Category: Technology

Apple cuts iPod Shuffle price, adds 1-GB Nano
SAN FRANCISCO (Reuters) – Apple Computer Inc. on Tuesday cut the price of its cheapest digital music player, the iPod Shuffle, and launched a smaller-capacity version of its mid-priced iPod Nano.
The move by Apple, which has 70 percent of the U.S. digital music player market, is aimed at further consolidating a market that it leads, Apple executives said. The company also said it has now sold 12 million videos on its iTunes online store.
Apple has already sold more than 40 million iPods since their introduction in October 2001, and, in 2005 alone, sold more than 30 million of the popular items.
The price cuts could raise questions about whether Apple’s profit margins will suffer, but American Technology Research analyst Shaw Wu said he was not concerned.
“The price of components have come down more than 70 percent, especially flash memory for the Shuffle,” he said. “And the price of the Shuffle hadn’t changed, so they were making a ton of profit off the Shuffle. So they’re passing some of those savings on.”
Asked whether Apple needed to cut prices for products that were already so popular, Wu said, “While iPods have a 70 percent share in the U.S., internationally its share is much lower at around 40 percent.”
Cupertino, California-based Apple said the 512-megabyte Shuffle will now sell for $69, down from $99 previously. The 1-gigabyte model will sell for $99, down from $129.
The 512-megabyte version holds about 120 songs.
The new 1-gigabyte Nano, the sleek iPod model that won rave reviews from critics and consumers when it was introduced last September, was priced at $149.
The 2-gigabyte Nano sells for $199 and holds about 500 songs; a 4-gigabyte model sells for $249.
Greg Joswiak, head of iPod product marketing, in a telephone interview declined to comment on the lower prices’ impact on iPod gross margins, he said the announcement was part of Apple’s longer-term strategy. Apple Chief Financial Officer Peter Oppenheimer has said that average gross margin on all iPod models is 20 percent or more.
“It’s fair to say this has been a planned move,” Joswiak said when asked about gross margin impact.
Wu also said that recent studies suggest only a third of all U.S. households have a digital music player, suggesting that the market opportunity for the iPod is greater than its global market share suggests.
Apple shares rose 30 cents to $67.60 on Nasdaq. During the session they traded as high as $69.48, a gain of 3 percent. The shares fell nearly 13 percent over the previous four intraday trading sessions.
The stock trades at about 25 times its projected earnings per share before items for its fiscal year 2007 ending in September.

Satellite radio on the air in Canada
Canadian satellite radio has hit the airwaves with the launch of XM Radio Canada and Sirius Canada, which are now broadcasting more than 100 new channels across the country.
Sirius Canada, a partnership between the CBC, Standard Radio and Sirius Satellite Radio U.S., launched Thursday, about a week after the launch of its main competitor XM Radio Canada, owned by former Raptors owner John Bitove and XM Satellite Radio Holdings Inc. of the U.S.
To celebrate its launch, Sirius Canada has planned two concerts that will be broadcast live next week and feature buzzworthy Canadian musicians.
Rockers the Trews and singers Feist, Kathleen Edwards and Ron Sexsmith will perform at Toronto’s Mod Club Dec. 6, with the concert broadcast on Sirius channels CBC Radio 3 and Iceberg. Les Pistolets Roses, Anik Jean and aKido will perform at Montreal’s Spectrum on Dec. 7, with the concert of emerging francophone artists broadcast on Sirius channels Bande ¬´a part, Energie2 and Rock Velours.
While it is too early to gauge the number of actual subscribers, XM Radio Canada says 4,500 interested people signed up to a database before its launch. Sirius Canada says it has received about 7,000 inquiries.
A brief comparison:
XM Radio Canada
Number of channels: more than 80, eight of which are Canadian-produced.
Monthly subscription cost: $12.99.
Receiver cost: prices start at $79.99 (after rebate).
Run by Canadian Satellite Radio in partnership with XM Radio in the U.S.
Sirius Canada
Number of channels: 100, 10 of which are Canadian produced.
Monthly subscription cost: $14.99.
Receiver cost: prices start at $69.99.
A partnership between the CBC, Standard Radio and Sirius Satellite Radio U.S.
Adoption of satellite radio in the U.S. was slow when XM first introduced its service there four years ago. However, interest has definitely been increasing, with XM estimating it has more than five million subscribers and Sirius calculating it had upwards of 2.1 million in September (Sirius is predicting a dramatic rise in U.S. subscriptions this winter as controversial radio host Howard Stern shifts to satellite radio Jan. 1).
American satellite signals have spilled over into Canadian border regions since the services debuted in the U.S. and a small number of border-dwelling Canadians who wanted to listen purchased receivers from the U.S. However, it wasn’t until June of this year, after two years of meetings, consultations and deliberation, that Canada’s broadcast regulator finally approved three domestic proposals to launch satellite radio here.
The Canadian Radio-Television and Telecommunications Commission decision, with its provision that more Canadian content be added to the proposals, was then approved by the federal government in September.
XM Radio Canada offers 17 categories of programming, including 13 musical genres, news and talk channels, sports stations, stand-up comedy and a children’s station. It also offers a channel targeted to truck drivers and has secured a 10-year deal, beginning in 2007, to be the NHL’s exclusive satellite radio broadcast partner.
Sirius Canada offers 60 commercial-free music stations, 12 news and information channels, 10 talk, entertainment and specialty channels and a variety of play-by-play sports programming. Though Sirius U.S. may have fewer subscribers, the Canadian version will benefit from its cousin’s high profile programming, including Martha Stewart Living Radio, Stephen Van Zandt’s Underground Garage, Jimmy Buffet’s Radio Margaritaville and Eminem’s Shade 45.
Sirius Canada officials have said, however, that shock jock Stern will not be in the company’s initial lineup.

Copy-protection turning fans off buying music: retailers
TORONTO (CP) – It’s becoming a regular occurrence in CD shops across the country: an irate customer comes in complaining the CD they bought won’t play on their computer, and worse yet, they can’t transfer the tunes to their IPod.
The culprit is copy-protected or copy-controlled CDs – something many Canadian music retailers say they would like to see pulled from store shelves.
“This is just another really, really ridiculous way of telling our customers, ‘We don’t want your business,’ ” said Tim Baker of Sunrise Records, which has 31 shops in southern Ontario.
“It’s so stupid.”
The issue was underscored last week with news that the anti-piracy technology used on about 50 Sony BMG titles released in the United States and 37 in Canada secretly left spyware behind on people’s computers.
The software – developed as a way to fight music piracy – made the machines susceptible to viruses and hackers. And trying to remove the software disabled CD drives.
Needless to say, the technology irked consumers. Thousands flocked to the web to vent, using blogs and online petitions to encourage people to boycott Sony products altogether.
“There’s still plenty of work to be done if we are to achieve our goal of being treated like the music lovers we are rather than the criminals that (Sony) assumes us to be,” read one posting on www.boycottsony.us.
Sony BMG said Friday that about 120,000 of the 4.7 million faulty CDs were sold in Canada.
They are not the only company to issue copy-protected CDs in Canada.
EMI has been releasing select albums – including the latest Nickelback album, All The Right Reasons – this way for about three years. The company intends to ship out all its releases with the technology by year’s end.
The EMI discs use different software than Sony BMG, and have yet to cause any computer troubles.
Labels say they need the technology in order to stop people from sharing music with those who haven’t paid for it.
Still, retailers say such technology is punishing those who are actually willing to fork over cash for music – an ever-dwindling group as it is.
“Consumers are not liking it,” says Leslie Purchase, assistant manager at CD Plus in the Halifax Shopping Centre. “People are getting very frustrated by (copy-protected CDs).”
She’s noticed an increase in customers who put CDs down after noticing the “copy-controlled” or “copy-protected” label.
“A lot of customers won’t buy them now. They say ‘I don’t want it’,” she said.
The copy controls are possible through digital rights management technology, or DRM. It lets labels restrict the number of times a CD can be shared – meaning burned or copied.
More controversial is the ability to control which programs consumers can use to playback their music. With EMI and Sony BMG discs, for instance, the music is compatible only with Windows Media Player but not with ITunes (for PC users).
That means people with IPods can’t add the newly purchased CD to their playlists without some complicated steps.
CDs with this technology are marked with a warning on the back, usually in a black box.
EMI and Sony openly admit its copy protection measures have upset and annoyed some of its music fans – specifically IPod users. They’ve even provided websites outlining ways to override the controls, www.emimusic.info and cp.sonybmg.com respectively, in order to get the songs on IPod players.
Complaints even trickled down to the actual musicians, who subsequently posted ways to circumvent the protection measures on their own websites. Bands include Dave Matthews and the Foo Fighters.
The grumbling doesn’t come as a surprise, says Terry Millar, director of manufacturing at EMI Canada.
“People have had the freedom to give 10 friends a copy of a disc. For anybody that’s used to doing that, all of a sudden they’re limited,” he said.
“We’re going to get complaints. We know that people are used to a certain thing. The thing about it is that it’s not the right thing to be doing.”
He expects other labels, like Universal and Warner, will eventually follow with similar technology.
But at least one label says it’s vehemently opposed to the content protection practice saying it unfairly punishes the music buying public.
“It’s backwards thinking. It’s protectionism,” said Terri McBride, president of Vancouver-based Nettwerk, whose roster includes the Be Good Tanyas. “The average consumer who’s not tech-savvy is going to buy the CD, thinking that they can load it onto their IPod . . . They’re going to be royally pissed off.”
He added: “Why do you want to piss off the people who buy?”

Sony BMG pulls CD software 35 minutes ago
AMSTERDAM (Reuters) – Music publisher Sony BMG said on Friday it would stop making CDs that use a controversial technology to protect its music against illegal copying.
“As a precautionary measure, Sony BMG is temporarily suspending the manufacture of CDs containing XCP technology,” it said in a statement.
The decision follows the discovery on Thursday of the first virus that uses Sony BMG’s CD copy-protection software to hide on PCs and wreak havoc.
A hacker had mass-mailed e-mail with an attachment, which when clicked on installs malware. The malware hides by using Sony BMG software that is also hidden — the software would have already been installed on a computer when consumers played Sony’s copy-protected music CDs.
The malware, a trojan program which appears desirable but actually contains something harmful, tears down a computer’s firewall and gives hackers access to a PC.
Sony BMG provided a patch to protect computers against the virus, which is available on its Web site.
“We also intend to re-examine all aspects of our content protection initiative to be sure that it continues to meet our goals of security and ease of consumer use,” Sony BMG added.
The firm provided software to remove the “cloaking element,” which enables the virus to hide inside the computer, but the patch does not disable the copy protection itself.
The music publishing venture of Japanese electronics conglomerate Sony and Germany’s Bertelsmann AG is distributing the copy-protection software on a range of recent music compact disks (CDs) from artists such as Celine Dion and Sarah McLachlan, according to user groups on the Web.
Sony BMG did not say which CDs or how many CDs were equipped with its software. “The XCP software is included on a limited number of Sony BMG content-protected titles,” it said.
The Sony copy-protection software does not install itself on Macintosh computers or ordinary CD and DVD players.
When the CD is played on a Windows personal computer, the software first installs itself and then limits the usage rights of a consumer. It only allows playback with Sony software.
The software last week sparked a class action lawsuit in California against Sony, which claimed that Sony had not informed consumers that it installs software directly into the “root” of their computer systems with rootkit software, which cloaks all associated files and is dangerous to remove.
British anti-virus company Sophos on Thursday offered a tool to disable the copy protection software. ZoneAlarm, a product of Check Point, also protects against the software.
Sony BMG said it stands by content protection technology “as an important tool to protect our intellectual property rights and those of our artists.”

Lennon Catalog To Make Digital Debut
John Lennon’s solo catalog will be made available digitally for the first time beginning this week with the release of the retrospective “Working Class Hero.” The balance of Lennon’s solo work will arrive digitally via as-yet-unannounced services on Dec. 5 in the United Kingdom and a day later in North America. A handful of unspecified tracks will also be available for download on mobile devices.
“I am very happy that John’s music is now available to a new generation of music fans,” says Lennon’s widow, Yoko Ono. “New technology is something he always embraced and this is something he would have loved. I always say that he would have been very excited by all the opportunities offered by the development of new means of communication.”
However, the artist’s music will not be sold via Apple’s iTunes Music Store, which is embroiled in a lawsuit with Apple Corps Ltd., the Beatles’ former record label. The latter company sued the computer giant earlier this year, claiming the iTunes store breaches a 1991 agreement involving the use of the Apple trademark for any works “whose principal content is music and, or performances.”
That disagreement is one of many reasons the Beatles’ music remains unavailable in digital form. Even Paul McCartney recently acknowledged the complexity of an online foray for the legendary rock quartet.
“I must say, I don’t really get involved too much in that stuff, because it’s all a little bit political,” he told Billboard in September. “It’s EMI, it’s [the publishing company] Northern Songs, it’s Apple; there’s an awful lot of people involved. I get involved in stuff I can actually control and do something about. There’s a lot of strangeness in those areas, and I tend to keep out of them.”
“Something will happen,” he added. “At some point, somebody will make the right move and it’ll all happen. But at the moment, people aren’t making the right move, so I just keep out of it. I stay on the edges of these things and just notice them with mild surprise.”

NBC, CBS to offer shows on demand for 99 cents
LOS ANGELES (Reuters) – NBC and CBS unveiled separate plans on Monday to make some of their hottest prime-time shows available for viewers to watch at their leisure — without commercials — for 99 cents an episode, throwing open the door to “on-demand” television.
The back-to-back announcements from NBC Universal, a unit of General Electric Co., and Viacom Inc.-owned CBS, came weeks after Walt Disney Co.’s ABC began offering commercial-free Internet downloads of its biggest hits, “Lost” and “Desperate Housewives,” for $1.99 a piece.
The two latest deals add CBS and NBC shows such as “CSI: Crime Scene Investigation” and “Law & Order: Special Victims Unit” to the mix of programs networks are clamoring to deliver outside conventional broadcasts.
All three ventures highlight growing efforts by the major commercial networks to shake up “old media” models and expand their avenues of distribution.
On-demand viewing — enabling audiences to order up shows when they feel like watching instead of according to a preset program schedule — has been commonplace on pay-cable networks for some time.
A number of broadcasters have dabbled in this area lately, and personal digital recorders such as TiVo Inc.’s popular device already allow viewers to record and play back their favorite shows while skipping through commercials.
But the NBC and CBS ventures are the first to give viewers access to several prime-time broadcast offerings on a next-day, on-demand basis through their television sets, as opposed to a personal computer or portable digital device like iPod. And viewers do not record the shows themselves.
Both services launch early next year, with NBC programs distributed through satellite broadcaster DirecTV Group and CBS via cable giant Comcast Corp..
“This has the chance to make our networks even stronger,” NBC Universal Television Group President Jeff Zucker told Reuters. “It provides more exposure to the shows and gives the viewer the ability to watch the episodes on their own timetable.”
NBC narrowly beat CBS to the punch by announcing its tie-in first. Under its plan, select shows from NBC Universal’s flagship network, NBC, and its cable networks will be made available for on-demand viewing to homes equipped with a new DirecTV digital video recorder (DVR).
NBC’s initial offerings will include the two spinoffs of its “Law & Order” franchise — “SVU” and “Criminal Intent,” as well as workplace comedy “The Office” and sea monster thriller “Surface.” Two cable shows also will be part of the mix — USA Network’s “Monk” and Si Fi channel’s “Battlestar Galactica.”
Hours after those shows first air on the network each week, they will be “pushed” to DirecTV Plus DVRs, where they will be stored digitally and available the next morning for customers to select and play at their convenience for 99 cents.
The DVR devices can be obtained by DirecTV subscribers from retail outlets for free after a $100 mail-in rebate.
The CBS venture will initially make four of the network’s biggest prime-time hits — “CSI,” “NCIS,” “Survivor” and “The Amazing Race” — available to Comcast digital cable customers in markets served by CBS-owned TV stations. Those areas include Los Angeles, Chicago, Dallas, Philadelphia, Baltimore and some outlying suburbs of New York City.
Comcast already offers digital cable customers some 3,800 on-demand titles, mostly movies, children’s shows, sports and music, at no extra charge. Comcast has logged more than 1 billion program views this year, as of last month.
Like NBC’s shows, CBS on-demand programs will be sold for 99 cents per episode, the same price online music sites typically charge for downloads of a single song.
In October, Disney began offering next-day Internet downloads of its biggest ABC hits, “Lost” and “Desperate Housewives,” and some other shows for $1.99 per episode via Apple Computer Inc.’s online iTunes music store.

IMesh Rolls Out New File-Sharing Software
LOS ANGELES – Popular peer-to-peer, file-sharing service iMesh introduced new software Tuesday that allows users to legally share and buy music online.
The service offers access to 17 million music files. About 15 million will be available for free. Another 2 million protected releases will be sold for 99 cents per song, with the company paying record labels a portion of the revenue from each downloaded or shared song.
The new service is being offered free for a 30-60 day introductory period, and will cost $6.95 a month after that.
“This takes the peer-to-peer experience, turns it on its ear and it becomes a pay service,” said Bob Summer, executive chairman of iMesh.
The move comes after New York-based iMesh paid $4.1 million to the recording industry in July 2004 to settle a copyright infringement lawsuit. The firm also agreed to block users from trading unauthorized copies of songs.
For years, peer-to-peer networks have made it simple to illegally share music online. Music labels claim illegal downloads have cut into sales, while analysts say high CD prices and musical quality also share part of the blame.
Users of iMesh can now legally access songs through the Gnutella network, where musicians and others post music for free sharing. In addition, songs can be bought from the four major music conglomerates.
Mitch Bainwol, chairman and CEO of the Recording Industry Association of America, said iMesh is another example of the growing online marketplace that respects the rights of musicians, songwriters, record labels and others.
“It is a significant moment in the transformation of the peer-to-peer model,” he said.

PluggedIn: DVD format war brews even as videos go off-disk
LOS ANGELES (Reuters) – Hollywood is gearing up for an ugly war over rival DVD formats, but the real battle may be in keeping customers hooked on physical discs at all.
“The irony of this format war is that it comes at the tail end of the century-long era of physical media,” said Ted Schadler, analyst with Forrester Research.
“While a high-definition video format does bring benefits over today’s standard-definition discs, in movies as in music consumers are moving beyond shiny discs,” said Schadler.
Providers of online video and video-on-demand on television are tapping into this trend, while Apple Computer Inc. has raised the stakes with its new portable iPod video player that downloads content from the computer.
But two camps, led by Toshiba Corp. and Sony Corp (NYSE:SNE – news)., are still firmly placing their bets on physical discs and players that offer sharper pictures and more interactive features. An all-out disc format war is brewing after efforts to settle on a unified standard have failed.
“Consumers are getting more comfortable with alternative ways of accessing content and there’s a sense of urgency to get the content out (on high-definition DVDs) as soon as possible for that reason,” said Mark Knox, spokesman for HD DVD, the new format that Toshiba expects to launch around February.
But in the latest twist on Thursday, Warner Bros., a longtime supporter of HD DVD among Hollywood studios, threw its weight behind Sony’s rival Blu-ray format, following a similar move by Paramount.
One format will ultimately triumph, industry members said, as in the high-stakes home video battle between VHS and Betamax in the 1980s. But this time, the real casualty could be physical DVDs altogether.
“Every month this battle wages, more and more people are getting used to getting video in other ways. That’s the real enemy of this indecision,” said Richard Doherty, analyst with Envisioneering.
If the six largest movie studios release films on both formats, consumers rather than studio bosses may get to decide which they prefer. But the longer the battle drags on, the greater are the chances of digital content providers winning over buyers with video-on-demand services, Internet video and portable devices like iPods and cell phones.
DIGITAL MEDIA ADOPTION
One in six cable subscribers either watches or is interested in watching video-on-demand, according to Forrester Research. This number should grow as cable operators like Comcast and Time Warner Cable expand their video-on-demand libraries and adopt an ad-supported business model for on-demand videos, the company said.
Moreover, Internet video is spreading rapidly with 46 percent of online consumers watching it, and 9 percent saying they would pay to watch it, said Forrester.
Strong growth is likely to come with advances in video search and as broadband penetrates more households. Broadband is expected to be available in 62 percent of U.S. households by 2010, up from 29 percent today, analysts said.
While only 8.8 percent of U.S. households have a home network, this will expand to 40 percent of households by 2010, Schadler said. One in five such consumers streams audio from the personal computer to a stereo, and they are likely to want to stream video from PC to TV as well.
Apple’s recent launch of the video iPod also has Hollywood studios thinking about how to make money by providing their content on these devices, executives said.
THE LAST DISC
Schadler said about 27 percent of online consumers aged 12 to 21 years say the device they can’t live without is a PC, while only 17 percent say they can’t live without their TV.
Internet-delivered video will continue to make that true, he said.
Microsoft Corp. Chairman Bill Gates backs HD DVD and has called Sony’s Blue-ray format “anti-consumer” because of a protection scheme.
“The inconvenience is that the (movie) studios got too much protection at the expense of consumers and it won’t work well on PCs,” Gates was quoted as saying in an interview with The Daily Princetonian earlier this month. “You won’t be able to play movies and do software in a flexible way.”
Still, Gates said he regarded the debate over the formats almost as an afterthought.
“Understand that this is the last physical format there will ever be. Everything’s going to be streamed directly or on a hard disk,” he said. “So, in this way, it’s even unclear how much this one counts.”

Next-Generation DVD Format Wars Heat Up
LOS ANGELES – The battle to become the next-generation DVD standard has escalated, with Paramount Pictures becoming the first major movie studio to support both rival formats.
Until Paramount’s announcement, the six major studios were evenly split between the Blu-ray technology backed by Sony Corp. and HD DVD supported by Toshiba Corp.
Both formats deliver movies in sharp high-definition and can store more data than traditional DVDs, which will allow them to offer interactive features such as games.
But the formats are incompatible and will force consumers to choose one over the other, a potentially costly decision if one format ultimately wins in the marketplace, the case when VHS defeated Betamax for home video in the 1980s.
Faced with a choice between two competing formats when discs do appear on the U.S. market next year, “consumers will stay away from that. They just will,” said Ted Schadler, a Forrester Research analyst.
Decisions by studios to provide content is considered key to the fate of the emerging formats. Paramount’s decision, announced Sunday, tips the balance in favor of the Blu-ray camp √≥ at least for now.
The Walt Disney Co., Sony’s Columbia Pictures and Twentieth Century Fox, which also support Blu-ray, have not said whether they will also release films in HD DVD.
Universal Pictures and Warner Bros. remain in the HD DVD camp.
“Universal has not changed its position,” Lea Porteneuve, a studio spokeswoman, said Monday. “However, we continue to evaluate all potential opportunities.”
Warner Bros. did not immediately return calls seeking comment.
The consortium backing HD DVD, which includes chip maker Intel Corp. and software giant Microsoft Corp., said they did not see the Paramount decision as a setback.
“While we are concerned that our established HD DVD partner has chosen to make this announcement at this time, we remain supremely confident in the superiority of the HD DVD format,” Mark Knox, adviser to the group that supports HD DVD, said in a statement.
The Blu-ray camp, which includes Apple Computer Inc., Hewlett-Packard Co. and Dell Inc., was quick to trumpet Paramount’s decision.
“It’s a a pretty clear statement that Blu-ray has got some major momentum going on,” said Andy Parsons, senior vice president of advanced product development at Pioneer, a major Blu-ray backer. “From a consumer’s point of view, if you buy a Blu-ray player, you’re going to have a much easier time finding content than ever before.”
While Paramount still intends to release its films on HD DVD, the company said new information about the cost of manufacturing Blu-ray discs led it to reconsider its decision to support only one format.
Most critical to Paramount’s decision was the availability of a Blu-ray drive on the new PlayStation 3 video game console, which will go on sale early next year.
“We have been intrigued by the broad support of Blu-ray, especially the key advantage of including Blu-ray in PlayStation 3,” said Thomas Lesinski, president of Paramount Pictures, Worldwide Home Entertainment.
Toshiba, which had predicted it would have an HD DVD player ready for this holiday season, has delayed the launch in the United States until spring, bringing it closer to the expected availability of the PlayStation 3.
Toshiba still plans on selling an HD DVD player in Japan this year.
Formal talks between the two rival DVD camps about a possible joint format have stalled. Paramount’s decision is unlikely to restart those talks and a format war, which studios dread, is as likely as ever, analysts said.
“We think the game’s not over,” said Richard Doherty, research director for the Envisioneering Group, a firm of technology analysts.

Music biz explores wireless frontier
SAN FRANCISCO (Billboard) – And so it begins. Wireless operators and record companies are starting to let mobile subscribers buy and download full songs over wireless networks directly to mobile phones capable of storing and playing music.
As a big first step, Apple Computer and Motorola have partnered to create an iTunes-compatible mobile phone, dubbed the ROKR, capable of storing 100 songs and currently offered by Cingular.
Will the result revolutionize both industries or just be another wireless hype machine met with tepid response and consumer apathy?
“We’re heading into areas where there is no market research,” says Andrew Seybold, a veteran wireless industry consultant. “The only way we’re going to find out what consumers will buy is to try various things and see what sticks.”
The opportunity is clear. There are 180 million mobile phones in the United States, most of which can be used to access the Internet and buy products with charges added to the user’s monthly phone bill.
The result is an on-demand, impulse-buy capability accessible to all age ranges that the still-struggling music industry sees as a lifeline out of the doldrums. Wireless carriers, meanwhile, hope access to music will be the application that compels subscribers to migrate to the new high-speed networks they have spent billions on developing.
HURDLES AHEAD
Research group IDC expects 1.8 million U.S. wireless subscribers to download music wirelessly by the end of the year once carriers launch their stores. It forecasts the market will grow to 50 million users and $1.2 billion by 2009.
Yet for all the opportunity, fully realizing it requires solving significant challenges, which is expected to take several years.
The leading question is cost. By all accounts, downloading a song to a mobile phone will cost twice the typical rate of 99 cents online. For many, this is a doomed strategy.
“To pay double or treble the amount of what you would be paying for the same track online is not going to receive the traction they’re looking for,” says Nick Holland, an analyst at Pyramid Research. “They will probably start off with a price point that is high and then discount it quickly as they realize that demand is not as anticipated.”
Record labels argue that music accessed wirelessly carries greater value than music accessed online, where the 99 cent per-track rate was set arbitrarily because of the threat of free peer-to-peer file sharing.
In addition, wireless consumers have been conditioned to pay for content, as reflected in the $2 or more they pay for master ringtones.
Wireless operators admit the price issue is something that they must overcome, but they’re betting subscribers will find the convenience of mobility worth the extra cost.
“There is a premium that a customer is willing to pay for the spontaneity of being able to download over the air a song right there on your mobile phone,” says Paul Reddick, VP of business development and innovation management for Sprint Nextel.
NO COMPARISON?
The main point that record labels and wireless carriers stress is that the wireless music experience is not meant to be compared with the online music experience, in either price or service. To get music fans to buy music wirelessly and pay more to do so, mobile music must be sold differently than ringtones and online downloads.
“Just thinking of mobile as a portable version of online is going to take you down the wrong path,” says Michael Nash, senior VP of Internet strategy for Warner Music Group. “We really have to think carefully about what consumers want, what’s unique about mobile and where we’re going to create propositions of value.”
The leading school of thought in this regard is to treat wireless as an early-release platform on which fans can get early access to new hit music that otherwise is unavailable elsewhere. Another is to use mobile distribution to test-market emerging acts by releasing their music via mobile before placing larger bets on physical distribution via CDs.
The concern, however, is that a high cost of entry teamed with an unfamiliar interface and confusion over how the service works will keep wireless subscribers from experimenting with wireless music services.
“There’s a lot of silliness going on between carriers and the labels,” Yahoo Music VP and general manager David Goldberg says. “They’re being overly greedy about things. Let’s figure out how to build the market and then worry about how to split the money up.”
USER-FRIENDLINESS
Ease of use is the albatross that has weighed down many new wireless initiatives in the past. Wireless operators are known for making bold claims about new services that ultimately fall flat because consumers do not understand how to use them. But carriers also have great resiliency, often relaunching services several times until they find the right fit.
“Most of the stuff they’ve tried out of the box (has) not been very successful,” Seybold says. “Look at the first attempt to get on the Internet. That was a terrible disaster.”
The music industry is not one to turn to for help either. Labels completely missed the boat on the digital revolution by ignoring P2P file-trading services that music fans were flocking to behind their backs.
The biggest point of contention is interoperability: Will a track downloaded to a phone be accessible on the PC as well and vice versa? The early solution is to operate what is called a “dual-delivery service.” For each wireless song purchase, two files are sent: one formatted for over-the-air delivery to the phone and another formatted for Internet delivery to the user’s computer.
While this satisfies the labels’ security concerns, it could prove a difficult concept to communicate to customers. It also limits the ability of users to share music wirelessly with their friends. At least initially, only wireless subscribers using the same carrier will be able to share music clips.
The main reason wireless text messaging was so slow to develop in the United States was because of the same lack of inter-carrier interoperability. Once users could send text messages to their friends on other networks, usage skyrocketed.
The idea of buying music digitally remains on the periphery of consumer consciousness, and doing it with wireless devices is even more so. As such, carriers and labels have a marketing and education job to do if this market is going to flourish.
The prevailing view is that the music industry needs wireless music to work more than wireless carriers do, and as such should be doing the legwork to promote these services.
“We should take more responsibility for the future of our business,” Universal Music Mobile VP and general manager Rio Caraeff says. “We need to start putting our money where our mouth is and start marketing this. (Carriers) are not good at music merchandising. You don’t want Con Edison marketing ‘Desperate Housewives.”‘