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Digital Music - Driving the Mobile Market in Europe
Growing Demand for Mobile Music to Spur Uptake of Mobile and 3G Services

London, UK – 04th October, 2006 - Digital music- the most popular form of mobile entertainment– is set to drive customer adoption of 3G services, with record labels, aggregators and handset manufacturers pursuing the mobile music arena.

“Digital music is expected to fuel growth of the mobile market and provide 3G services with much-required impetus,” notes Frost & Sullivan ( ICT Industry Manager Pranab Mookken. “In addition, the availability of the 3G network capacity, combined with the increasing availability of music-friendly feature phones will drive enhanced adoption of these services.”

The mobile music market is projected to exhibit substantial growth, with key participants such as handset vendors and operators offering customers a bundled package of both, communication and entertainment. The new mobile music value chain represents key telcos and handset vendors, further up the value chain, partnering with record labels in offering content. Innovations in both, the business model and delivery mechanisms, are likely have a favourable effect on the market.

New second-generation music-capable phones from Nokia, Sony Ericsson, Motorola and Samsung are competing with devices such as the iPod, to be the preferred device for portable digital music, especially since an average song of three to four minutes can now be compressed so effectively that transmission of the packet is fairly efficient even over slow 2.5G or GPRS networks. Thus, from a content delivery perspective as well, mobile music offers tremendous scope.

The impact of new and enhanced social networking tools such as blogs, RSS feeds and even websites such as myspace and youtube will change the dynamics of digital music, boosting the availability of a wide variety of music, and in turn pushing consumer subscription to threshold levels rapidly. While the market for digital audio players (DAPs) and other devices for mobile music will continue to grow for the next three to four years, the market for music-capable phones is expected to grow even faster.

With key participants such as handset vendors and operators offering customers a bundled package of both, communication and entertainment, the market is anticipated to develop and innovation will be seen as a key driving force for mobile music. By mid 2007, marketers and advertisers are expected to focus on promoting mobile music, once a certain subscriber threshold has been achieved.

However, providing the consumer with the easiest and the simplest form of access to music remains the key challenge that is likely to hamper the increased use of mobile music services. The silo-ed approach currently adopted by mobile operators for various services, make it impossible to offer flexibility to consumers and encourage them to use more data services.

“Operators often compartmentalise different services and therefore, not allow for maximum usage of any particular service, which customers might be inclined to use,” states Mr. Mookken. “The need to provide easy access to music services with minimum handset navigation is critical to the degree of success that the mobile music market can achieve.”

Market participants will need to focus on simplifying the customers’ purchasing experience by providing simple and easy access to premium music products, while ensuring that there are no ambiguities in the price of the service and data transmission. Here, employing a flat or built-in rate type of data model will be conducive to the growth of the market. It will become essential to merge silo-ed departments within mobile operators, to provide for flexible tariffs across these different revenues, thus allowing users to make their choice in the selection of the service/content application.

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