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The telecoms and music industries have been impatiently waiting for the product of the Motorola and Apple partnership announced last year: a cell phone using Apple’s popular iTunes music software. Mobile carriers have been reluctant to contribute to the rollout of such handsets that would leave them outside the mobile music value-chain. We believe they are swimming against the tide, unless they figure out models that would reduce the cost of a download to less than US$1, as in the Internet world.
Pyramid Research CMT Director Guy Zibi argues that “the number of parties in the mobile music value-chain is one of the key obstacles for the development of a workable business model.” The crowded mobile music value chain must pass through music companies to publishers through the mobile operator to the end user.
The reluctance of mobile operators to support the Motorola/iTunes mobile handset indicates how actively mobile operators wish to grab a piece of the pie. This reluctance, Pyramid Research asserts, is another key obstacle facing the evolution of mobile music. Initially, mobile carriers will wield all their power to become a key part of the value-chain. They will face the challenge of recouping the cost of downloading a 3Mbps - 4Mbps file over-the-air without charging too much.
Some argue that end-users will be willing to pay US$2-US$3 per song, with a premium afforded towards mobility; however, Zibi contends, “Apple’s iTunes has essentially set a psychological barrier at US$1 for a download and the mobile industry must bring the cost to consumers down into this price range.”
The full text of this article is available as part of Pyramid Research’s Next Generation Trend Letter. To learn more or purchase the full version, visit our online store.
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