Digital music reshaping telco, mobile industry

The digitalisation of music is having a profound impact on the way the music industry, telcos and mobile handset manufacturers do business.

Speaking at a CeBIT forum on the impact of digital music, Sony’s Gavin Parry said that after initially being caught off guard by the download rush, digital music was now becoming a major income stream.

For Sony BMG Australia, digital song and true tone ring tone downloads were now accounting for seven to 10 percent of revenues, he said. In the US this was around 15 percent and in Asia more like 25 percent.

ITunes, once perceived as a threat to the company because of its allegiance to digital music, was now the company’s eight largest retailer, Parry said.

The way in which music companies now signed on and marketed their artists was also changing with the move to digital music, he said.

“We now ask whether an artist is CD- or download- or ring tone-biased and that changes how we launch an artist,” Perry said. “It’s no longer a matter of putting two singles then an album out. Now we might work with a mobile phone handset company on a promotion, and then put an album on the market.”

With ring tones now often outselling CD single sales in Australia, digital music was also transforming the telecommunications market and providing new opportunities as the local market reached 100 percent mobile phone saturation, Optus director products and services, Chris Lane, said.

“We are implementing our ADSL2 network and have launched our 3G service so downloading a music track now a realistic proposition,” he said.

Motorola marketing head, Neil Stewart, said digital music and the hardware demands it placed on phones provided a major opportunity for vendors as well as telcos.

“Phones now have stereo Bluetooth, a couple of GB of storage via SD cards and big screens – all of that in two years is a massive increase,” he said. “If anyone has the right to claim the ultimate in mobility and music, it’s the mobile phone industry.”

Optus’ Lane said telcos and record companies now needed to analyse their digital music sales models in order to avoid customer bill shock brought on by combined content and data costs.

“We’re not as good as we need to be [around billing] and that is something we are looking at as it is in our interest to get people to use this stuff,” he said.

One possible solution would be to look at subscription-based models used in other markets, Lane said. This involved near unlimited content downloads, for a fixed fee and period of use – usually a month.

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