Pump Up the Volume
By Peggy Anne Salz, Wed Nov 27 07:30:00 GMT 2002

Combine music with lifestyle services, viral marketing and a new twist on an old technology and you've got a real showstopper. Starting this year mobile music is not only going to rock the industry, it's going to send tremors through the mobile value chain.

Experience shows that the most successful mobile services are actually based on what users do in their "fixed" lives. Users read newspapers and magazines - and so they are comfortable with scanning news and sports snippets on their handsets. They communicate by email - and so they have eagerly embraced SMS, and given the mobile industry its first, and so far only, "killer app." But consumers, youth in particular, also like to listen to, talk about, look like and dream about music artists. Music isn't just about songs; it's a billion-dollar lifestyle industry ranging from fan magazines to fashion. More important, it's a passionate and personal interest around which communities congregate. So why isn't mobile music a hit?

One reason could be the industry's preoccupation with gadgets. Despite all the lip service paid to criteria such as simplicity and usability, the industry still isn't quite over its love affair with technology. The temptation to create an "all-in-one" dedicated device is great, but many observers suggest that this new breed of mobile devices will be too clunky and costly to compete with existing technology and methods such as CD burners and file-sharing.

To complicate matters, the ability to download and playback music files over a mobile phone is an embryonic and uncertain market. Against this backdrop, it's best to build services with the technology and tools that exist. As Dario Betti, an analyst with Ovum in the UK, puts it: "The new devices aren't the market opportunity. The money is in harnessing the power of music to enhance existing services."

Express Yourself, Baby

The advent of polyphonic ringtones, which incorporate 16 tones rather than one, will drive revenues and allow operators to build new business models around musical content, according to Ovum. It estimates that the market for personalization through ringtones, logos and screensavers in Italy, Germany and the UK alone will be worth $673 million in 2002, and receive a considerable boost when more handset makers can support them. One company in this space is Musiwave, Europe's leading provider of mobile music services and the first to enable downloadable ringtones with original music.

The company, which distributes its music services and platform through customers including T-Mobile in the UK and Germany, Orange in France and Optimus in Portugal, recently teamed up with Telefonica Moviles to launch a similar service in Spain. In addition to ringtones, the company supplies a turnkey solution that includes games, contests, SMS alerts and an assortment of other value-added services focussed on music artists. It also offers "Musimail," a dedication service allowing users to text a tune to a friend together with their own recorded message.

Musiwave, which has a partnership with handset manufacturer Sagem, is close to Nokia and "expects to announce relationships with at least two other manufacturers by the end of 2003,"according to Guillaume Decugis, Musiwave VP, Technology & Operations. "Music and mobile are a perfect fit. But software modifications are necessary so that the user can just turn on the phone and use [these] music services." Musiwave also cooperates with music labels to reduce some of the red tape around digital rights issues. To this end Musiwave recently sealed a deal with BMG to make its music catalogue available through Musiwave's services. BMG, which belongs to German media giant Bertelsmann, owns more than 200 record labels worldwide.

The Power of Love

Tj.net, a Bertelsmann wholly-owned subsidiary based in Italy, is determined to be the wireless equivalent of MTV. Rather than focus on technology, tj.net has quietly and quickly built up an interactive music service based on simple IVR (interactive voice response) that counts over 1.6 million registered users in Italy making it Europe's largest mobile music service. "We want users to play with the music rather than just play music," says Paolo Roatta, tj.net CEO.

The service, which works like a remote control, allows users to interact with music by pressing a number on the keypad. They can send a song to a friend by pressing 8; they can buy the CD of the artist they are listening to by pressing 3; they can vote for the music by pressing 9. And so on... "Kids don't only want to listen to music, they want to share it, they want to send it to a boyfriend or girlfriend and say 'hey, I'm thinking about you,' or 'hey, I know you're having a bad day so here's something to cheer you up,'" Roatta says. "It's just another way to call and say 'I love you.' "

An "unexpected success" is the community that has grown up around a new service users can access by pressing 7. The idea was to allow users a chance to not only comment on the music, but also reply to other user's comments about music. When this happens, the user who left the original message gets an SMS alert and can call in to hear what others are saying. The service, which is growing virally, is "more like a talk show than a chat room," Raotta explains. Tj.net, which launches a new service every two weeks, plans to extend its reach to other countries and operators across Europe.

They're Playing our Song

A new kid on the block is Shazam Entertainment, a UK company with a unique proposition. It's developed the world's first-ever ubiquitous song identification service available to mobile operators. "We thought it would be great if there were a service that could identify a song at the exact moment you hear it," notes Chris Barton, Shazam Business Development Director. "Since there wasn't one we decided to build it."

Shazam's technology is able to match a noisy audio sample (15 seconds in length) captured over a mobile phone against a database of more than two million songs in a fraction of a second. The search works even with background noise such as people talking or street noise. When a user hears a song he likes, he dials a four-digit number from the mobile and holds hold up the phone to capture 15 seconds of music. The service then compares this "fingerprint" against Shazam's own database. Once the matching segment of the matching song is found the service responds with an SMS to the user's phone that not only identifies the song, but the artist and the CD as well. The user can then interact with the song in three ways.

The so-called "Tag" feature allows users to identify a song and tag it, both through an SMS and via a personalized web site with a list of identified songs. This web site allows the user to track the songs he has requested and purchase the CDs via the Internet through affiliates such as Amazon.com. The service's "Send" feature let users forward a song clip to a friend. This is sent via a free text message with a link to the IVR short dial, which is charged at a premium rate. Finally, the "Buy" feature allows user to purchase the CD - a transaction involving Shazam partner on the site.

Looking ahead, Barton envisions a service that will "be a bit like instant messaging." The service would link users to their buddies with the best taste in music. "It would allow you to get the same cool song your buddy gets or recommends - and the 'follow-me' aspect of the service means it would market itself." The service could also be expanded to let users get the picks and tips that their favorite club and radio DJs recommend.

Last Friday, Shazam officially launched with four UK operators. The company is also "in conversations" with three German operators and involved in more "concrete negotiations" with Japan's three mobile operators as well as "one of the major trading houses in Japan," Barton reveals. Other players in the mobile space, including tj.net, have also confided that they would be interested in partnering with Shazam to complete their music offerings. "We like the technology a lot, and music recognition is definitely a service that music lovers would appreciate, but we wouldn't want to invest the money to develop it (the technology) on our own," Roatta commented.

P(l)ay that Tune

While mobile music has what it takes to be a killer app, it's important to remember that it's an emerging market where many players risk being sidelined. Unlike most other wireless content, operators and providers actually have little ownership and control over music content. This lies in the hands of record companies and a handful of rebels who create and distribute their own music compositions. Music is also not the kind of content that operators can tuck their own rather dull and mainstream branding campaigns and logos. The user is loyal to the artist - not the operator.

And, while music companies are all aware they should harness the mobile channel to market their stockpile of content, they are also know they deserve top billing. Indeed, EMI recently drew the line and told ringtone providers some of its biggest chart hits were off-limits. This has sparked speculation that it plans to launch its own ringtone service. To further complicate matters, the issue of digital rights management (DRM), licensing and copyright will require the value chain to make plenty of room for a slew of content aggregators and legal middlemen who will also want their share of the revenues.

But that shouldn't intimidate providers. Mobile music is not a new market, but it does require a totally new approach that builds on personalization, community and communication. Companies in this space shouldn't dwell on tough topics such as devices, downloads and DRM. They should get down to the business of testing and developing music services that integrate existing technologies and applications. They should also start partnering with content owners and teaming up with the artists for access to exclusive content. Otherwise, providers may find themselves peddling, the cheap seats, the bootleg CDs and the (un)official memorabilia. And that's an offer music fans can definitely refuse.

Peggy Anne Salz is a freelance author who likes to go beyond the day-to-day developments in the mobile space to grapple with the toughest issue: where the industry is going.Her work has appeared in a number of publications including Time, Fortune and The Wall Street Journal Europe, as well as Communications Week International, where she is one of the editors.