THE END OF THE IPOD? The number of people listening to music on their mobiles is rising rapidly. But does this bode well for those looking to sell music over mobile networks? Tom Weiss isn’t so sure … When researching my new book Mobile Strategies, I was surprised to learn that mobile phones are one of the most popular devices to listen to music.
Since 2002, FM radios have been included in many handsets, and they now have a similar share of the listener market as car stereos and walkmans.
Given the success of built-in radios, it is ironic that researchers base their mobile music forecasts on the success of ringtones. Although many ringtones are based on music, and have generated huge licensing revenues for record companies, they are considered part of the 'phone personalisation' phenomenon rather than 'digital music'.
A large part of the success of mobile phones is down to personalisation. Since people have been able to programme numbers into their phones, they've been more likely to make calls from their mobiles than from a landline.
From personal addressbooks, the trend quickly grew with many small businesses creating operator logos, faceplates and ringtones based on well-known celebrities, sports images and music. Most started out below the radar of the big record companies and many illegally sold music. With polyphonic ringtones, the popularity boomed and the record companies finally got involved.
Nowadays, MP3 ringtones (or 'truetones') include clips from actual recordings, and record companies can take a leading role in this business.
However, the market for music on mobile phones is very different. People buy ringtones to say something about themselves. They want other people to form an impression of them on that basis. Ringtones are primarily a fashion accessory, and for that reason the customers will pay significantly more for ringtones than for conventional music.
The ringtone market is also much less competitive than the music business. You can buy CDs in the high street, you can buy them online, you can download the contents to use on a music player. But ringtones you can only buy from your mobile operator or from the few ringtone businesses that advertise in magazines.
Let's look at the competitive nature of the market for full-track music on the mobile phone. iTunes sells single tracks for 79p, CDs frequently sell for less than £10, and Russian download sites offer albums for £2. These prices include a license for music to listen at home on your stereo, your PC, in the car, or a portable device (including many mobile phones). It is cheap and flexible.
But music bought on your mobile phone tends to be more expensive and less flexible: you can't burn to a CD or listen to it in the car, and often you can't copy to your PC.
The only advantage of buying music directly on your mobile is that you don't have to download it from a PC. However, the additional costs and inconvenience raise further obstacles: First, even with a 3G network, downloading music to your phone takes longer than over broadband. Second, you pay your network operator additional data charges for the download. Third, if paying on your phone bill, the mobile operator's commission will be 5-10 times higher than processing the transaction through Visa or MasterCard.
These factors may be alleviated over time, but in the short term the cost and inconvenience of buying music on a mobile will limit the market to gadget freaks more likely to buy music on their PC and download it to their mobile phone than pay a premium for something they can get elsewhere.
Most people will continue to listen to music on their PCs, hi-fis, and car stereos. Many will upgrade from Walkman to iPod. But basic listening habits are not going to change. The mobile phone is not going to kill the iPod.
And the people who are listening to music today on their mobiles will carry on using their built-in FM radios.
Tom Weiss is a recognised authority on mobile business strategies. An advisor to the UK Government and a Vice President at T-Mobile, he is the author of the book Mobile Strategies.
Given the success of built-in radios, it is ironic that researchers base their mobile music forecasts on the success of ringtones. Although many ringtones are based on music, and have generated huge licensing revenues for record companies, they are considered part of the 'phone personalisation' phenomenon rather than 'digital music'.
A large part of the success of mobile phones is down to personalisation. Since people have been able to programme numbers into their phones, they've been more likely to make calls from their mobiles than from a landline.
From personal addressbooks, the trend quickly grew with many small businesses creating operator logos, faceplates and ringtones based on well-known celebrities, sports images and music. Most started out below the radar of the big record companies and many illegally sold music. With polyphonic ringtones, the popularity boomed and the record companies finally got involved.
Nowadays, MP3 ringtones (or 'truetones') include clips from actual recordings, and record companies can take a leading role in this business.
However, the market for music on mobile phones is very different. People buy ringtones to say something about themselves. They want other people to form an impression of them on that basis. Ringtones are primarily a fashion accessory, and for that reason the customers will pay significantly more for ringtones than for conventional music.
The ringtone market is also much less competitive than the music business. You can buy CDs in the high street, you can buy them online, you can download the contents to use on a music player. But ringtones you can only buy from your mobile operator or from the few ringtone businesses that advertise in magazines.
Let's look at the competitive nature of the market for full-track music on the mobile phone. iTunes sells single tracks for 79p, CDs frequently sell for less than £10, and Russian download sites offer albums for £2. These prices include a license for music to listen at home on your stereo, your PC, in the car, or a portable device (including many mobile phones). It is cheap and flexible.
But music bought on your mobile phone tends to be more expensive and less flexible: you can't burn to a CD or listen to it in the car, and often you can't copy to your PC.
The only advantage of buying music directly on your mobile is that you don't have to download it from a PC. However, the additional costs and inconvenience raise further obstacles: First, even with a 3G network, downloading music to your phone takes longer than over broadband. Second, you pay your network operator additional data charges for the download. Third, if paying on your phone bill, the mobile operator's commission will be 5-10 times higher than processing the transaction through Visa or MasterCard.
These factors may be alleviated over time, but in the short term the cost and inconvenience of buying music on a mobile will limit the market to gadget freaks more likely to buy music on their PC and download it to their mobile phone than pay a premium for something they can get elsewhere.
Most people will continue to listen to music on their PCs, hi-fis, and car stereos. Many will upgrade from Walkman to iPod. But basic listening habits are not going to change. The mobile phone is not going to kill the iPod.
And the people who are listening to music today on their mobiles will carry on using their built-in FM radios.
Tom Weiss is a recognised authority on mobile business strategies. An advisor to the UK Government and a Vice President at T-Mobile, he is the author of the book Mobile Strategies.