A slew of recent headlines about cloud-based services have revitalized a mobile music space that has long failed to live up to ridiculous hype. The NPD Group last week reported that an amazing seven or eight million iTunes users would pay $10 a month for a cloud music service that gave them to access their music libraries across devices and platforms. Apple, Google and Microsoft are all in various stages of rolling out cloud-based services that extend to mobile, joining relative veterans in the space like Rhapsody and Thumbplay as well as startups MOG and Rdio.
But while Apple enjoys the benefit of using music as a tool to further its lucrative hardware business, all of those other players will have to find a viable business model.
As I discuss in my weekly column over at GigaOM Pro, carriers and record labels have pinned their hopes on music since before the bottom fell out of the lucrative ringtone market, but the track record is a miserable one: Sprint unsurprisingly failed to entice users to spend $2.50 per song when it launched full-track downloads in 2005, and Verizon Wireless’s original V Cast Music was such a debacle that it was overhauled 18 months later and still appears to have few fans. No other premium mobile offering has made much of a dent either.
There is no shortage of reasons for those failures, of course. But the economic flaw in both full-track downloads and cloud-based streaming services is the same: Delivering music to on-the-go users (via downloads or streaming) costs more over cellular networks than it does over the fixed-line Internet. Operators who deliver content over their networks want a piece of the pie, but margins in the subscription-music business are already razor-thin. And as AT&T’s data calculator shows, consumers on a metered billing plan (which soon will be most of us) can rack up usage pretty quickly listening to tunes on the go: Enjoying just one hour of streaming music every day eats up nearly half of the monthly data allotment on AT&T’s high-end plan.
So every player in the value chain will have to experiment with innovative new offerings and revenue streams as they try to monetize their content in mobile. Because only one thing is certain in the world of mobile music: The old business models simply don’t apply.
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