Two of the most heavily sold electronic devices in Europe in 2003 have been mobile phones and MP3 players. In one of the latest issues of Germany's weekly "Der Spiegel" you can see actress Calista Flockhard jogging with an iPod in one hand and her mobile phone in the other (Der Spiegel, May 3, 2004). Now imagine that these two very successful products could be merged into one and music could be consumed on the mobile phone. The match seems perfect! Online music services on the mobile could offer a new, very attractive source of income to some of the largest companies in Europe — ranging from media technology giants such as Sony or Nokia to mobile operators such as T–Mobile or Vodafone.

Strong growth of the mobile music market expected
There are a numer of arguments that make this proposed success story even more appealing:
  • Music on the mobile phone is already a big business. In the UK, ring tones outsold CD singles in 2002 and 2003 (see Concise-Insight.com, March 2004); in South Korea, revenues from mobile music services already outstripped all CD sales in 2003 (see Rafat Ali, March 2004).
  • Unlike some other new technologies which require relatively strong changes in the consumption patterns of customers, the value proposition of music for the mobile phone is easily understood. It is only a small step from listening to music on portable music players to enjoying music on the portable phone (see Ollila et al. 2003).
  • Billing music consumption via the mobile phone is very easy due to existing billing relationships between mobile operators and their customers.
  • And last but not least, DRM–based business models are facilitated on mobile phones, since customers are — in contrast to the Internet — not anonymous but can be clearly identified by their SIM–card (see Hartung 2003).

Accordingly, the research firm A.T. Kearney expects that by 2006 20–30% of all music revenues will be over mobile phones. Most mobile operators and music labels are currently launching or about to launch mobile music services. European mobile operators such as T–Mobile in Germany, Telekom Austria, Telenor Mobil in Norway, Telia Sonera Finland or Eurotel Praha have already entered the market in cooperation with major music labels. Others are about to start their mobile music services within the next few weeks. In Germany, all four mobile operators are expected to offer online mobile music services by the end of the year (see de.internet.com, April 17, 2004)

Content owners fear that mobile networks could become a new channel for piracy
However, as promising as this new market may look, there are a number of issues that need to be addressed before music on the mobile phone can really become an attractive (mass?) business. In particular, it is yet to be seen if the various involved players in this market (ranging from music labels over mobile operators and aggregators to handset manufacturers and technology providers) will be able to create business models that match the suppliers' wish for copyright protection with consumers' specific demands for music services.

Content owners fear that music on mobile phones could open up a new channel for illegal copying and copyright infringement. From their point of view, viable business models need to involve DRM solutions that prevent the unpaid use of music files. In the Open Mobile Alliance initiative (OMA) more than 250 industry players are therefore working on the definition of DRM standards for mobile networks. The first set of OMA standards, however, is said to be not entirely secure. As a result, some large music labels like Universal are not yet authoriszing full track downloads over OMA-compliant phones (see Schenker 2004). A number of other providers are using proprietary DRM solutions. This, however bears the risk of a fragmentation of the newly emerging market due to missing interoperability.

The lack of standards is however a normal feature of immature markets and their emergence will only be a question of time. But the application of DRM solutions involves yet another and much more severe risk: that such solutions neglect consumers‚ specific demands and limit possible uses of mobile music products. Forward–lock DRM solutions, for example, which prohibit forwarding of music to other devices and sharing with others would be contraproductive to a fast development of the mobile music market.

Consumers will only be willing to pay for attractive services that match their specific demands
Experience from the online music business on the Internet shows us that some of the most important factors for consumers‚ acceptance of online music services are: the ease of use, low costs, the possibility to access and store a large diversity of music collections, the personalisation of music compilations, listening to music on various devices and sharing music with friends.

  • Ease of use and low cost: Most forms of music consumption require only little input functionality. The limited functionality of mobile phones, therefore, does not pose a severe problem to ease of use (see Buhse and Wetzel 2003). What does limit the ease of use, however, are long downloading times on current 2.5G networks. In addition, costs for file downloading are still way too high (see Lin 2004). At T-Mobile‚s new "Mobile Jukebox" service, for example, downloading a 90 - 120 second version of a song costs € 2,49 and takes about 2 minutes.
  • Storing: In addition, the limited memory on most mobile phones currently puts mobile phones at a clear disadvantage against music–only–devices such as MP3 players. Special devices at reasonable costs have to be developed that merge communication and music features. However, it is still questionable, whether such an all-in-one-devices could become a mass-market product or rather remain a device for dedicated music-fans.
  • Personalisation: One of the major advantages of online music over traditional music consumption from physical media are the almost endless possibilities to select, save and sort music according to the very personal tastes of each user. The sale of music, therefore, has to be imbedded into a wide set of services. One example is the so-called "Personal Music Assistant", that will be released by Sony Connect and Telia Sonera in June, which includes a smart personalisation system that keeps track of individual tastes. Consumers can tailor their personal music stream by pressing a button on their phone to indicate whether they like or dislike a song (see paidcontent.org, March 17, 2004).
  • Diversity: To date, primarily the large music labels are getting active on the mobile music market by cooperating with mobile operators and technology giants. Experience from the Internet has shown, however, that consumers want to access a wide diversity of music content, including work by less known artists. Towards this end, the inclusion of smaller, independent labels into the service offerings of mobile music providers could become crucial in the medium-term.
  • Listen to music on various devices: Consumers want to listen to their music collections on various devices that they possess. They will hardly be willing to pay for music downloads that are limited to just the mobile phone. Successful mobile DRM solutions will have to address this issue by allowing content to be legally transferred to different devices that belong to the consumer.
  • Share music with friends: The success of peer-to-peer networks on the Internet cannot only be attributed to their low–cost–nature (or no-cost-nature). It also lies in consumers‚ inherent wish to share music with friends. The OMA has therefore developed a DRM concept, called superdistribution, that can turn private file sharing from a content owner‚s enemy into a friend. Superdistribution allows that media content and the rights for using it are transmitted separately. The content can be forwarded to another device, but not the respective rights for using it. The content object contains some meta–data, though, informing the holder of the second device about how and where to acquire the related rights (see Hartung 2003). This allows a user, for example, to inform a friend via MMS about a brand new song. The friend can listen to the song once, but in order to store, copy or forward the song he has to acquire the necessary license from the music service provider. If superdistribution is applied intelligently it could become a very effective new marketing tool for content owners.

DRM has to support special user habits in consuming music
If the above issues are not solved by providers, online mobile music will hardly become a profitable new area of business. In the end, consumers will only be willing to pay for mobile music if the offered services support their specific habits in consuming music. For suppliers of mobile music this involves that they have to apply intelligent DRM solutions that enable various forms of music consumption such as sharing, copying and transferring music. Instead of using DRM to fight piracy and locking up content, it should be used as an effective instrument for satisfying consumers' demands. Mobile DRM solutions can, for example, be effectively used for marketing and promotion purposes in connection with low distribution cost (superdistribution) or for price-differentiation in various stages of the life-cycle of a song. Against this backdrop, DRM has to be regarded as enabling „money making“ instead of only as a way to avoid loosing money due to content leakage (see Ikola) Everything else will be contraproductive to a fast development of the mobile music market.

Sources
  • Ali, Rafat (March 2004): „Mobile music Briefing Book“
  • Buhse, Willms; Wetzel, Amélie (2003): Creating a framework for business models for digital content. Mobile music as case study. In: Becker, E.; Buhse, W.; Günnewig, D.; Rump, N. (Eds.): Digital Rights Management. Technological, economic, legal and political aspects. Berlin et al.: Springer, pp. 271-287
  • de.internet.com, April 17, 2004: Mobilfunkbetreiber sehen Musikverkauf als neuen Schwerpunkt
  • Der Spiegel, May 3, 2004: Jukebox in der Hosentasche
  • Hartung, Frank (2003): Mobile DRM. In: Becker, E.; Buhse, W.; Günnewig, D.; Rump, N. (Eds.): Digital Rights Management. Technological, economic, legal and political aspects. Berlin et al.: Springer, pp. 138-149
  • Ikola, Sirpa H. (Nokia Mobile Phones): Mobile DRM http://www.forum.nokia.com/seap/Digital_Rights_Management_Sirpa_Ikola2.pdf
  • Lin, Eric (2004): CeBIT 2004: Streaming ahead. The Feature, 17 March 2004 http://www.thefeature.com/article?articleid=100461
  • Ollila, Mark; Kronzell, Mikael; Bakos, Niklas; Weisner, Fredrik (2003): Mobile Entertainment Business. Deliverable D5.4.2 of project MGAIN (Mobile Entertainment Industry and Culture) http://www.mgain.org/mgain-wp5-D542-delivered3.pdf
  • Schenker, Jennifer L. (2004): Wireless: Is music on your mobile a new route for piracy? International Herald Tribune, April 5, 2004
  • The Research Room (2004): Swing while you‚re ringing. The opportunities for music on the mobile phone. Wireless Horizons February/March 2004, pp. 6-8 http://www.concise-insight.com/Main/Docs/WirelessHorizons2&3-04.pdf

About the author: Nicole Dufft is a Senior Analyst at Berlecon Research. She has been analysing a varierty of ICT topics ranging from mobile computing and
application service providing to DRM. Currently, she works in the field
"digital consumer".

Status: first posted 27/05/04; revised for INDICARE Monitor Vol. 1, No 1, 25 June 2004; licensed under Creative Commons
URL: http://www.indicare.org/tiki-read_article.php?articleId=16