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Summary:

The hype surrounding mobile music continues despite the lack of evidence that the space will ever generate much in the way of revenues. But carriers still have a chance to use music to attract new consumers and keep the ones they have.

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Digital music has always been a difficult place to make a buck, but there continues to be a bevy of players willing to try. Last.fm recently introduced a premium offering for phones and home entertainment systems (apparently ad dollars weren’t paying the rent), Spotify continues to promise a U.S. launch, and mSpot just launched a cloud-based service in Europe. Pandora appears to be the lone success story, as demonstrated by its growing user base, but the company has spent oodles of money just to approach profitability and — as Kevin noted in December — the field could get a lot more crowded this year as Apple and Google pursue streaming-music initiatives.

Mobile music has a particularly dubious track record. Nokia is abandoning its doomed Comes With Music service in all but a handful of markets, record labels are watching mobile revenues shrivel and according to new comScore data, fewer people are listening to music on their phones than are using mobile instant messaging. Mobile instant messaging!

There are plenty of reasons for the lack of traction in mobile, from ridiculously high pricing models to nightmarish DRM schemes to horrendously designed apps. But I think there are still opportunities in mobile music, and I think carriers are still well positioned to take advantage. No, seriously.

I know carriers are the primary reason mobile music has never come close to the irrationally optimistic forecasts of years past. But with their massive user bases and huge revenues, network operators have the luxury of viewing music services as an added bonus, not a fundamental source of revenue. They don’t have to profit from it; break-even would be just fine if services are leveraged in the right ways. So a savvy carrier (if such a beast exists) could operate a compelling service that generates money for others in the value chain and generates customers for itself.

Indeed, mobile music is a strategy that seems to be succeeding for the French carrier Orange, which four years ago launched a free streaming service called Deezer. Orange began charging for the service six months ago and last month said it had reached 500,000 paying customers.

So how can other carriers leverage music to lure users even as Apple, Google and countless smaller players join the space? For my thoughts on potential strategies, please see my weekly column at GigaOM Pro.

Image source: Flickr user Bohman.

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  1. In as much as digital music offers a lot benefit for consumers, startups needs to find that killer model to get the revenues coming in. Its been difficult for a lot of startups hence the need to study that industry with a lot resources to find the right revenue model.Pandora is doing great, but its limited to the US, and they’ve even filed for IPO.what exactly are they doing right.

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  2. Hey Colin,

    Interesting analysis.
    As I am a French Digital Consultant in Paris, I would just to correct you on one thing.
    Orange did not “launch” Deezer in France. Deezer is an independant French version of Spotify, Rdio, MOG…that did skyrocket in terms of users for 4 years, mainly trying to monetize (badly) trough advertising.
    What Orange actually started to do since August 2010 is to BUY a stake in Deezer and DISTRIBUTE the paid subcriptions to Deezer through mobile options and tarif plans inclusion.
    And through that distribution agreement, Deezer paid subscribers started to climb at much higher levels, from 10k to 500k in just 4 months.
    So your point stays : a good strategy for mobile carriers is to partner with established digital music subsriptions services and distribute them right into their plans.

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    1. Thanks for setting me straight, Julien. I’ll be watching to see whether Deezer can continue that momentum.

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  3. Personally, I use Pandora, as well as my music library, but how often? At work, with constant interruptions… On the train for 30 minutes. Is it really persistent? Is anything in mobile?

    I continue to be interested in the business, but still stick with my opinion that mobile music is experience and discovery. Pandora is not efficient enough. Sitting on the couch using a music experience is completely viable, twice, or thrice. Past that, it is about finding new fodder.

    When music is social and dynamically driven by user needs, ala Pandora but smarter, we will see both use, sharing, and sales surpass other areas. I told the labels two years ago, that in five years most of their sales would be via mobile. I stick by that, barring the labels continuing to chase their tails of course!

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    1. I think you’re right that social will eventually play a huge role in mobile (or online) music, Nicolas. Carriers and record labels could capitalize if they can produce some innovative services. Of course, neither of those industries are really noted for their innovation. =)

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