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Mobile music

Mobile music. 20.04.2004 Sandro Grech <sandro@cc.hut.fi> Helsinki University of Technology T-109.551: Research Seminar on Telecommunications Business II. Overview. Music industry overview Mobile music, state of the art A service architecture for Mobile Music downloads OTA Analysis

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Mobile music

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  1. Mobile music 20.04.2004 Sandro Grech <sandro@cc.hut.fi> Helsinki University of Technology T-109.551: Research Seminar on Telecommunications Business II

  2. Overview • Music industry overview • Mobile music, state of the art • A service architecture for Mobile Music downloads OTA • Analysis • Conclusions

  3. Taxonomy of mobile music Mobile music Music content delivered through mobile networks Music playback over portable devices Playback from physical media Super-distribution Ringtones download Audio/ video clips streaming Digital media playback FM radio reception Music download Multimedia mobile terminal mobile music capabilities

  4. Music industry in a nutshell • Mature oligopoly (“big five” record labels) • In 1947 six labels controlled 90% of the music industry • In 1999 five of their successors still controlled 84% of the industry • Market size: 40 billion euros annually • Music = information • Intangible, inexhaustible • public good = non-rival, non-excludable • Experience good • Repetitive good • Declining sales attributed to online piracy

  5. Music industry in a nutshell • Continuous wave of innovations: 1870’s 1877 – First music recording (Thomas Edison) First record catalogues 1880’s 1890’s First mass production of records (12´´) 1900’s … 1951 – First tape recorder 1950’s 1963 – Introduction of audiocasette (Philips) 1960’s Sony releases the Sony Walkman 1970’s 1980’s CD format introduced (overtook LP sales in 1988) 1987 – mp3 digital compression (Fraunhofer Institut) 1990’s 1997 – First mp3 player p2p file sharing 2000’s

  6. Value chain and cost structure Recording studio, CD manufacturer Distributor, wholesale dealer Retailer Record label Composer, performer Development Production Marketing Distribution Retail Consumer Retailer markup (28%) Overhead (20%) Royalties and advances (16%) Manufacturing (7%) Marketing (16%) Label’s profit (3%) Distribution (10%)

  7. Mobile music, state of the art • Monophonic ringtones • Polyphonic ringtones • 2002 global ring tone sales of $1.5 billion • 3rd party content providers take up vast part of the revenue • Operators missed a sizeable revenue opportunity (keeping only SMS revenue)

  8. Mobile music download OTA • Mobile music downloads have the potential to succeed if: • the service is capable of meeting consumer requirements that cannot be met by download services in the fixed Internet, or • the mobile download service is more convenient to use than its fixed Internet equivalent.

  9. A service architecture for Mobile Music downloads OTA Radio broadcast Synchronized portal Radio station Synchronized GPRS portal (including “reverse channel”) • GPRS content synchronized with radio broadcast Music download Mobile Terminal Record Labels • FM broadcast reception • application client • 2.5/3G data • DRM client • media player Mobile Operator Content aggregation • 2.5/3G infrastructure • billing platform • DRM platform • hosting of encoded audio content

  10. Business model Synchronized portal 1. Pays bill to mobile operator, including music download fees (content + bearer charges) Radio station $ “Marketing Commission” 3a. commission Consumer Record Labels 2. Content fees - commission 3b. Royalties Mobile Operator Content aggregation $ Royalties $ (bearer charges + commission) • $ (content fees • operator commission • radio station • commission • record label • royalties)

  11. Supply chain • Radio & TV broadcasters • Music portals • Ringtone providers • Wireless portals • Record companies • Ringtone providers • Music MVNOs • Broadcasters • Network vendors • Device vendors • Software vendors/integrators • Mobile phone vendors • Consumer electronics manufacturers • Recording labels • Music publishers • Network operators • MVNOs • Composer, performer Development Music production/ publishing Music acquisition/ aggregation Mobile platform/ application provider Network operators Service provider/ portal Device manufacturer Consumer Signs, records, markets and distributes music. Holds licensing rights to performances and recordings. Acquires and aggregates music rights for reproduction on various channels. Develops applications for mobile platform. Includes DRM, billing, MMS, etc… Provides delivery, access and network services. May offer billing or hosting. Creates the interface, bundles and markets mobile service. Includes content and subscription management. Produces access devices capable of storing, and replaying music. Creation of music pieces

  12. Implications • Music development • Reducing the control of music sellers? • Music production and publishing • New source of revenue • Require DRM protection • Music acquisition and aggregation • Intermediary (e.g. aggregators from fixed Internet) or carried out by other players in the supply chain • Mobile platform and application providers • Nokia “Visual Radio” • Ericsson “M-USE”

  13. Implications • Network operators • Unlike other wireless content and applications, operators have little or no ownership and control over mobile music offerings • operators have to position themselves as value-added partners to record companies and labels, with the core role of mobilizing the provision of mobile music. • Consumer willingness to pay (~ 1€/song) • Small margins, high volumes

  14. Implications • Service provider/portal • Possibly a new type of MVNOs? • Radio stations, music televisions… • Device manufacturers • Battery life • DRM fora • Open platforms • Possible expansion towards other consumer electronics (e.g. car stereos)

  15. Implications • Consumer • ubiquity, immediacy, flexibility, convenience and personalization • unbundling • Better selection?

  16. Mobile music evolution roadmap Bearer technologies SMS, CSD GPRS (30-40kbps)* EGPRS (100-160kbps) WCDMA (64-384kbps) HSDPA (2xWCDMA) IEEE 802.11 (limited by transport) Mobile music services OTA Monophonic Ringtones OTA Polyphonic Ringtones Streaming audio Integrated FM Radio Receiver Interactive FM Radio • Radio reception with synchronized GPRS content. • - ringtone downloads • interactive polls • “click to buy” • interactive marketing • etc Mobile music capabilities Radio reception only Radio reception with capability to download selected tracks over wireless network. 2.5 - 4min down to 1 min down to 30 sec Estimated download time for a 3MB audio file * typical (non-peak) data rates

  17. Conclusions • Digital music distribution has profound implications on the music industry • Fixed Internet has showed that consumers are willing to pay for music downloads • Several variants of mobile music downloads may exist. Time will show which will be the most successful • Role of incumbents (e.g. broadcasters)

  18. Conclusions • Enabling technologies already in place or already under development • Business cases, particularly for mobile operators will be based on thin margins • Complementary rather than full replacement

  19. Discussion…. Questions?

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