music is so last year, we know. Particularly now that Apple has
effectively sabotaged the mobile operators' hopes for higher ARPU from
music by unveiling the iPhone, a phone that gets it music from a
computer not over the airwaves.
Nevertheless, two of the west's biggest music companies have decided
that this elusive business model can be made to work in China. Sony BMG
Music Entertainment and Warner Music Group have invested (pdf) in Access China Media Solutions, which is a JV between Japan's Access Co. and Melodeo, a US-based mobile music company.
According to the press release, Access China Media Solutions was
formed to encourage the growth of a “vibrant, legitimate” digital music
business in China. In particular, it offers a digital rights management
(DRM) system to prevent content distributed over mobile phones from
being copied without permission.
To date, the Chinese JV has only closed a deal with one mobile operator, Singapore's MobileOne.
The news follows the announcement last month that EMI Music has
agreed to make online music available on Baidu, China's most popular
search site. EMI and Baidu will share revenues from an
advertising-supported free online music streaming service in China. EMI
is the largest music company in China.
The move is an about-turn for EMI which previously was one of a
group of music companies that took Baidu to court in China for allowing
its users to download pirated music. Baidu won the law-suit but the
group, now down to trio of Sony, Warner and Universal, plan to appeal.
Music companies have long sought a secure, economically viable way
to distribute their content, not just in China and throughout the
world. Piracy of both physical CDs and online digital music has put the
music industry on the defensive and made them increasingly desperate to
find ways to “monetise” the new digital channels without cannibalising
existing revenue streams.
Mobile music is often painted as the retail channel of the future
for the music industry. It lends itself well to impulse purchases and
more importantly, it is easier to protect IPRs if music is downloaded
into a phone. Mobile music also has obvious appeal to young people, a
key demographic for mobile operators and music companies alike.
After a slow start in the west, there are signs that mobile users
are prepared pay to download music over-the-air — although Apple boss
Steve Jobs is apparently not convinced and so iPhone users side-load
music from a PC instead. (Apple apparently has no plans to launch the
iPhone in China and its not hard to understand why if if you read this article on SeekingAlpha.)
An admittedly partisan report on mobile music commissioned by UK
operator 3 predicts that mobile could overtake computer-based music
purchases within five years. 3 is the UK's biggest mobile music
retailer with 75% of the market and its 3.75m customers in the UK now
buy over 1m audio tracks and music videos per month.
Analysis firm eMarketeer, predicts worldwide revenue from sales of
mobile music will increase from $434m in 2005 to $7.7bn by 2010, or
around 22% of total music industry revenue.
But will many of China's mobile users take to the idea of paying to download music to their phone? We remain to be convinced.