Report: Digital Music Meets Mobile Music A Detailed Analysis of the European Market TOC

1 INTRODUCTION

2 THE MUSIC BUSINESS: PHYSICAL FORMAT

2.1 Introduction
- Record Labels: Late Starters, Quick Learners
- Mobile Operators: Early Success, Now Doing Their Own Thing
- Analysis: A Complex Problem
- No Consumer Research?
- Vision, Forecasting and Opportunity
2.2 Industry Operation
- 2.2.1 Writers: Songwriters and Composers
- 2.2.2 Performers: Artist, Acts and Talent
- 2.2.3 Agents and Professionals
- 2.2.4 Music Publishers
- 2.2.5 Record Labels
  - Talent Prospecting
  - Recording Contracts
  - Writing and Recording Songs
  - Manufacturing and Distribution
  - Tour Support
  - Marketing
  - Website
  - Clubs
  - New Media Channels
  - Media Relations
  - Television and Radio
  - Agencies
  - Advertisements
  - Formatting
  - Artist Image
  - Direct Mail
  - Store Events and Promos
  - Music Video
  - Retail Placement
  - Strategic Aspects of the Marketing Process
  - Investment Function
- 2.2.6 Manufacturers
- 2.2.7 Distributors
- 2.2.8 Retailers: Record Stores
2.3 Music Copyright
- 2.3.1 Creation of Musical Rights
- 2.3.2 Mechanical Rights
- 2.3.3 Sound Recording Rights
  - Soundalike Ringtones
- 2.3.4 Examples of Usage Rights: Mechanical and Sound Recording Rights
- 2.3.5 Additional Licenses: Performance Elements
- 2.3.6 Summary: License Rates for Various Music Formats
2.4 The European Music Market
- 2.4.1 Size of European Major Recorded Music Markets
  - Illegitimate Downloads
  - The Good News
- 2.4.2 Unit Sales: Total Songs
- 2.4.3 Structure of European Retail Market
- 2.4.4 Repertoire Mix: The Importance of Local Content
- 2.4.5 Music Videos
- 2.4.6 Consumer Demographics

3 DIGITAL MUSIC: OVERVIEW

3.1 Value Propostion: Digital Music
- 3.1.1 Comparison with the CD
- 3.1.2 Lack of Tangibility
3.2 Is Digital Music Simply Another dot.com Fiasco?
- 3.2.1 Strong, Proven Customer Proposition
- 3.2.2 Tangible Distribution Advantages
- 3.2.3 Large Market
3.3 Format Replacement: The Compact Disc
- 3.3.1 Successful Formats Offer Clear Consumer Benefits
  - Reduced Sound Quality
- 3.3.2 New Formats Are About Value, Not Price
- 3.3.3 Digital Music is Unique: Demand-Led Market
- 3.3.4 Summary
3.4 The Value of Music
- 3.4.1 Value Prespective 1: Absolute Value of Recorded Music
  - The Sony-BMG Case
  - Generatorfs Analysis
- 3.4.2 Value Perspective 2: Underlying Need for Musical Entertainment Limits Demand
- 3.4.3 Value Perspective 3: Content Drives Demand, Not Price
- 3.4.4 Value Perspective 4: Price is a Secondary Consideration for Most Consumers
- 3.4.5 Value Perspective 5: High Margins Do Not Mean Prices Are Too High
3.5 Pricing: Digital Music
- 3.5.1 Long-Run Album Pricing
  - The Cost of CDs
3.6 Pricing: Benchmarking Digital Song Pricing
- 3.6.1 Per-Song Prices: Compact Disc Albums
- 3.6.2 Per Song Prices: Compact Disc Singles
- 3.6.3 Complicating Factors
  - Relative Worth: Hit Songs and Fillers
  - Differences Between Genres
  - The Effect of Digitisation on Product Formatting
  - Extra Value Offered by Digital Music
  - Price Plays: Bundling and Promotions
  - Commoditisation
3.7 Music Subscription Services
- 3.7.1 Consumer Benefits
- 3.7.2 Future Potential
- 3.7.3 Premium Pricing
3.8 The Role of the Player
- 3.8.1 Example: The iPod
- 3.8.2 Discussion
  - Corporate Priority
  - iTunes: A Simple Loss Leader?
  - Bundling
3.9 Evolution to Digital Movies
- 3.9.1 Players: Personal Media Centers
- 3.9.2 The Personal Movie Market
- 3.9.3 Comparison Between Portable Movie and Music Markets
  - Personal Market
  - Home Market

4 THE MUSIC BUSINESS: DIGITAL FORMAT

4.1 Consumer Experience
- 4.1.1 Discovering Music
  - Infomediaries: MP3 Blogs, Chatrooms, Messageboards
  - Equal Stakeholders
  - Trusted: Impartial
  - Quality
  - Intermediaries
  - Into Music
  - Artistlaunch
  - Vitaminic Buongiorno
  - Interent Undeground Music Association - IUMA
  - Peoplesound
  - Vitaminic
  - Soundclick.com
  - Textone
  - Magnatune
- 4.1.2 Obtaining and Consuming Music
4.2 Music Production
- 4.2.1 Tilly and The Wall
- 4.2.2 Impact on Established Record Labels
- 4.2.3 Impact on Wannabe Acts
- 4.2.4 Talent Supply
4.3 Industry Structure and Operation
- 4.3.1 Artists
- 4.3.2 Record Labels
- 4.3.3 New Entrants
  - Capital Providers
  - Artist Marketing Services
- 4.3.4 Virgin Music
- 4.3.5 General Retailers: Wal-Mart Music Downloads
- 4.3.6 Consumer Brands: Coca Cola
- 4.3.7 Event Organisers
- 4.3.8 Summary

5 THE RINGTONE MARKET

5.1 Erosion of The Ringtone Premium
- 5.1.1 Alternative 1: Use a Digital Song Purchased From an Online Store
  - Situation 1: Customer goes looking for a specific ringtone
  - Situation 2: Customer wants to use already-purchased digital songs as ringtones
  - Situation 3: Customer uses mobile to access an online digital music store directly
  - Situation 4: Operatorsf bespoke digital music stores
- 5.1.2 Alternative 2: Visit Online Store to Buy a Ringtone
  - Possible Service Implementation
  - Pricing
5.2 Pricing
5.3 Changes in the Ringtone Value Chain

6 DIGITAL MUSIC SERVICES: ONLINE

6.1 Apple Computer
- 6.1.1 iTunes
  - Sync With the iPod
  - Importing Windows WMA Song Files
  - Party Shuffle
  - CD Jewel Case Inserts
- 6.1.2 iTunes Music Store (iTMS)
  - User Experience
  - Key Features
  - Music Videos
  - Movie Trailers
  - Audiobooks
  - Radio Stations
  - Value-Added Information and Features
  - iMix
  - Usage Restrictions
  - Catalog
  - Payment
  - New Updates: Direct Marketing
  - Additional Features of the Music Store
- 6.1.3 Accessories
- 6.1.4 Peripherals
- 6.1.5 iPod
  - Hard Disc Drive Storage Technology
  - Future Evolution: Enabling Technology
  - Possible Product Line Extensions
  - Personal Stereo Products
  - Home Entertainment Products
  - iMac G5: Analysis and Implications (Update 2 September 2004)
- 6.1.6 Summary
6.2 Microsoft
- 6.2.1 Platform Licensing or Retail Services?
- 6.2.2 Windows Media DRM10 (WM DRM10)
  - Outline Technical Description - WM DRM10
  - System Operation and Terminology
  - Key Licensing Features: WM DRM10
  - Protected Live Streaming
  - Superdistribution
  - Time-based Playback
  - Play Counter
  - Portable Device Transfer
  - Copy Limits
  - CD Burning
  - Different Licenses for the Same File
  - Discussion: Comparison With Mobile-Focussed DRM Solutions
- 6.2.3 Digital Music Jukebox: Windows Media Player 9
- 6.2.4 Digital Music Jukebox: Windows Media Player 10 - Beta (WMP10b)
  - Device Synchronisation
  - Digital Media Mall
  - Analysis Microsoft Digital Media Mall (DMM)
  - Music Search
  - Music Search: The Bigger Picture
  - Reduced Entry Barriers
6.3 Sony
- 6.3.1 Online Store: Sony Connect
- 6.3.2 Jukebox: SonicStage
- 6.3.3 Usage Restrictions
- 6.3.4 Devices
  - MiniDisc (MD) Products
  - High Capacity MiniDisc (Hi-MD) Products
  - FLASH Products
  - HDD Products
  - Portable Media Players
  - Digital Music Players
- 6.3.5 Supplementary Services
  - Music Radio Services
  - Movie Downloads
- 6.3.6 Mobile Phones
- 6.3.7 Discussion : Why MiniDisc?
  - The History of the MiniDisc
  - Deciding on a Device Strategy for the Connect Music Store
6.4 Hewlett Packard
- 6.4.1 iPod
- 6.4.2 iTunes
- 6.4.3 Device Portfolio
6.5 Napster
- 6.5.1 Business Analysis
- 6.5.2 Marketing
- 6.5.3 Service Outline
  - Usage Restrictions
  - General Comments
6.6 Loudeye
- 6.6.1 The Digital Music Platform Business
- 6.6.2 Mobile Music Platform: Nokia Deal
  - Marketing Strategy
  - Technical Solution
- 6.6.3 Other European Digital Music Platform Providers
6.7 Real Networks
- 6.7.1 Rational for Inclusion
- 6.7.2 Current Business Focus
- 6.7.3 Importance of Subscription Services
- 6.7.4 Review of Music Services
  - Subscription Music Service: RealRhapsody
  - Subscription-based Streaming Music Radio Service: RadioPass
  - Analysis: Extension to Mobile
  - Subscription-based Streaming Music Video Services
  - Digital Downloads: RealPlayer Music Store
- 6.7.5 RealPlayer 10 (RP10)
- 6.7.6 Harmony
  - History and Rationale for Harmony
  - Analysis
  - Legal Challenge
  - Licensing of Harmony
  - Backwards Compatibility
  - A Zero Sum Game: Applefs Loss = Real Networks Gain
  - Outline Operation
  - Significance for the Mobile Operators and Third Party Service Providers
- 6.7.7 Helix DRM
- 6.7.8 Mobile Offering: Helix Mobile Platform
  - Platform Description
  - Helix Mobile Producer
  - Helix Universal Server - Mobile
  - Helix Universal Gateway - Mobile
  - RealPlayer Mobile
  - Current Position in the Mobile Media Market
6.8 MusicMatch
- 6.8.1 Digital Music Jukebox - MusicMatch Jukebox
  - Device Compatibility
  - Portable Devices: Song Transfer and Synchronisation
- 6.8.2 Online Digital Music Store - MusicMatch Downloads
- 6.8.3 Internet Radio - MusicMatch MX
  - Genre Radio Stations
  - Artist OnDemand Radio
- 6.8.4 Marketing
  - Shipping Player with PCs and Smartphones
  - Purchasing Music

7 MARKETING: PROMOTION AND BRANDING

7.1 The Role of Branding in Digital Music
- 7.1.1 Apple iPod
- 7.1.2 iPod: Brand Leverage by Others
7.2 Promotion
7.3 Competitive Analysis
- 7.3.1 Brand Extension: Strategies Used in Other Industries
  - Alcoholic Beverages
  - Soft Drinks
  - Software
- 7.3.2 Brand Extension: Four Strategies Being Used in the Mobile Industry
- 7.3.3 Virgin Group
- 7.3.4 Nokia
- 7.3.5 Mobile Network Operators
  - Mobile Operator Brand Development
  - McDonaldfs
  - Branding a MNO-Provided Digital Music Service: The Options
  - Summary

8 DIGITAL MUSIC SERVICES: MOBILE OPERATORS

8.1 MMO2: O2 Music
- 8.1.1 Technology
- 8.1.2 Service Outline
- 8.1.3 Service Test Methodology
- 8.1.4 Browsing
- 8.1.5 Song Downloads
- 8.1.6 Audio Compression
- 8.1.7 Music Management
- 8.1.8 Usage Restrictions
- 8.1.9 Pricing
- 8.1.10 Error Messages
8.2 Chaoticom
- 8.2.1 Orange (UK) Implementation
  - Service Outline
  - Player Download Process
  - Browsing Performance
  - Catalogue Depth
  - Previewing and Downloading Songs
  - Usage Restrictions
  - Pricing
- 8.2.2 Service Description Eurotel Czech Republic
  - Pricing
  - Application Download
8.3 AT&T Wireless

9 MOBILE PREMIUM

9.1 Argument 1: The Intrinsic Mobile Premium
- 9.1.1 The Human Communication Process
  - Voice Calling
  - Text Messaging
  - Mobile Premium: Test Criteria
- 9.1.2 The Music Purchase Process
  - Customer Awareness
  - Initial Awareness
  - Developing Interest
  - Purchase
  - Effecting The Purchase
  - Product Delivery
  - Consumption
- 9.1.3 Other Factors
9.2 Argument 2: No Need for a Separate Player
- 9.2.1 The Argument
- 9.2.2 Analysis
  - Apples With Apples
  - Shifting Value Benefits Between Songs and Devices
  - Device Performance and Service Features
9.3 Summary

10 MOBILE OPERATOR PORTALS: MUSIC CONTENT

10.1 Events
- 10.1.1 Information
- 10.1.2 Ticket Purchase
  - SMS-Based Systems
  - MMS-Based Systems
10.2 Mobile Shop: CDs
- 10.2.1 Requirement
- 10.2.2 Summary
10.3 Video Material
- 10.3.1 3
  - Quality
  - Usage Rights
- 10.3.2 Orange
- 10.3.3 Pricing
10.4 Information
- 10.4.1 Album Reviews
- 10.4.2 Alerts
  - Current Activity
  - Potential Opportunities
- 10.4.3 News
  - Music News
  - Pay-as-you-go News
  - Text and Picture
  - MMS-based Slide Show Alerts
- 10.4.4 Interaction
10.5 Magazines
- 10.5.1 The Business Case
- 10.5.2 Customer Proposition
  - Quality: Rendering
  - Magazine Reading Process
  - Leverage of Channel-Specific Attributes
  - Usage Environment
- 10.5.3 User Experience
- 10.5.4 Summary
10.6 Artist Sites
- 10.6.1 Introduction
- 10.6.2 Results of Comparative Tests
- 10.6.3 Mobile Interent: Avril Lavigne Website Functionality
- 10.6.4 Music: Streaming and Downloads
- 10.6.5 Music Videos: Streaming and Downloads
- 10.6.6 Summary

11 RADIO

11.1 Introduction
11.2 Premium Music Radio Services
- 11.2.1 Key Differences: Commercial Radio Vs. Premium Music Radio Services
- 11.2.2 Commercial Radio and Premium Music Radio: Competitors?
- 11.2.3 Sony StreamMan
  - Outline Service Description
  - Billing and Pricing
  - Benchmarking with Online Alternatives
  - GPRS Usage-based Tarrifing
  - Mobile Premium
  - Product Enhancements
  - Discussion: Possible Future Developments
- 11.2.4 Other Developments in Premium Radio Services
  - Premium Radio Services: Transfer to Portable Devices Within the Home
  - Transfer of Vanilla Radio Stations
  - Transfer of Personalised Music Radio Stations/Playlists
  - Additional Evolution Paths
11.3 Digital Radio (DAB)
- 11.3.1 Introduction
- 11.3.2 Current Status
  - Europe
  - DAB: A Clear Growth Market
  - DAB: A Clear Early-Stage Market
  - Leading Receivers: Enabling Future Purchase of Digital Music
  - Comparison With Other Markets: FM Receivers and Smartphones
  - International Markets
- 11.3.3 Outline Description: DAB
  - Spectrum and Licensing
  - Available Capacity and Station Choices
  - Programme Associated Data
- 11.3.4 Analysis: The Role of Mobile Phones
  - Selling Digital Music
  - Premium Services
  - Using Digital Radio as a Means to Boost Ad Revenues
  - Other Considerations for DAB Stations
  - Conclusion
11.4 Enhanced Analogue FM Radio
- 11.4.1 GWR eHear it Buy it Burn itf
  - Service Description
- 11.4.2 Future Developments
  - Put Affiliated Stations on the Internet
  - Porting the Service Concept to Mobile Phones
  - Hear it Buy it Burn it on Mobile Phones: Avoiding GPRS Charges
- 11.4.3 Nokia: Visual Radio
  - Outline Description
  - Usage Scenarios and Cost Implications
  - Comparative Analysis: DAB and Visual Radio
- 11.4.4 Sony: Any Music

12 MOBILE INTERNET

12.1 Introduction
12.1.1 Accessing Existing Web Resources
12.1.2 Third Party Services
12.1.3 Not More Hype!
12.2 Enabling Factors
12.2.1 Mobile Phone Operating Systems
Accessing Existing Web Resources
Enabling Technology
Operating Systems Standards
12.2.2 Internet Search Tools
12.2.3 Internet Browsers
12.2.4 Media Players
12.2.5 Mobile Broadband 3G
12.2.6 Data Tariffing
12.2.7 User Interface: Displays and Data Entry
Display Size
Data Entry
12.2.8 Phone Technology: Memory and Processor Power
12.2.9 Smartphone Penetration
12.3 Market Timing
12.4 Implications for Mobile and Music Industry Executives

13 THE ROLE OF STANDARDS IN DIGITAL MUSIC

13.1 Industry Needs: Supply-side Drivers
13.2 Consumer Needs: Demand-side Drivers
13.3 Self Interest of Industry Players
- 13.3.1 Company Interests Vs. Consumer Interests
  - Toner Cartridges
  - Printer Driver Software
  - Console Games
- 13.3.2 Implications for Digital Music
  - Rival Platforms
  - Platform Convergence
13.4 Regulatory Intervention
- 13.4.1 EC Copyright Directive
  - No Big Issues
  - Copyright Control Technology Circumvention
- 13.4.2 Collective Licensing of Rights Relating to Digital Media
13.5 Summary
- 13.5.1 Wider Digital Music Market
- 13.5.2 Mobile Channel
13.6 Emergence of a Digital Music eStandardf?
- 13.6.1 The DRM Quagmire
- 13.6.2 Rival Technolgy Platforms
- 13.6.3 Real Networks
- 13.6.4 Apple Computer
- 13.6.5 Sony Corporation
- 13.6.6 Microsoft
13.7 Consumer View: Meaning of Digital Music Standards
- 13.7.1 Music Accessibility
  - Focus on a Niche
  - Provide Music Search Features
- 13.7.2 Format Compatibility
- 13.7.3 Device Interchangability

14 THE WILD CARD: COLLECTIVE LICENSING

14.1 Introduction
14.2 Arguments For and Against
14.3 Implementation Issues
- 14.3.1 Infrastructure
- 14.3.2 Copyright and Related Laws
- 14.3.3 Collecting Societies
- 14.3.4 Critical Mass
- 14.3.5 Tax Laws
14.4 Market Developments
- 14.4.1 Brazil
- 14.4.2 Europe
14.5 Making it Happen: Action Plan

15 MARKET FORECAST: DIGITAL MUSIC

15.1 Current Status
- 15.1.1 The U.S.
- 15.1.2 Europe
15.2 Overall Market Size
- 15.2.1 Industry Maturity
  - Format Replacement
  - Interesting Music
  - Improved Format
  - Digital Music
  - Criteria
  - Piracy and Illegitimate Downloads
  - Competition From Other Forms of Entertainment
  - Economic Fundamentals
- 15.2.2 Demand: The Desire to Listen to Music
- 15.2.3 Supply: Availability of Interesting Music
  - More Acts and More Songs: Effect of Digitisation and the Internet
  - Tools to Help Creative Process: Creative Commons
  - Music Search
  - Adoption by Intermediaries
  - Music Industry MO
  - Sampling
  - Product Formatting
- 15.2.4 Leakage
- 15.2.5 Pricing
- 15.2.6 Structural Changes in The Music Industry
- 15.2.7 Summary
15.3 Historic Adoption: Previous Recorded Music Formats
15.4 Future Adoption: Digital Music
- 15.4.1 Consumer Proposition
- 15.4.2 Consumer Behaviour
- 15.4.3 Fundamental Factors
- 15.4.4 Legacy factors
  - Content
  - Artist Marketing
  - Manufacturing
  - Distribution and Retail
  - Cross Industry Support
  - Standards: Device and Format Plug and Play
  - Industry MO
- 15.4.5 Format-Specific Factors
  - Fixed Broadband Penetration
  - Realtones
  - Various Mobile Options
15.5 Digital Music Forecast
15.6 Channel Mix
- 15.6.1 Today: Physical Format Retail Channels
- 15.6.2 Future: Digital Music Retail Channels
  - Music Retailing Moves into the Home
  - Convergence
  - Device Interaction
  - Channel Separation
  - Channel Separation: Sales and Product Delivery
- 15.6.3 Forecast: Channel Mix

16 MARKET FORECAST: 3G (WCDMA)

16.1 Status of Current 3G Deployments
16.2 3G Rollout Scenarios
- 16.2.1 Scenario 1: Consumer Pull
- 16.2.2 Scenario 2: Operator Push
16.3 Detailed Analysis - Scenario 1: Consumer Pull
- 16.3.1 Key Success Factors Affecting 3G Rollouts
- 16.3.2 Supply Side Factors
  - Service Coverage
  - Handset Maturity
- 16.3.3 Demand Side Factors
  - Customer Proposition
  - End User Pricing
- 16.3.4 Summary
16.4 Detailed Analysis - Scenario 2: Operator Push
16.5 Conclusion

17 APPENDIX

17.1 Download Speed: 2.5G - GPRS
- 17.1.1 Coding Scheme
- 17.1.2 Handset Class (GPRS Class)
- 17.1.3 Timeslot Allocation (Multislot Class)
- 17.1.4 Traffic Load Requirement
- 17.1.5 Summary What it Means
17.2 Network Capacity
- 17.2.1 Offered Load
- 17.2.2 Available Network Capacity
- 17.2.3 Conclusion

Digital Music Meets Mobile Music A Detailed Analysis of the European Market

Table of Contents

1 INTRODUCTION

2 THE MUSIC BUSINESS: PHYSICAL FORMAT

3 DIGITAL MUSIC: OVERVIEW

4 THE MUSIC BUSINESS: DIGITAL FORMAT

5 THE RINGTONE MARKET

6 DIGITAL MUSIC SERVICES: ONLINE

7 MARKETING: PROMOTION AND BRANDING

8 DIGITAL MUSIC SERVICES: MOBILE OPERATORS

9 MOBILE PREMIUM

10 MOBILE OPERATOR PORTALS: MUSIC CONTENT

11 RADIO

12 MOBILE INTERNET

13 THE ROLE OF STANDARDS IN DIGITAL MUSIC

14 THE WILD CARD: COLLECTIVE LICENSING

15 MARKET FORECAST: DIGITAL MUSIC

16 MARKET FORECAST: 3G (WCDMA)

17 APPENDIX