July 26, 2005 4:00 AM PDT
Digital music is going mobile
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great opportunity for the competitive landscape to be transformed."
A wild card is what Apple itself will do in the mobile space. The company announced an iTunes-enabled phone with Motorola a year ago, but it has yet to be unveiled. At his company's press event Monday, where it was widely expected to be released, Zander said it was still on the way.
"It's real, and it's happening," Zander said, joking that he had "put his foot in his mouth" every time he'd previously predicted that it was ready for market. "Stay tuned for iTunes."
Race to launch
Among over-the-air services, Verizon Wireless, with the most advanced data network, is likely to be first to market in the United States. At a conference hosted by the Yankee Group last month, Chief Executive Officer Dennis Strigl told attendees that his company's music service would be ready in "six to eight months," according to Bloomberg News.
Company spokesman Jeff Nelson said the operator is "working toward offering a mobile music service" but declined to be more specific.
Music industry sources who have been briefed on Sprint's plans say the company is building a branded service that is likely to launch early next year, but will offer access to other companies' services as well. Sprint already has deals to provide mobile music from Sirius Satellite Radio, a start-up called MSpot and Music Choice.
Music industry sources say that services from both Verizon and Sprint are likely to offer customers a way to download music on both cell phones and PCs, so that music can be consumed on a variety of devices.
Cingular, whose 3G infrastructure plans trail Verizon's, isn't expected to launch a service until next year at the earliest.
Surprisingly, Virgin Mobile USA--whose teenage appeal might make it a natural for music services--is sounding the industry's sour note. Virgin executives say downloads to phones still take too long for immediate launch of a service.
"Our customers have always wanted to (consume) music," said Virgin Mobile USA chief Dan Schulman. "But if you were to download a song, and it takes five minutes to do so, it doesn't matter if it costs 10 cents; they are not going to do it."
Far from a sure thing
It may be some time, if ever, before these wireless music services become a direct competitor to iTunes, analysts and even record label executives say. Instead, they may initially serve as a complement to computer-based services.
"They're not mutually exclusive," IDC's Kevorkian said. "We think it's very likely that while there will be a growing percentage of consumers who choose to use (a) phone as (their) primary MP3 player, a large majority will also own a portable MP3 player and use them interchangeably."
Label executives say phones' ability to support instant impulse buying will be attractive even to existing customers of iTunes, Napster and other services. Executives note that most music marketing materials, from radio play to street posters, reach consumers when they're not near their computers.
There are other issues to overcome before carriers can persuade consumers that a cell phone is an adequate substitute for an iPod and iTunes, however.
As with the computer-based services, interoperability will be a key hurdle, analysts say. Even if carriers' services allow downloads to PCs as well as cell phones, it is unlikely that they will offer songs in a format that is directly compatible with all MP3 players. Today, for example, Apple's iTunes sells songs that can be played only on the iPod.
Marketing will also be a key issue. Mobile phone companies have large marketing budgets, but are also launching video-on-demand, wireless messaging and other services. They may be hard pressed to match the consistent, successful marketing campaign that has boosted Apple's iPod and iTunes service.
"I think the verdict is out as to whether they'll put a long-term (marketing) commitment behind these services," Universal Music Mobile's Caraeff said. "It's not just about putting $100 million behind it in one quarter. Just because a device is music-capable doesn't mean customers will know about it."
Indeed, some analysts fear that cell phone companies' rapid expansion into a plethora of data services could shortchange all the new features, including music.
"The real question is, 'What are these guys becoming?'" said Iain Gillott, who heads wireless communications consulting company iGillott Research. "Are they media companies, business solutions companies or cell phone companies? I'm not sure the problem will be marketing muscle, as much as confusion in the market."
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