Delivering the Double WAMI
By Peggy Anne Salz, Mon Mar 21 08:30:00 GMT 2005

While major labels and operators debate who has the brand equity to sell mobile music, a few clever companies are quietly bringing technology to market that will ultimately allow artists to thumb their noses at the lot.


To hear the mobile operators tell it, sheer size is a prerequisite condition to marketing ringtones, downloads and related music services to the masses -- at least that was the message at a recent industry gathering of mobile and entertainment executives. There, Guy Laurence, Vodafone's consumer marketing director, argued operators (specifically Vodafone) have the clout to market content successfully: "We're so big that when we turn it on, we really turn it on." What content owner can claim the same?

Market muscle was also the root reason for the current revenue-sharing model, one that most content companies claim is a raw deal. An informal poll of executives identified the revenue share as a major obstacle to market growth. Laurence's response to that? "When we launched 3G, we put 21 billion pounds into it. If anyone wants to write me a check for a couple of billion, I'll be happy to alter the revenue share. No problem!"

The music labels weren't amused. "What really frightened me as a music person was hearing Vodafone really taking ownership of music retailing," commented Richard Huntingford, chief executive of the Chrysalis Group. "What do Vodafone know about selling music?"

"I think ... we need to take a much stronger position in how the whole market's packaging of music through mobile platforms takes place," Huntingford concluded. "If we leave it (to the operators), then we won't build the market as successfully as we would if we get it back and take control of it."

But should music labels -- or operators -- control music retail?

The answer from Jigsaw, a start-up with offices in the UK and Germany, is a resounding "NO!"

It used MIDEM to launch its global content management and delivery platform that effectively enables artists to sell their music directly to mobile users and collect payment via reverse SMS. This month, Jigsaw will be live in 25 countries, an achievement that makes it a new force in the mobile music market.

Direct Sales

Jigsaw is a hosted service that lets artists directly sell mobile content through their Web sites. Artists can create any bundle of content they want and set their own prices via Jigsaw's management system, then include a line of code in their site that displays the relevant info. Users choose the content they want, then are billed via a reverse SMS that contains a PIN code they use to access and download the content on the site, and then they transfer it to their handset.

While the technology isn't earth-shattering, Jigsaw only takes a 10% commission and also rents low-cost short codes to make sure artists receive the lion's share of the revenues. The company also plans to bring a module to market this summer that will enable artists to "hack out a 30-second clip of any kind of music content" and deliver it as a real music ringtone across 25 countries, reveals Mark Bjornsgaard, a company managing director, as well as merchandising and concert ticketing applications.

Breaking a Monopoly

"It's all about consumer choice and artist empowerment," Bjornsgaard observes. Before there was a cartel of music labels that dictated what music would fly and what would flop, and a group of mobile operators that considered themselves "the self-appointed gatekeepers to mass exposure."

Today, he says, "that cartel is shaking in its boots." Bjornsgaard sees a new world order he refers to as the "World After the Music Industry," or WAMI. Artists who "WAMI" can use mobile technology to create a kind of post-modern marketplace where they can limit the role of middlemen.

At Germany's Fraunhofer Institute for Digital Media Technology this new world order also includes rewards for users who share content they buy with their friends.

Like Jigsaw, the PotatoSystem allows artists to create and sell content directly to fans from their Web sites. But users don't only purchase a music file -- they purchase the right to redistribute it to other fans. "Thus registered users become registered resellers," explains Juergen Nützel, CEO of 4FriendsOnly.com, the company that developed and now distributes the PotatoSystem.

Resellers receive a commission for redistributing a music file. The split is 43% for the artist and 35% for resellers. In a typical scenario the first reseller would get 35% of the revenues for sending it to a friend. The second reseller would get 20% for passing it on and the original reseller would get a 15% cut. Finally, a third reseller would get 20% and the remaining 15% would be split between the first two resellers. The system allows three resellers to collect money.

A version is also in the works that will allow fans to do all this via a mobile phone. While services like Amazon recommend products, the PotatoSystem recommends people: it connects buyers to users with similar tastes in music.

Both platforms understand that mobility has changed how we buy and sell goods and services, particularly if we created the stuff in the first place. Their grassroots approach to commerce empowers artists to sell directly to users with minimal meddling from middlemen, putting the onus on operators to come up with their own free-trade content platforms -- or risk being relegated to a spectator's role.