A couple of weeks ago, I pondered Spotify’s impact on music business models and suggested that mobile may have a role to play in the monetization end of it (which is, unless you’re Twitter, an inherent part of a business model indeed). It didn’t take them long:
Today, the UK arm of 3 – always one of the more creative carriers - announced a handset (and not a bad one either) to be bundled with Spotify Premium (i.e. on the go and no ads): users will pay £99 up front, and then £35 a month for 24 months for a tariff including a Spotify Premium subscription covering both PC and mobile, 750 minutes voice calls, unlimited texts, data and Skype-to-Skype calls. Listen up: all bandwidth included. For a streaming service. Now we’re talking!
3 said that the Spotify Premium service was
worth £240
which suggests that they might want to stick to the £9.99 price point (which would surprise me). But then it is hard to tell which bit of such announcements is marketing and which actual price-setting for the sake of royalties and such like…
3 also said
that the deal with Spotify would extend to other products in the coming months, including 3′s mobile broadband service.
Again, I am curious about the price point: the way it is, it would be a nice marketing deal for Spotify but it could be said that not much was going for taking exactly that offer vs just signing up as it is already. A little discounted however (with the difference paid for by 3′s marketing department) might change the ball game altogether…
It’s all good though: I for one am truly intrigued by the prospect of having more than 6 million tracks (equating to, what?, 6 terabyte or so of music) on my phone!
And one little thing on the side: it is – again – an app and not the mobile web that they choose – in spite of bandwidth apparently not being an issue at all. It is thus another argument for the superiority (for the time being) of apps over mobile web when it comes to UI and input constraints.
The 192nd iteration of the Carnival of the Mobilists is under way. This week’s edition is hosted by C Enrique Ortiz on his About Mobility blog and features an overview of Opera Mini 5, a background story on app stores (juicy: written by a Qualcomm exec), some stuff on mobile learning and, last but not least, my own “little” contribution on mobile’s role in the transformation of the music business (which also received a “favourite of the week” note; thanks C Enrique!).
Check it out, it is well worth a read! You’ll find it here.
Spotify was a breath of fresh air when it hit the markets. Finally, there was someone who combined the ease of iTunes with unsurpassed breadth in catalogue. Lots of songs. Always available. And even the ads weren’t all that bad (which is why few people upgraded to the ad-free premium version [more on this below], much to the dismay of label executives who – rightly – fail to see the greater good of dependable revenue streams from those few ads; although they are getting more, mind you).
Then, back in July, Spotify submitted its iPhone app to Apple. And the big wait began. After lots of back and forth and speculation if it would or would not, Apple finally approved the app. So now it’s live, and not only on the app store (where it ranked #1 on the UK store when I checked tonight) but also on Android Market. A Symbian version is in the works.
All reviews I have read are raving: from “very impressed” (and that’s the Daily Telegraph no less) to having “to pry it out of my cold, dead iPhone” (Wired), everyone waxes lyrical about the thing. It comes with a load of stuff, too: streaming all your favourites from over 6m tracks on the go sounds promising, and one can also sync up to 3,333 (what a number!) songs for offline use in the networks’ broadband doldrums.
The trouble (!?) is: you can only use it as a premium subscriber, which means forking out £10 per month. Which brings me conveniently to the key point, which is the business underlying model.
The labels are fairly happy, it seems. Because they got shares in Spotify itself. Some more equal than others though: the majors are said to have received a disproportionately high stake). The same report claims though that ad income is only £82,000 and, in the UK, only 17,000 users had signed up for the premium version. However, shareholders and all that, Spotify still has to pay the labels a fee per streamed track, irrespective of the user paying or not. Tricky model, that. Note though that this might be different in other countries: according to reports, the world’s largest major, Universal Music is making more money from Spotify in Sweden than from iTunes!
Anyhow, all this was before the mobile app, and mobile may well be the game-changer for them… The launch of the iPhone app, glorified niche audience or not, seems to have gone fairly well (#1 position on fhe app store within days of launch). Spotify reckons that mobile is where its future lies. And this had been echoed (and well ahead of the actual launch!!!) by others in the industry, and perhaps rightly so: if users are used to (and in love with) a service they are more likely to pay for it if that means they can also have it whilst on the road. For the marriage of music with the world’s leading MP3 player come mobile phone, the iPhone, this seems to be made in heaven: I can have the smallest model and still carry 6m+ tracks around with me? Wow! Here’s value-add!
The much-discussed freemium model it is then: get them hooked on the free desktop app and convert them to paying users on mobile. It has long been known that users are more likely to pay if stuff is portable (I can still recall the disbelief of music executives when they realized that people would pay more for a monophonic ringtone than for a full-blown music track). And whilst now the link between (free) basic service on the desktop and (premium) mobile service is new, the principle is old and proven: and it is simply added value (plus the little things like being used to paying on mobile and having convenient existing billing models in place). If the user perception is that they are getting value for money, they are willing to pay. And if it is for such a fairly special thing such as music (don’t we all love and nurture our very own musical mix tastes?), the step is even easier to make.
Spotify fully expects this to fly: they are upgrading their servers already. Labels are said to be still a little jumpy but I reckon their experiences over the last decade or so have shown that their is a need to re-think incumbent models…
Orange UK, one of the large carriers in the country with 15.8m mobile subscribers, has released its “Fifth Digital Media Index”, containing a set of interesting numbers on the data uptake on their network, and it makes for intriguing reading!
- Music and video downloads increased both by 38%.
- Games only grew by 8% (but at least they grew; anecdotally, some other carriers recorded sometimes dramatic drops in take-up) to a total of 770,000 downloaded games, which equates to a market share of 23% of all UK games downloads (the total UK games market would hence be 3.35m downloads for the year with Orange claiming top spot). From the top 10 downloaded games in 2008, 8 were part of the carrier’s embed programme, which shows – again – that users appear more comfortable if they can try it out before (embedded games normally are trial versions).
- Social network use over mobile increased by 129% in page impressions per month and 48% in unique users. The monthly average number of pages per user was 397. In terms of popularity of social networks, Orange’s Mark Watt-Jones (@MWJ) fed us additional bits via the Twittersphere: Facebook dominates, Bebo is significant, MySpace less so and Twitter grows very quickly (what was the Oprah moment in the UK?)
- An average of 386,000 GB of data have been transferred via dongles and handsets per month.
- Mobile search grew by 120% with 45% of the results being “off-portal”, i.e. outside Orange’s domains.
- Good old SMS still looking good, too: 19% growth with 1.7bn sent every month.
January is MIDEM time (even though, sadly, I cannot go this year), which means that music dominates the news. In an interview, the EVP of Universal’s eLabs, Rio Caraeff on the revenues of Universal Music Group that:
“about 40 to 45% of our overall digital business is coming from mobile channels like Verizon and AT&T. [...] On much of our frontline pop or R&B or urban releases [...] we’re seeing mobile comprising 20-45% of the [overall] revenue for those artists.”
“The consumer doesn’t want a mobile-only experience – they want an all-digital multi-platform experience. They want to consume their music on their mobile handset [and] on PC and other online platforms. Partners like Verizon and AT&T wanted to have multi-platform online experiences as well. [...] Now at Universal, we don’t have a mobile business. We don’t have an online business. We just have one multi-platform digital business.”
Nokia’s “Comes With Music” service (unlimited downloads of 4m+ music tracks), which you get when you buy a phone, had been announced with much fanfare but it went a bit quiet after that. Now “early results” from the service show that it is mothers appear to be amongst the leading adopters, according to a Nokia executive. Unfortunately, that seems to be amongst the few bits of information they would let out into the public, the only other one being fairly obvious: recommendation is a driver (did they consult Amazon?) and chart coverage matters (Popularity matters? What?).
Not really mobile but at least digital and interesting in any event: a news release has it that Apple‘s iTunes had overtaken mighty Wal-Mart as the US’ largest retailer of music. Best Buy was ranked third and Amazon.com and Target tied for the fourth spot in January and February, it is reported.
iTunes apparently sold more than 4 billion tracks since its launch in 2003. The survey counted every 12 digital downloads as one CD but excluded mobile music sales. Apple claims more than 50 million customers. This is a rather impressive development: They sold around 25m tracks in 2003, surpassed the 1bn mark only 3 years later and hit 3bn in July2007.
LiveWire Mobile (part of Nasdaq-listed NMS Communications Corp) acquired former ringtone and now full-track platform provider Groove Mobile for $14.5m in what commentators call an “unexpected swoop” (why? because they waited with the PR until the deal was closed?).
Groove Mobile runs the music decks for 12 carriers, including most notably Sprint in the US and 3 UK. It also holds contracts with all major music labels.
Now, why should this be unexpected? The press release lays out the “strategic reasons” for the acquisition and, whilst it is all a bit embellished in the usual PR blurp, it is relatively plain to see: LiveWire Mobile are – or so I understand – specialising in ringback services (their website says they are deployed on 30 carriers with that). However, those carriers do not seem to give them too big a footprint: the release states that the acquisition triples their “addressable market”.
Also, ringbacks are a bit of a beast to run as they require deep integration with the carrier on which it is deployed (you need to be on network level to integrate this), and the relationships of a company that runs the music platforms for some carriers are naturally quite valuable to someone like that (although someone still needs to explain to me what turn-key means in mobile telecommunications terms). So: you get someone who is already integrated with a carrier, you increase your chances that that carrier will choose more services from you. Compelling, huh?
If it is a good acquisition remains to be seen: ringbacks are utter flops in some countries (people query the value of a service that the person paying for it never experiences…) and huge hits in others; not consistent though… Also, digital music distribution seems to be a field with utterly low margins; great if you can deliver VERY efficiently and to enough consumers but tough as you always face margin pressure from every side you are involved with: the labels that are struggling to replace retail sales and the carriers (and, increasingly web players and OEM) who want to be amply “reimbursed” for allowing you to sell to their customers. If the above considerations can deliver, it should have been a good buy: at about 2 x revenues, it was at a relatively sane valuation multiple.
Good luck, folks!
Following their relatively recent announcement of a multimedia initiative, Nokia reports a big win with Vodafone having agreed to carry their Ovi platform on Nokia devices that are distributed through the operator. Ovi, which is Finnish for door, was to be Nokia’s next big push towards becoming a multimedia company. One of its flagships under that umbrella, the Nokia Music Store, will now run alongside Vodafone’s own music service.
Nokia’s risk with the introduction of Ovi was that operators would reject having the Ovi links on the phones that they were distributing (not uncommon for them to do), so to have the “world’s largest operator by revenue” amongst their ranks is no small feat. Otherwise, Nokia would have seen limited distribution in markets where handset prices are subsidised by carriers, which is true in most!
With Nokia having bolstered its portfolio of offerings in recent months even more (the acquisition of Navteq being the biggest one), this opens the pipeline to a much richer content experience, and this is what might have pursuaded the good folks at Vodafone: with carriers struggling to come to terms on the “right” treatment of content to maximise sales and user experience, a door to a fully-packed store of content and applications must sound tempting.
It might actually mark a turn in the market: could it become the handset manufacturers who will take the lead in the content space and become the funnel through which content providers feed their wares to the consumer? It would make sense in that it is arguably easier for an OEM to ensure that there is optimal performance for a product on a device (after all, they manufacture the device). Such a model would bring relief to the operators who would continue to control the billing relationship with the consumer and hence alleviate fears of removing that bond but they would be a big step closer to becoming the dreaded bit pipe as had happened to ISP on the Internet. I have argued before that this process would – in any event – take longer, so that might alleviate fears.
It is breaking into the control-driven model of operators, and that is a significant development in itself. Nothing will of course change for the content providers, at least not in the short term: it is just that they need to ring a different doorbell now (or rather an additional one…).
One I’ve been waiting for for a long time: an opportunity to post something on one of my all-time heroes (strictly music-wise!) , the man who plays at least 167 instruments, the only one who can walk on 19” stilettos, the artist with the infallible fashion sense, namely the incredible Prince. We read that Verizon and Prince entered into a collaboration which they claim is an industry-first “direct-to-mobile relationship”. Prince will release new single “Guitar” exclusively via Verizon. This leads a promotional campaign up to the new album “Planet Earth” which will be released in July.
Verizon will promote artist, song and – incidentally – its V Cast service via print, TV, radio and cinema. This strikes me as rather traditional really… However, Verizon and the artist have tied up a rather need package featuring nearly every sexy must-have service around these days: V Cast customers can hold their handset up to the TV set to identify and download the song – IF their phone as Song ID, that is. They can also simply go to Verizon’s website and download it there. Upon release, the video will also be available on “licensed sites” YouTube, MySpace, Revver and Veoh.
As Prince isn’t signed to a label, this will be the main piece of promotion for the album, and that is certainly a rather revolutionary affair, at least one never tried by people who weren’t signed because they couldn’t find a label (as had happened to the Arctic Monkeys a while ago who, having started off on MySpace, have since grown to become an established acts signed to Domino). This together with a hole bouquet of recent activity of the artist (everything ranging from new website, concerts in Minneapolis [7/7/7] and London [21 Nights, selling 140,000 tickets in 20 minutes] to a new perfume and cosmetics range [not sure if I'll try that one]) suggests a serious assault on the classic set-up of the music industry and the labels’ stranglehold onto it. This had been weakened by the arrival of digital media but never broken.
If it pans out? I sincerely hope so – less for revolutionary zeal, more for one of the greatest artists of recent decades. But in any event is this one of the more exciting music promotions of recent times. Well done!
Although, I don’t want to hide the bad: the world there is again defined as being North of Mexico and between the Atlantic and Pacific Ocean only… Or are we non-Americans not worthy of some Prince-ly mobile musical delights?
One of my true favourites, Groove Armada, have teamed up with all the heavyweights to bring their music, more specifically, their new album “Soundboy Rocks” to the very cutting edge of digital: whenever you b uy a Nokia N76 in a Vodafone store, you will get 1) a voucher and 2) a PIN to take to 3) a website to 4) download a song (you can store 1 copy on your computer and 1 on your phone, sorry, multimedia device). Easy, isn’t it?
I would hope this will work (if only to help the good folks from Groove Armada) but the whole approach would appear a wee bit cumbersome: with every click, you lose consumers. With every change from one media to another (retail to mobile, mobile to web, retail to web, etc.) you lose them tenfold. So why on earth don’t they just run and show off a mobile download service and/or pre-install some content to demonstrate the superb capabilities of Nokia’s really fine devices? I don’t get it…
When one reads on, it becomes clear, that this is clearly more a PR affair for both sides: the remainder is a hilarious marketing blurp: Nokia loves Sony who love Nokia who love everyone else… Vodafone’s role, other than providing the retail space and being represented on the rather lame microsite with a logo – below the fold – isn’t entirely clear. Executives showing their superiors that they actually do “something” in mobile? Is it just me or does this appear somehow pieced together?
