Summary:

Yesterday afternoon, I had the pleasure of listening to Larry Kenswil’s presentation at the MMC. He is President of Universal eLabs , which…

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.com 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.

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