Mobile usage a rare highlight in music biz

Mon Sep 28, 2009 5:19am EDT
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By Antony Bruno

DENVER (Billboard) - The mobile music landscape is very much a study in good news, bad news.

The bad news is that mobile music has failed to live up to the expectations that the early success of ringtones had inspired. Combined ringtone and ringback tone sales have fallen almost 23 percent so far this year, according to Nielsen RingScan. And Forrester Research analyst Sonal Gandhi estimates that only one-third of U.S. mobile subscribers with music-capable phones use their devices to listen to music.

"That's not very big in the grand scheme of things, considering how long we've had MP3-capable phones," she says. "Compare that to iPhones users. Almost 60 percent of them are listening to music on their phones, and it's only been around two years."

But it's not all gloom and doom. The mobile content business is undergoing a dramatic sea change, evidenced by the introduction of downloadable applications for such devices as the iPhone, BlackBerry and Android-powered phones. This new app-based distribution model allows developers and service providers to create mobile-specific services and sell them directly to users without interference from mobile operators, which historically have restricted the flow of new services available on their networks.

This, combined with more sophisticated handsets and smart phones, has already had a positive effect on mobile music consumption. According to Gandhi, mobile music usage -- while still low overall -- doubled during the past year. She credits music apps like Pandora and Slacker as driving the bulk of that increase.

And there are more music apps coming. RealNetworks just released an iPhone version of its Rhapsody subscription music service, marking the first time U.S. music fans can access on-demand streaming music from their mobile phones. Spotify just launched a similar app in Europe as well.

Both require monthly subscription plans, which will certainly affect adoption. But it's only a matter of time before a U.S. mobile carrier decides to bundle a monthly music subscription into the cost of an unlimited mobile data plan to retain existing customers and attract new ones.

"Mobile companies have to be really serious about using music as a differentiator," Gandhi says. "They're the best people to do music subscription because they have a billing relationship. They can get people to pay a certain amount monthly without even thinking about it, (and) that can be used as a way to drive data adoption as well."   Continued...

<p>Customers look over an Apple iTouch at the company's retail store in San Francisco, California April 22, 2009. REUTERS/Robert Galbraith</p>