“Cell phones may become the new way for the iPod masses to download and listen to music in the coming years, but wireless companies may not see much of a boost to their profits from selling such services,” Sinead Carew reports for Reuters. “The biggest U.S. mobile service companies are considering selling phones that can play songs and some have plans to deliver music to phones over the wireless airwaves, in a bid to boost revenue as phone call prices drop.”
“Analysts expect Cingular Wireless, the biggest U.S. mobile service, to reveal plans on Wednesday to sell a new Motorola Inc. phone that comes with iTunes, the music store software from Apple Computer Inc., whose iPod player dominates the portable digital music market,” Carew reports. “At least initially, Cingular is expected to let users transfer songs to the phone from computers rather than through wireless download services. The No. 2 and No. 3 U.S. mobile services Verizon Wireless and Sprint Nextel Corp. have already said they are planning mobile music download services.”
Carew reports, “Pricing these services could require a tough balancing act between profitability and creating widespread demand since iTunes, Apple’s high profile digital music service, charges only 99 cents a song, analysts said. Sprint has said it believes wireless customers, which already pay as much as $3 for ringtones, will pay more for song downloads on-the-go than for downloads to their computer.”
“About 70 percent of the sale price for iTunes songs downloaded on computers goes to music industry players, according to Yankee, and the remainder is split almost evenly between Apple and transaction processors such as credit card companies, she said. In a mobile music world, operators could eliminate the credit card industry’s roughly 15 percent share of the pie by charging through mobile phone bills. Yankee estimated that operators get 20 to 40 percent of revenue from ringtones,” Carew reports. “Carriers’ options could include bypassing Apple by setting up a rival to iTunes, or going with other partners such as RealNetworks Inc. or Napster Inc., which control less of the music download market than Apple, according to Yankee.”
Carew reports, “Or phone companies may justify a wireless song premium if they give consumers new reasons to download songs wirelessly, Forrester analyst Charles Golvin said. For example, song recognition software could be used to identify a song playing on a nearby radio and then let the user buy it through the cell phone… Golvin believes carriers could ask for as much as $4 for a package that could include a full song, a musical ringtone and maybe some graphics all related to the same song.”
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