carriers reiterated
that their interest in the music business
is more than just passing.
Upinder Saini also says that Rogers is
completely committed to the music business.
"It's
been all about music - that's the vehicle
we've been pushing," says
Saini.
"We have people inside the company
that actually do artist development," says
Motorola's Dave Ulmer. "This is the
serious commitment on the part of us. We
see it as a foregone conclusion that phones
are the device that everybody has for not
just music, but for video and other media
going forward."
However, Ulmer deflected criticism that
Motorola's interest in music is strictly
altruistic.
"Who thinks that Apple's in the business of selling music? It's not necessarily
mutually exclusive.
"If we want to sell more handsets, and we find that music stimulates the
sales, engages customers, keeps them with
us and keeps them coming back, then it's
a good thing.
"But because our No.1 position is that we want to sell devices doesn't
necessarily mean that we're going to ignore
or put music in the back seat."
In fact, Ulmer emphasized his earlier
commitment to improving the customer experience,
and says big strides will be made over
the next two years as the quality of phone
technology drastically improves.
"You have to have a really damn good phone before you start turning it into
a mobile music entertainment device," Ulmer
insists.
As far as the music industry of the future
is concerned, Paul Strickland says mobile
has played a crucial role in allowing the
Chinese recording industry to survive.
"Mobile media has saved the record industry in China hands down," said
Strickalnd. "I have friends who are
either musicians or run record labels,
and they have to have a mobile strategy
or else they're dead in the water.
"In the Chinese market, at the end of 2006, the size of the ringtone market
was valued at $200 million U.S.
"At the end of 2010, it's going to
be $3 billion U.S. -- and that's for all
the different types of music mobile entertainment
that will be available."
Mobile technology and content are obviously
going to be important factors for the new
tomorrow, as life radically shifts even
more so to one of completely portability
and choice-on-demand.
As Dave Ulmer concludes,
the future is closer than you think.
"This is a very, very rapidly moving, confusing and chaotic technology," declares
Ulmer. " And we're just at the beginning
gates.
"It's coming like a freight train." |
