Diversifying Business Models Highlight Strength of Mobile Music – Analyst View

POSTED BY Global Administrator
In Juniper Research’s recent report on mobile music, we found an industry in a healthy state with cause for optimism. Hence I was surprised to read a recent blog post by BBC journalist Rory Cellan-Jones which starts by asking: “Whatever happened to the mobile music revolution? You know, the idea that your phone would become a digital juke box, the main way to access and pay for the world's music? So far, it just hasn't happened…” In our report we identified a number of hurdles to the development of mobile music, and Mr Cellan-Jones himself identifies some of them, namely that:

3G is not sufficient for streaming at certain times

The key user demographic (aged 16-30) is unwilling to pay for music services

The cost of data usage from consuming music on the mobile is too high

Whilst these are concerns which we share, we feel he is understating the impact of music services on the mobile device in stating that the mobile music revolution “hasn’t happened”. As my colleague Windsor Holden wrote in his recent report on mobile entertainment, mobile music remains the largest single contributor to mobile entertainment content revenues over the next few years. Albeit this includes ringtones, but the proportion of total revenue from this source is diminishing, and Juniper Research found that revenues from full track music – including subscription and pay-per-download – were $3.1 billion in 2010, and forecasted that they will rise to $5.5 billion in 2015 based on recent and expected developments. Furthermore, the range of business models is diversifying all the time. One service Cellan-Jones himself focuses on is We7, an initially free ad-funded radio service. The freemium approach, which is proving so successful across a range of apps, is utilised by We7: after trying out this free radio version, users can upgrade to the paid on-demand service allowing them to choose what they listen to rather than being fed tracks based on their preferences. Either way, whether it is through ads or a subscription fee, the music is being monetised. Grooveshark offers another approach to freemium: the first 25 streamed tracks are free after which users have to upgrade to unlimited tracks for a monthly subscription. As with other apps, such as games, we at Juniper Research feel this kind of freemium approach to music is having, and will continue to have a positive impact on mobile music revenues.