The Direct to Consumer: Feasibility, Profitability & Market Competition included George White from Warner Music Group, Markus Berger de Leon from Jamba, Eric Harber from Qpass, Anil Malhotra from Bango, Andrew Bud from mBlox, and it was modertated by Matt Edelman from Multimedie Networks. Most of the first half of the panel was taken up discussing Crazy Frog, which is unsurprising considering the amount of ringtones that were sold and the controversy that sprang up over the subscription model. Surprisingly, there was someone in the audience who had no idea what the Crazy Frog was. Lucky fella. “I’m happy to tell you a new frog is coming,” said Markus at one point.
There was also a lot of talk of Verizon…Markus kicked it off with the comment: “It’s a growing market. The missing piece in this market is that Verizon, one of the largest carriers, is still not a part of that market.” This makes advertising very difficult, because a large portion of the population can’t respond to that ad. There was some speculation as to what was holding Verizon back (although everyone stressed they weren’t speaking for the carrier). Eric said that carriers are looking at extending their billing to the off-portal world, but if they don’t do it right they could lose 50c a transaction due to leakage, fraud, customer care and so on. Andrew speculated that Verizon’s reticence is due to their Brew business and contracts with Qualcomm, which makes it “a more tortuous technical journey for them”.
There was a lot of agreement that the question about on-deck vs off-deck is the wrong one, they are both going to be viable sales channels. Likewise, there is going to be a mixture of the big hit pieces of content which “drive value” and an enabling of the long tail.
There was an interesting comment by George about covertones: “It is limiting the consumer choice and as a result of that it gives the consumer a bad experience, so on a subscription model that will increase churn.” I can understand George doesn’t like covertones, but I can’t see it reducing choice — if both types are offered surely that increases choice? George later explained that he meant that people would buy the covertone and be dissatisfied because it’s not what they heard on the radio and turn away…and off-portals that went with covertones did so because of the margins and didn’t offer the realtones (from the original artist) alongside. Anyway, to compete Warner music went into D2C with a different business model, the costs are structured differently depending on whether it’s going to the carrier or an off-deck portal. He said one of the main reasons for this is that off-portal companies tend to promote the ringtone, which promotes the band. Markus said that in some markets Jamba does more promoting for a single than the label does.
A new wave of content is just hitting now in the US, and that’s the interaction with TV content…
Our CTIA coverage is sponsored by mBlox, Bango and Motricity
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