Mobile Music free essay sample

The transition from physical to digital music distribution is bound to have profound Implications on the music industry. So far, most of the activity related to digital music distribution has been centered on the fixed Internet. In the meantime, mobile operators have been making significant investments in extending their network capabilities to support data services. This paper includes an analysis of the current situation of music delivery in mobile networks, as well as future prospects enabled by the technical evolution of mobile networks.The overall feasibility, and the potentially most viable forms of, mobile music business are studied. Key Words Music Industry, mobile communications, digital distribution, e-commerce, Information economics. 1. Introduction until recently, ownership of recorded music has been always tied to a physical medium. The introduction of new encoding techniques, most notably the MPH format, together with other technological developments towards the turn of the millennium have detached music from any physical medium, One of the most fundamental implications of this technological development is that it enables digital distribution of USIA. We will write a custom essay sample on Mobile Music or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page This has profound implications on the music industry, which heavily relies on physical distribution models. Initially disdained by the incumbent industry players, this new distribution channel has until recently only been successful as a channel for pirated content, enabled by a wave of peer-to-peer distribution technologies, effectively draining revenues from the incumbent players. A second wave of digital music distribution soon followed, with the Intent of diverting users from pirated content from peer-to-peer networks, while still offering the benefits enabled by digital music distribution.So far we have witnessed the success of at least one of the commercial services that is based on digital music distribution, namely Apple tunes, which currently dominates the market success. The aim of this paper Is to study the potential of mobile operators to repeat their success in monopolizing voice telephony also for digital music distribution. There is a wide range of definitions of mobile music, some limited to music playback over portable devices, I OFF terminals on the other extreme. This p aper focuses on the latter definition, I. . Music download of entire music tracks over mobile networks for later consumption. As Figure 1 shows there are many other services that can fall under the definition of mobile music, but are out of the scope of this paper. Figure 1 Mobile music taxonomy (focus of this paper highlighted) Before mobile operators can leverage any opportunities enabled by digital music distribution there are various technological gaps that need to be addressed. But more importantly, new business models and value chains need to be devised.This paper outlines the technical evolution that will shape the mobile music market place. The business aspects are studied with respect to a specific distribution chain which averages the assets that differentiate mobile communication from fixed Internet. The rest of the paper is organized as follows. Section 2 presents the music industry foundations. This is followed by an overview of the mobile industry, in section 3. In section 4 a value chain for mobile music distribution is presented.The technical and business implications of mobile music are studied from the perspective of each of the various players in the value chain. Finally, section 5 summarizes the conclusions from this study 2. Music industry foundations Before embarking on any discussion about mobile digital music distribution, this section gives an overview of the foundations that form the music industry. Economic properties, history of innovation and market structure of the current music industry are covered in the following subsections. . 1 The economic properties of music In economic terms, recorded music is non-rival and non-clubbable, I. E. Once the DOD is provided, additional resource cost of another person consuming the good is zero and to prevent anyone from consuming it is either very expensive or impossible. Consequently, recorded music exhibits the economic properties of information. One f the fundamental economic properties of digital information deals with its cost structure characterized by low reproduction costs.Another noteworthy attribute that can be associated with music is its nature as an experience good. According to the definition by Shapiro and Varian, (1988), music can be classified as an experience DOD since it needs to be experienced to know what it is. According to other definitions by Hamper and Schwab (2001), music is a repetitive good, since unlike many other types of information, if one likes a song, one is inclined to listen to it over and over again. It is essential to keep these economic properties in mind when considering mobile music distribution. 2. History of innovation in the music industry Nas the only means of distribution. Subsequently, the ability of audio recording and duplication emerged, eventually giving rise to mass-production capabilities using arioso technologies as storage media (Figure 2). Despite the continuous stream of innovation, the record labels have remained largely unchanged in the way they organize themselves to produce, market and distribute music. In 1947 six labels controlled 90% of the industry. Today, five of their successors still control 84% of the industry (Millennium Group, 2001).Figure 2 Timeline of innovations in the recorded music industry Towards the turn of the millennium, a new wave of innovations of a totally different nature started to emerge. Ever since the introduction of convenient audio codes, CD burners and sound-card hardware became readily available to computer users, new forms of music distribution have been enabled. Coupled with an Internet connection and the development of peer-to-peer networks, the cost of duplicating and distributing music has been reduced unprecedented.For the first time in history, the recording industry has been faced with a wave of disruptive technologies that have caused a downturn in the music industry. Faced with an impeding disruptive technology, the recording industry has reacted using of the strategies that Christensen (2001) presents in his paper. Specifically, the recording industry first attempted to block the disruptive technology with a series of lawsuits. Subsequently En have seen some players such as one of the industry leaders, BMW, riding the Nave, by investing in startup companies in an attempt to commercialism distribution eased on the disruptive technology.Mobile operator networks equipped with adequate Digital Rights Management (DRUM) capability may represent an ideal platform for the last of the three strategies identified by Christensen (2001), namely the co-opt strategy. With the latter strategy, firms can attempt to integrate the new technology with their existing business models and introduce the resulting new product to the mainstream market. 2. 3 Market structure ere music market is based on monopolistic competition of products created by individual artists, bands and orchestras (Talon, 2003).The traditional music striation industry is dominated by the big five whose global market shares in 2001 are illustr ated in Figure 3. Figure 3 Music industry global market shares for the year 2001 (IF, 2002) Figure 4 illustrates the traditional music industry value chain and cost structure. Manufacturing, distribution, wholesale and retail account for 45% of the cost structure. Even though digital distribution effectively bypasses these processes, it is fair to say that re-intermediation will very unlikely result in lower prices for the consumers, or higher margins for the suppliers.Particularly in the mobile environment, network operators need to cover the hefty investments poured in potential to increase sales volumes through innovations that enable more convenient music consumption. Figure 4 Value chain (top) and cost structure (bottom) 3. Mobile telecommunications industry To date, the growth of mobile telecommunications has been fuelled almost exclusively by voice calls. However, voice is becoming a saturated market, and with increasing competition forcing lower prices, leading to a trend of declining ARPA, mobile operators are seeking to introduce new services in order to maintain growth. Industry forecasts predict that revenues from data traffic will compensate for the decreasing voice ARPA and will further grow to become an important portion of the overall mobile operator revenue in the future. Backed by these predictions, mobile operators have made hefty investments in license fees and infrastructure upgrades. Mobile operators are currently in a critical phase in which they are striving to launch appealing data services for the end-users, in order to drive revenues and start experiencing a return on their investments.The following section investigates the attention role of mobile music as a catalyst for mobile operator data revenues. 4. Digital music distribution over mobile networks Music is already a huge and valuable mobile market in the form of monophonic, and recently also polyphonic, rhinestones. The popularity of rhinestones, however, does not necessarily give any assurance about the success of music tracks delivered over cellular networks. Whereas the latter is focused on the action of listening to music, Remington downloads, in contrast, is an act of personalizing the mobile phone.Mobile music download in the generic sense, will need to compete with other forms f music download over the fixed Internet. Note that in the latter case, even though music download occurs in a non-mobile environment, it can still be consumed in a mobile environment by transferring the downloaded content over to the mobile device with playback capability. Mobile music downloads have the potential to succeed if: the service is capable of meeting consumer requirements that cannot be met by download services in the fixed Internet, or ; the mobile download service is more convenient to use than its fixed Internet equivalent.Despite the fact that mobile music download may take an initial lead when it comes o certain functions such as billing systems, there are several technical and economic barriers that need to be overcome before mobile music do wnload can compete with fixed Internet downloads on the ground of convenience. On the other hand, mobile music download has an essential lead in terms of functionality, since it enables and at any location. As an experience good, mobile music download enables consumers to download record tracks as soon as the experience event that inspires the purchasing action takes place. The mobile download service can facilitate the link between the experience event and the download event. A mobile terminal equipped Ninth FM radio reception and mobile data connectivity may act as a platform for this Several mobile phones currently available on the market also support FM radio reception. In a research carried out by the Radio Advertising Bureau (2002), 9% of the respondents aged 16-24 answered that they occasionally or regularly listen to radio through their mobile phones (compared to 17%, over the Internet).The number of respondents aged 16-24 that answered that they would listen to radio through their mobile phone if they could goes up to 34%. These figures clearly show that mobile ermines are redefining the patterns whereby music consumers are exposed to new music, at least within the age group that is typically considered to be the heaviest consumers of music. More radio consumption than ever before occurs in a mobile environment. One must recall, that due to the experience good nature of music, radio broadcasts have a significant influence on consumer music purchases. Figure 5 A service architecture for mobile music download Figure 5 illustrates a service architecture for mobile music download based on converged broadcast media and mobile data communication. Figure 6 presents the associated business model. The following sections concentrate on the technical and economic implications arising from the convergence between radio broadcasts and mobile operator music download services. Figure 6 A mobile music download business model 4. 1 Mobile music supply chain Figure 7 illustrates the supply chain associated with the mobile music mode presented in the preceding section.The following sections expand on each of the roles in the mobile music supply chain in more detail. Figure 7 Mobile music supply chain 4. 1. 1 Music development ere music industry is established on the premises of transaction cost economics. The cost for the musicians to distribute the music to as large an audience as possible Mould be forbidding without the music distributing market mechanism (Ghana, 2002). In the traditional music distribution model, music is owned by the artists, but in control of the sellers.The latter have interest in selling music that brings most revenues, thus distorting the market by over-promoting disproportionably in favor of small number of works. Paper, enables new communication models between performers and audiences, possibly attenuating the biased control of music sellers. 4. 1. Music production and publishing In the recent years, record labels have been experiencing declining revenues allegedly caused by the success of pop file sharing applications over the fixed Internet. Mobile music distribution will be welcome as a new source of revenue, in an otherwise ailing market.Before record labels embrace the new distribution channel, however, they need to make sure that the necessary property rights protection mechanisms are in place. One fundamental problem associated with audio content is that even if DRUM mechanisms are in place, unauthorized copying can take place wrought digital-to-analog-to-digital (DAD) conversion techniques with only minimal loss in audio quality. Although still unable to prevent unauthorized copying and distribution, digital watermarking techniques enable copyright owners to track down the sources of misuse, since watermarks can survive the DAD conversion. . 2. 3 Music acquisition and aggregation ere role of music aggregation may be taken up by an intermediary (e. G. Existing music aggressors from the fixed Internet) or by one of the other players in the supply chain (e. G. Mobile operator or radio station). Its role is essentially to host a efficiently wide selection of encoded audio files. 4. 1. 4 Mobile platform and application provider Network vendors have taken the lead as suppliers of mobile music platforms.This is evidenced by the number of press releases during the past months from the major network vendors. For example Monika is partnering with Televisions, Kiss FM, and HP to launch its Visual Radio platform in Finland in 2004. Several other launches in other countries are set to follow (Monika, 2004). Ericson is partnering with Sony Music in launching its music service platform called M-USE (Ericson, 2003) which includes a reorganization engine that recommends artists and tracks tailored to each consumers individual music taste. 4. 1. Network operators Network operators have the potential to be key players in the mobile music value chain, but they are also in danger of becoming normalized. Their role includes the provision of the wireless connection, and equally importantly billing services. Unlike other wireless content and applications, operators are in the somewhat unusual situation of having little or no ownership and control over mobile music offerings. In the music industry, the record publishers hold the rights to the music and record abeles hold the rights to the artists, and they command the marketing and distribution channels.Consequently, operators have to position themselves as value- added partners to record companies and labels, with the core role of monopolizing the provision of mobile music. Which would take about 10 minutes to transfer over the current GAPS data rates of about Kbps) would cost at least 6? Just in delivery fees. Comparing with the price level for the same content available through other channels, it is difficult to expect that customers would be willing to pay much more than 1? per song. It is thus clear hat operators need to adjust their pricing in order to accommodate mobile music download services.Operators are currently investing in advanced charging machinery that is capable of adapting the data charges according to the type of content. In this way, operators will also ensure that customers are not able to bypass legitimate services as unregulated data charges will be prohibitive. One of the biggest challenges ahead for mobile operators willing to embark in mobile music is how to ensure a viable business case for delivering an audio track of acceptable quality, with relatively low latency, for under 1?.Based on these figures it is clear that the op erator business model should be based on small margins, and aiming at high volumes. 4. 1. 6 Service provider/portal Figure 7 separates the role of network operators and service providers. A new class of Moves, focusing on music services may emerge. Existing music brands such as radio stations and music television channels may have an interest in taking up this role. 4. 1. 7 Device manufacturer Device manufacturers play an integral role in facilitating mobile music. Manufacturers are adopting multiple roles in the value chain by:Improving battery life, the runtime environment and playback capability in the handset ; Generating shared risk/reward partnerships with the music industry and providing a forum for open music applications development, including DRUM ; Collaborating on interoperable platforms based on open standards, allowing application developers to develop applications for multiple vendors using a single platform, and ultimately enabling the sharing of music content and applications across device manufacturers. For device vendors wanting to launch mobile music into the markets consciousness, he in-built FM receiver is a laudable first step.Its importance lies in the fact that it helps users get used to the idea of viewing the phone as more than a voice or text communication device. As the market takes off, we may start to witness several ot her music consumer electronics such as car stereos adopting the new delivery channel. This is certainly something that mobile operators would like to see happening in the long run, since it significantly increases the number of devices that are capable of tapping data from the operators networks. 4. 1. 8 ConsumerFor consumers, mobile music download has the potential to provide them with of mobile music depends on its success in enabling each of these functions. 5. Summary and conclusions Mobile music, in the general sense, is not a new market. It is an existing, sophisticated market populated by a multitude of portable music devices. Mobile music downloads over mobile networks is a natural progression of mobile music services. In the coming years, several new variants of the service will emerge. This paper has concentrated on a potential variant for mobile music download based on inter-working with radio stations.The enabling technologies for mobile music are already currently in place, or will be deployed in the short-term future. The economic aspects of the service still need to be worked out, particularly for mobile operators No need to base their business cases on particularly low margins. There are several interesting services that mobile operators can launch in partnership with radio stations, even before fully-fledged music downloads are commercialese. Mobile operators networks offer the possibility of introducing a return channel for radio stations, thereby improving interactivity and overall experience.