ZDNet UK

CNET NETWORKS UK BUSINESS SITES:
atlarge.com
BNET UK
silicon.com
SmartPlanet.com
ZDNet.co.uk

ZDNet.co.uk - Winner of Best Business Website 2007

You are here: ZDNet.co.uk > News > Internet

Mobile devices Toolkit

Is Apple driving music to mobiles?

John Borland CNET News.com

Published: 20 Apr 2005 17:25 BST

Wireless, the music industry's new saviour
For the most part, the labels have remained loath to push too forcefully against the company that still accounts for the vast majority of their new online sales.

Instead, they are turning hungrily to the mobile phone market, where phones are slowly gaining the capacity to play music. Executives note that there are many times more mobile phones than iPods in the world, potentially offering a far larger digital music market. Already full-song download services for mobile phones are operating in Europe and Asia, and are expected to reach the United States this year or next.

Part of the mobile market's attraction comes in pricing. Consumers around the world have shown they will eagerly pay $2.50 or more for a ring tone, a mere snippet of a song that costs just 99 cents for the full version at iTunes. Labels see these consumers as receptive to variable prices for different songs.

But some music executives also describe mobile carriers as simply better potential partners than Apple. Like the labels, the carriers' bottom line depends directly on selling content, while Apple's profit sheets depend on hardware sales.

The carriers' interests were underlined in the case of Motorola's iTunes-enabled mobile phone, announced nine months ago but now delayed. As described by the companies, the phone would let people transfer their iTunes-purchased songs from computers to the phone.

Publicly, carriers say they are interested in the idea and will offer the phone to their customers if there is demand.

"Ultimately, the consumer is the boss," said John Burbank, vice-president of marketing for Cingular Wireless. "We're going to create products that best match what the consumer wants to do."

But mobile industry sources say some carriers have been critical of Motorola's move, which would encourage consumers to buy music on a computer rather than over the phone network. Because most phones are sold with a substantial subsidy from the wireless carrier, their lack of interest has set back the release of the iTunes phone.

"Carriers subsidise phones and features when they drive network usage," said Iain Gillott, a wireless industry consultant. "Yet here was a phone that I was supposed to sync to my PC so I could buy music from Apple. Why would the carriers subsidise that?"

None of this means the labels are likely to stop dealing with Apple. Indeed, the companies continue to work closely behind the scenes discussing issues such as CD copy protection and new promotions. And label executives are quick to commend Apple for doing more than any other company to create the digital download business.

And any business relationship, particularly in new arenas, is bound to have its bumps, insiders say.

"The relationships are really better than ever," said Cary Sherman, president of the Recording Industry Association of America. "Everybody understands where the other side is coming from. Everybody understands that there is a market here, and everybody's trying to find a path. The dialogue is healthier and more wide-ranging than it's ever been."