The Mobile-Online Music Disconnect: What Will It Take?

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(Read my earlier post on managing user’s expectations) This is a situation which will blow up in music industry’s face, if only because stories like this will be a catalyst of this disruption…remember, the audiences that downloads online music and ringtones are very web savvy, and are probably very blog-savvy as well, where this story is being played up big.

I have mentioned it here before (“Try justifying [pricing differential] to a consumer on one platform…hence it makes sense to keep the two platforms separate, until the industry figures out more rational synergies”), and have been asking music industry executives on why isn’t there an iTunes or Napster ringtones store, along with the online store? Nobody has the answer…most of the digital music execs are in awe of how big the ringtones business is, and wish they could have the same takeup and margins.

Of course, the situation is not as black and white as this Reuters story makes it out to be…it is not as simple as music lables asking for less royalites–25 to 55 percent. Telco players also have to cut down on their demands, and pehaps move to the iMode standard: 10 percent. Many other nuances play into this…

The price disconnect between a song-clip ringtones and a single digital song is huge, but so is the value proposition, to some extent. A ringtone is an expression of personality for the mobile user, an online song is just plain music consumption, some would argue. But the situation grows murky with the presence of “renegade” software companies like Xingtone and Primetones, both of which help change and converge user expectations.

Add to that mix, the radio streaming on mobiles (through DVB-H), and Microsoft’s Janus DRM, which enables portable subscriptions onto MP3 players, and things look chaotic. But ultimately, this begs the question: will there be a super-phone-MP3 player? It is already happening, and music companies, telcos, ringtones vendors and digital music players have to put their heads together to capitalize on it, or else users will take things in their hand, as it happened with P2P…it is easier said than done…again, my job is to ask the questions and identify trends…

As an aside, it will probably take an industry leader to bring heads together on this…this quote from former Moviso CEO Shawn Conahan caught my eye: “I don’t see anyone prepared for the scale that’s going to be required to turn the mobile space into a media distribution channel, but there is huge money to be made there, and that’s where I’m going to go next. I think this is no different from John Malone and Ted Turner building the cable industry. Let me put that into perspective: The device is the television, the SIM chip is the set-top box and the network operators are the MSOs. But who’s John Malone? Who’s Ted Turner?

For more details on the study in this Reuters story, read this Informa press release: According to the report, the ring tone market was worth $3 billion in 2003. Of this total, authors’ societies received $148 million in royalty collections, equivalent to year-on-year growth of almost 50%.

The report forecasts that the value of ring tone sales in 2008 will be $4.7 billion. Assuming that the value of traditional music sales increase

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