Mobile Music Conference 2004 : Day 1

Day 1 - Today was part one of the Mobile Music Conference and provided an excellent cross section of keynote speeches by major industry executives as well as several brief industry spotlights from some innovative players in the space (i.e. 9Squared, Nellymoser, Retro Ringtones, Chaoticom, Sony BMG Music, Upoc Networks.)

The first keynote speaker was Les Bider, Chairman and CEO, Warner/Chappell Music, Inc., which is Warner Music Group’s award-winning music publishing company that currently administers more than one million copyrights. He stated that the mobile music business is primarily about ‘creativity , technology , commerce, and portability’ and that mobile devices will soon ‘lead the music industry to its recovery.’ The newer mobile technologies such as ringbacks, downloading and streaming to the handset will obviously spur this growth.

While there are many projections being given about the industrys future growth potential, differing greatly depending on which analyst you ask , according to Bider , ‘the current retail value of worldwide ringtones is currently 3-5 billion.’ Everyone at the event seemed to agree that this number will be exponentially better by 2008. Bider also predicted that sometime soon we are going to see every handset delivering the potential to become a retail outlet - effectively dwarfing the actual number of physical retail stores. Bider also sees cellular phones as eventually becoming ‘virtual ATMs’ for the company, but before this can happen - several industry hurdles need to be overcome such as:

• The administrative difficulty of dealing with songs have more than 1 owner (i.e. multiple copyright holders)

• The market offers multiple places to buy ringtones (depending on which handset you have)

• Different national royalty rates and collection organizations

• Piracy via grey market ringtone providers (As fractured as the industry is with all the individual players, we all have 1 common enemy which is the illegitimate market.)

• Enable technology companies to attract consumers; deliver value to consumers and artists

Bider admitted that overall competition for consumers attention is getting tougher in the mobile space, but one thing that could help the industry would be to come up a with a standardized naming convention. For example, several members of a later panel admitted calling ‘ring tones’ various names such as: master tones, master tracks, sound clips, true tones, music tones, song tones, real music tones, pieces of songs, real tones, etc. This obviously is confusing many potential customers.

He ended his presentation with some good news for the music industry, noting that one result of the Apple iPod phenomenon is that it has led to an overall heightened awareness of music in society - which in the long run will only help the mobile music industry. Also mentioned is an interesting emerging trend, which is the delivery of hit singles being released by the record labels to the cellular market before they hit radio and the fact that many insiders feel that the various flavors of ringtones are becoming the new single of the future. Stay tuned for more coverage!

J.J. Rosen - SONY BMG	Thomas Dolby - RETRO RINGTONES

Yesterday afternoon, I had the pleasure of listening to Larry Kenswil’s presentation at the MMC. He is President of Universal eLabs , which is a division of Vivendi Universal’s Universal Music Group. which is the largest music group in the world. He stressed that UMG is focused on the business of selling music and music related products in as many places as possible. However, in order to do this, he said that the actual method of delivery (i.e. format or transport mechanism) should not actually dictate the value of a song because technology is not the means to an end - it’s just the means. Obviously, one of the keys to success is to take a hard look at consumers and figure out what they want and then figure out a very simple way to give it to them. One of the main challenges for content providers is that the carriers basically set the price on ringtones - leaving low margins - and over time there will be more downward pressure to lower the price which will hopefully lead to more volume. In addition, there are multiple players in the value chain each vying for a piece of the pie.

Mobile music is the fastest growing area of digital music in the world and in many instances, ringtones of hit songs are outselling downloads, which currently comprise around 2-3% of UMG’s total revenues. As a result, some A&R people at the record labels are now starting to really pay attention to ringtone charts to see who’s hot, especially in specific regions. Kenswil suggested that the future of the mobile music industry is perhaps not about selling by the bit or minute, but about differentiating your content and its related offerings. “It’s the content that differentiates and sells.” For pricing, he mentioned the need for the current business models to be rationalized in order to maximize the market and avoid cannibalization. (i.e. $.99 for 4 minute song vs. $2.50 for 20 seconds)

One interesting announcement that Kenswil made was the fact that Sprint is now awarding Gold/Platinum Awards for ringtone sales. Let’s just hope they’re being rational, unlike the RIAA, and not also purposefully excluding legitimate independent artists from their sales totals.

How can the consumer get better and faster content? Kenswil said that the current Digital rights management technology (i.e. OMA DRM 2.0) initiatives are key to the industry’s explosive growth, but the specs need to quickly be finished and implemented before the window of opportunity is missed. A true global standard would help to eliminate confusion and enable the market, but unfortunately there is no solution yet.

New platforms are a core strategy for UMG and artist voice tones could soon become a new cash cow. Also, pirated ringtones could pose a major challenge if the average consumer figures out that they can easily rip songs from their own CD’s and load them into their phone from their PC with a cable. According to Kenswil, “the ringtone market won’t be a market if people keep repurposing like this.”

Todd Beals is a multimedia producer and consultant who is currently the senior digital media analyst with Creative Media Services where he publishes The Beals Media Update. He will be guest blogging on location this week from the Mobile Music Conference 2004 (MMC) being held in South Beach, Miami, FL from Nov. 18-19 at the Ritz Carlton. (The opinions expressed in his blogs are his own and not necessarily those of Paid Content.org or MocoNews.net.) You can reach Todd by e-mailing him at beals…at…bellsouth.net.

Mobile Music Conference 2004 : Day 2 >>