Verizon Wireless has upped the ante in its efforts to take on Apple's iTunes store in the digital music market by offering DRM-free music for all purchased music plus a new subscription service. But will it be enough to make a dent in Apple's dominance?
On Monday, Verizon Wireless will announce the revamped V Cast music store, which will be loaded with digital music that is free of the pesky digital rights management encryption on all songs that are purchased through the store. Verizon is joining Amazon as the only other digital music distributor that will be selling DRM-free music from all four of the major record labels, including, Sony BMG, Universal Music Group, Warner Music Group, and The EMI Group.
The company is also offering its first ever music subscription service courtesy of its relationship with Real Networks' Rhapsody America service. Verizon announced it was partnering with Rhapsody last year. And through this partnership, the company has redesigned its music store and the V Cast user interface.
The new service clearly puts Verizon Wireless in a new category when it comes to digital music. Verizon cell phone subscribers as well as nonsubscribers can download the DRM-free music onto a PC and sync it to any MP3-enabled device for $0.99 a song. Songs can be purchased over Verizon's cell phone network onto a Verizon phone for $1.99 a pop. And the new V Cast service also allows Rhapsody subscribers to sync their phones to the subscription service, much the same way AT&T subscribers can access the Napster subscription service.
But even though it has potential to become a major player, it's still unlikely that the cell phone company's moves will have much impact on market leader Apple. Instead, experts believe that Verizon is much more likely to help grow an already underperforming market.
"The issue isn't whether Verizon can take down iTunes," said Russ Crupnick, a senior analyst at the NPD Group. "But rather, can it help grow the market? And I think the answer to that is yes. Verizon is very well-positioned for that."
The music industry is in dire straits. Sales of CDs have been plummeting over recent years, and the industry hasn't been able to make up for the losses through digital distribution. Apple is by far the leader in digital downloads, hitting the 5 billionth song download mark from its iTunes music store just a couple of weeks ago. According to Crupnick, over three-fourths of the full music tracks downloaded come from the iTunes store. Amazon is a distant second, with other players such as Wal-Mart trailing even further behind.
So far, freeing music downloads from DRM protection hasn't done much to move the needle. Amazon and Wal-Mart have been offering DRM-free music for almost a year, and they still lag behind Apple. The reason for this could simply be that Apple is so far ahead in terms of market share that few people have reason to see DRM protection as a problem.
"When you have 80 percent market share on Apple devices," Crupnick said, "there isn't much demand from people to get unprotected music. They don't seem to encounter any issues with it."
Ed Ruth, director of digital music for Verizon, said that the company is simply trying to offer customers choices.
"Of course we recognize that Apple has done a great job," he said. "They have helped tell the digital music story quite well, and they've tilted the ecosystem in one direction. But in some ways they have trapped people into one experience. And that's the problem we're trying to solve."
Meanwhile, Verizon could also have an uphill struggle in getting people to use the Rhapsody subscription service, which costs about $15 a month for unlimited access to millions of songs. In the online world, only a small niche of music aficionados use services like Rhapsody and Napster. And so far, the model hasn't proven to be much more successful in the mobile world. AT&T has been offering the Napster music service, and even though the company hasn't published figures on how many customers are using the service, analysts say it hasn't been a runaway success.
But some analysts think that a service that does a good job of integrating Verizon's V Cast with Rhapsody could help attract new users to the subscription model.
"If they can make the experience of Rhapsody on a handset complimentary to what they are already doing with V Cast, I think it will make Verizon a stronger player by attracting new music subscribers," said Susan Kevorkian, an analyst at IDC.
While Verizon may never be able to beat Apple in the online music game, there's reason to believe that the company could beat out its fellow cell phone carriers and other music downloading services for market share. And in such a nascent market, Verizon still has an opportunity to make a significant amount of money from its music store and help move the carrier away from simply being a phone company.
Verizon claims that record labels have told it that in terms of revenue, it is already second to Apple when it comes to the money that is made from full track downloads. And in a recent survey of Internet users conducted by NPD Group, Crupnick said that over half of the respondents had heard of the V Cast music service. This was higher than awareness for music services from other cell phone companies such as Sprint Nextel or AT&T. But it was also higher than some well-established music brands, such as Microsoft's Zune music store, Rhapsody, and Napster. Still, only about 7 percent of the respondents said they had ever used the V Cast music service to download songs.
But Crupnick believes this consumer awareness could someday translate into growth for Verizon's V Cast service. Verizon also has other attributes that some of these other music distribution channels don't have. In addition to selling full track songs, Verizon is also able to help the record labels monetize the same songs in multiple ways by selling ringtones, ring-back tones, and wall papers of the artists. The company has even begun working to help produce some albums using a mobile recording studio.
What's more, Verizon has access to a wide variety of music playing devices, something that Amazon and Wal-Mart don't readily offer themselves. And it already has an established billing relationship with most of the customers that will likely use its site to download music. All of this bodes well for Verizon. But is it enough to really challenge Apple's dominance?
The answer is probably no. But it could be enough to make it a strong alternative. At the end of the day, Verizon's Ruth said that it's all about forming good relationships with the music industry and providing a great service to customers.
"Our approach is to be as good a partner to the music industry as we can be, " he said. "And we always keep the customer experience and expectations in mind when designing and delivering the service. I think we've done that so far and as a result have earned the trust of our customers."
NEW YORK--Verizon Wireless wants to make music.
Or at least it wants to help record labels and artists make music. More importantly, it wants to provide new, innovative ways for them to make money from the music they create.
Ed Ruth, director of digital music for Verizon, gives a tour of Verizon's mobile music studio.
(Credit: Marguerite Reardon/CNET Networks)"Artists are frustrated with the traditional music-producing model, which is broken," said Ed Ruth, director of digital music for Verizon. "They are frustrated that labels aren't innovating. And we think we can help. We think we can bring some innovative approaches to the whole process."
In addition to its music store, V Cast Music, which is designed to sell digital music, including full tracks, ringtones, and ringback tones, that can be played on Verizon mobile phones, Verizon is also sponsoring a new program it calls Mobile Producer in Residence. Essentially, the company has rented a bus outfitted with equipment to make a traveling recording studio. In February it announced it was working with the rapper-turned-music producer Timbaland as the first producer in residence.
The deal is that Timbaland will use the traveling recording studio, which has been paid for by Verizon, to work with artists anywhere in the country. Every month, Timbaland will work with a guest artist to record a new track. As the bus tours through various cities, Verizon will release singles and behind-the-scenes video clips of the recording sessions exclusively through the V Cast music store.
So far Timbaland has already begun working with R&B singer Keri Hilson on the bus. Also on the bus, he produced some of the songs used on Madonna's recently released Hard Candy album.
Verizon showed off the bus in New York at the launch concert for Madonna Wednesday night. Ruth was on hand to give reporters a tour of the bus before the concert at the Roseland Ballroom in Midtown Manhattan.
Ruth said Verizon isn't looking to replace the record labels. But he said he feels the company is in a unique position to bring innovation to the industry.
"We don't want to disintermediate between the artist and the record label," he said. "What we're trying to do is help the label save some money by introducing a more streamlined process. And we can also help the artist market their songs by offering them in a variety of different formats."
Specifically, Ruth said that record labels save money because they don't have to rent expensive studio space or fly artists to a specific city to cut an album. Artists can be touring the country and the mobile music studio can literally go to the artist as opposed to doing it the other way around.
Verizon also believes it can help artists market their albums before they are fully released by using the creative process itself as a promotion tool. It will do this by releasing behind-the-scenes video clips of the recording sessions on its V Cast music store. It can also turn singles into ringtones and ringback tones before the full tracks are released or even release single songs before the entire album is finished.
Verizon also believes it can help the music industry make money by providing multiple ways to sell the same piece of content.
"The big problem that the music industry is facing is that physical sales of music are failing," Ruth said. "And digital music is trying to catch up. But what we offer is a unique ability to offer consumers content in multiple formats."
For example, consumers who really love Madonna's "4 Minutes" single can spend $2.99 for a standard ringtone, $1.99 for a ringback tone, and another $1.99 if they buy the full track using their phone or 99 cents if they download it from their computer. (Verizon also offers a 20 percent discount for subscribers buying the song as both a ringtone and ringback tone.)
This ability to sell the same piece of content in multiple ways is likely the main reason artists and record labels are working with mobile operators like Verizon.
But just as much as the music industry may need Verizon, the carrier also needs the music industry. Music is an important piece of Verizon's overall mobile content strategy. And the company has been racking up deals for the past couple of years with individual artists, such as Prince, John Legend, and Shakira, in an attempt to promote its music store and service.
Verizon claims that V Cast is the second largest music store on the market behind Apple's iTunes, with more than 3 million songs in its library. And in the first quarter of 2008, it sold a total of 34 million "units," which included ringtones, ringback tones and full music tracks, Ruth said.
Mobile music, along with other data services such as mobile Web surfing and e-mail, are important for Verizon as it tries to get its customers to spend more each month on additional services. So far, its efforts seem to be working.
On Monday, the company reported that mobile data, which includes music downloads, accounted for over 20 percent of the company's total wireless revenue in the first quarter of 2008. And it said that customers on average spent nearly $12 a month on data services. These are fees that are above and beyond what customers pay for basic voice minutes.
"Music is a very important piece of our content business," Ruth said. "It not only can be a profitable business for us, but it also attracts a lot of interest, and over the long term, it creates a loyalty lock-in with customers."
While most of Verizon Wireless' music efforts have been focused in the U.S., the Madonna concert was the first time Verizon Wireless collaborated with its European parent company Vodafone. Part of the concert Wednesday evening was simulcast live to Verizon Wireless subscribers in the U.S. and in over a dozen other countries over Vodafone's wireless network. Ruth said that in the future, Verizon Wireless plans to work more closely with Vodafone on more music initiatives, but he wouldn't divulge any specifics. So stay tuned.
Motorola Rizr Z6tv
(Credit: Motorola)Though there was much ado about Verizon Wireless' V Cast Mobile TV service when the carrier launched the service earlier this year, it's been eerily quiet since then. In particular, we've been waiting for new handsets beyond the original LG VX9400 and the Samsung SCH-U620.
Motorola Rizr Z6tv
(Credit: Motorola)Fortunately, our wait came to an end this morning when Verizon and Motorola announced the new Moto Rizr Z6tv. Sporting the familiar, and may we add quite attractive, Rizr slider design, the Z6tv offers a solid feature set beyond the Mobile TV support (which is quite enough by itself). You'll find Bluetooth, a 2-megapixel camera, an expandable memory slot and a digital audio player. The Z6tv's dimensions are marginally bigger than those of the original Z3, and like the other V Cast Mobile TV phones, the display can switch to a landscape orientation for more comfortable television viewing. Yet we noticed that the Z6tv has a 65,000-color display, compared with the 262,000-hue screens on the VX9400 and the SCH-U620. We'll have to see how that affects the video quality when we get a review model.
It's important to note that you should only consider the Rizr Z6tv if you live in a V Cast Mobile TV coverage area. Otherwise, and that currently includes us in San Francisco, you'll miss out on all the fun. The Rizr Z6tv will be available October 5 for $179 with service and rebates. Check back soon for a review model.
MTV, Real, and Verizon Wireless have 'formed Voltron' in an effort to take on the iTunes behemoth.
(Credit: TV Tokyo)With their new joint digital music initiative, MTV Networks, RealNetworks and Verizon Wireless are taking a direct aim at Apple's iTunes powerhouse.
Called Rhapsody America, the yet-to-launch collaboration among the three companies will combine MTV's relatively unsuccessful Urge music store, the Real-owned Rhapsody subscription download service, and Verizon's V Cast mobile media service to create a music store that reaches across the PC, digital music player, and mobile phone platforms.
The new Rhapsody America company is officially a joint venture between MTV Networks and Real Networks, with Verizon Wireless as its exclusive mobile partner. Urge as a brand will cease to exist, with Rhapsody becoming the service of choice for MTV Networks' MTV, VH1, and CMT music brands. Michael Bloom, general manager of MTV's Urge, has been appointed head of the new company, and the company's offices will be located in New York, San Francisco and Seattle.
Urge had been launched as a music store in conjunction with MTV Networks' music brands, but its highly publicized deal with Microsoft had fallen by the wayside as the software company launched its Zune music player and accompanying music store.
Executives from MTV, Real, and Verizon held a joint conference call on Tuesday morning, filled with talk of "alliances" and "joining forces" that evoked superhero Captain Planet or Voltron. "The collaboration of these three companies is like a perfect storm," said Van Toffler, president of MTV Networks' Music/Logo/Films group, who added that they're striving to make Rhapsody America "the best service out there, hands-down."
"The notion of combining with these two marketing behemoths is very, very exciting from our standpoint," said Rob Glaser, chairman and CEO of RealNetworks. "This is a relationship that we spent a long time putting together." RealNetworks, which holds the larger stake in Rhapsody America, has been trying to expand its footprint in the music sales world for some time now through high-profile partnerships.
Few details about the revamped Rhapsody were actually disclosed--pricing, for example, or details regarding finances--but the executives hinted that Rhapsody tie-ins will start to appear as part of the MTV Video Music Awards, which will be broadcast from Las Vegas on September 9.
The executives from all three companies talked up the Verizon deal as crucial to the nature of Rhapsody America. "Our audiences have made it crystal clear that they really want their music accessible wherever they might be," Toffler said. Glaser added that over-the-air downloads through V Cast epitomize Real's goal of a "jukebox in the sky," which he said has been the company's aim since it launched the first RealPlayer in 1995.
More importantly, it's a potential arsenal in the fight to catch up with Apple's iTunes store, the inarguable leader in the digital music sales industry: iTunes offers no mobile download capabilities. John Stratton, Verizon's executive vice president and chief marketing officer, reminded those listening to the conference call that V Cast mobile phones now support 4GB of storage and will support eight by the end of the year--an underhanded nod to the storage capacity of Apple's own iPhone.
The formation of Rhapsody America is the latest move in a music industry trend to prime new strategies for an assault on iTunes. Most recently, Universal Music Group announced that it would not be renewing its contract with Apple's music store and that it would be making portions of its catalog available without digital rights management protection to a number of non-iTunes outlets, one of which is Rhapsody.
It's not the only game in town
(Credit: Apple.com)With the iPhone completely dominating cell phone news this week, it's easy to forget that other cell phones exist. Crave wonders why any manufacturer or service provider would see the PR benefit in making an announcement this week, but that hasn't stopped T-Mobile from unveiling its Hotspot @Home and Sprint from taking the wraps off its new LG Muziq phone.
But today Verizon Wireless revealed that it was hosting its own party to match the Apple and AT&T events on the iPhone launch day. In a press release, the carrier invites shoppers to test-drive "the leading wireless company with the most reliable voice and data network". Meow.
The carrier also invites shoppers to check out its selection of music cell phones, including the LG VX9400, which is on sale for $99.99. That's a good deal for a cool phone, but the keep in mind that the spiffy V Cast Mobile TV service (something the VX9400 supports) is available only in a few cities. Yet unlike the iPhone, the LG handset does offer 3G.
Get 'em while they're hot
(Credit: CNET Networks)Buyers will also be able to download songs wirelessly at the stores from Verizon's V Cast Music service. As everyone knows, the iPhone will not support tune downloads over the air. But the best news is that customers will get a free Music Essentials kit, which normally sets you back $30. That's exceedingly generous of Verizon, considering the kit is needed to even sync a phone with a PC. We don't know why Verizon just doesn't give you the kit in the first place, but that another story.
So if you've decided you're too cool for the iPhone, or you refuse to leave Verizon for AT&T, you'll be pleased to know that Verizon has you covered. Verizon stores and kiosks will stay open until 9 p.m. And you can be sure these stores won't have a line.
The ESPN MVP will look exactly like the Mobile ESPN user interface seen here
(Credit: CNET Networks)Those with long memories in the mobile space might remember a little MVNO called Mobile ESPN that debuted some time in early 2006. The sports-based carrier catered especially to sports fanatics who wanted a cell phone that delivered real-time sports scores, sports videos, news stories, stats of favorite teams, and more, via an innovative ESPN-themed user interface. However, Mobile ESPN had to pull the plug only after a few short months, presumably due to lack of consumer interest.
Well, sports fans can now rejoice, because ESPN has partnered with Verizon to resurrect the Mobile ESPN experience via an ESPN MVP application exclusive to V Cast subscribers. The software application will look identical to that of the Mobile ESPN user interface, complete with sideline navigation, game casts (graphical illustrations of games as they're taking place), video clips, highlights, and more. And the best part is that the whole thing will be available for free as long as you have a V Cast subscription. Supported handsets at launch will be the LG Chocolate, the LG VX8300, the LG VX8600, the Motorola Razr V3c, the Motorola Razr V3m, and the Motorola Krzr K1m.
Verizon Wireless is launching its V Cast TV service on March 1 in select markets, according to the company's Web site. RCR Wireless News was the first to notice and report the launch date.
When the service was announced at the Consumer Electronics Show in Las Vegas in January, Verizon said it would be available during the first quarter, which ends March 31.
V Cast TV offers viewers full-length and live programming from a number of networks, including NBC, CBS, Fox and MTV. V Cast TV is the first mobile television service to use MedioFlo, a dedicated video broadcast network built and owned by Qualcomm. Qualcomm announced that Verizon would be using the network in 2005.
AT&T's Cingular Wireless announced earlier this month it also will use MediaFlo to deliver mobile TV. And Sprint Nextel, which also offers a video service over its 3G cellular network, has been testing the MediaFlo network since last year. But Sprint has not announced whether it plans to offer a live TV broadcast service to its subscribers using MediaFlo.
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