The Apple iPod is a small, simple-to-use white box that can store and play back thousands of songs. But that's it; that's all it can do...
NEW ORLEANS — The Apple iPod is a small, simple-to-use white box that can store and play back thousands of songs.
But that’s it; that’s all it can do, says the wireless industry, which is betting it can build a strong contender by adding those features to a cellphone that already places calls, takes pictures and links to the Internet.
The wireless industry focused on music services and hardware yesterday, the first day of the annual Cellular Telecommunications and Internet Association wireless conference in New Orleans. Judging by vendors and others at the conference, streaming music to the phone is one technology that may reach a wide array of consumers by the end of the year.
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But first the industry must resolve a two-pronged debate. The first is whether a mobile music phone can overcome the lead set by music-only devices like the iPod, and also how a service would work financially among all players who want a cut.
The second was sparked in part by handset-maker Motorola’s decision to hold off last week on announcing a phone that offers iTunes, the music service underlying the iPod.
Motorola spokeswoman Monica Rohleder said the company decided to make the announcement closer to when the phone becomes available.
Many in the industry speculated, however, it wasn’t Motorola, but the wireless carriers, that drove the decision.
The iTunes service is a closed platform, meaning songs downloaded from it cannot be played outside the iTunes environment. For wireless carriers, that could potentially mean no cut of the revenue.
The speculation is one product of intense industry discussion over a business model that would satisfy carriers, handset makers, music service providers and others involved in the technology.
“That debate had already been going, and this fueled the fire,” said Rohleder. “There was no carrier involvement. We are really excited about the launch and we have carrier interest.”
What’s less debatable is the size of the opportunity. The industry gauges potential interest by looking at the ringtone business, which has taught subscribers how to download songs.
Subscribers have grown used to paying for these clips, which can cost up to $3 or more each, and which, by some accounts, make up a $11 billion market worldwide.
There’s already a variety of available music service offerings, just not in the United States.
Nokia has partnered with Microsoft and Seattle-based Loudeye to develop a service that allows users to browse a music selection on a phone and download a track, with a copy remaining on the phone and one sent to the PC.
Another service provider, Seattle-based Melodeo, yesterday announced a similar two-copy feature that’s split between the phone and the PC. A partnership between Microsoft and Napster, which has a music-subscription service, promises to offer users as much music as they want for a monthly fee.
That’s just the beginning. Quiz the industry on what’s developing, and imaginations run wild.
A user hears a track playing on the radio and wants to buy it. Dial a number, put the phone up to the speaker, and the phone identifies it.
Melodeo has a service that allows friends to share music. One user passes a song on to the next using Bluetooth, the short-distance wireless technology, and that friend can listen to a sample and decide whether to buy it.
Such services could be a threat to the iPod and other stand-alone music players, said Ted Cohen, the senior vice president of digital development and distribution at EMI Music. Cohen participated in a panel discussion yesterday on opportunities in mobile music.
“If I have to make a choice between the phone and the music player, I’m going to choose the phone,” he said.
Loudeye Chief Executive Michael Brochu also contended the phone will become the device of choice. “The iPod is not a telephone. Why not download straight to the handheld?” he said.
Kris Rinne, Cingular Wireless’ chief technology officer, owns two iPods and has a different view: The more devices the merrier.
“I see different applications for both,” she said. “This is all jewelry for geeks. You can never be satisfied with one set of earrings.”
For now, it isn’t just how the service would operate that has the industry hung up. It also needs technological advances, including more available high-speed networks to shorten download waiting time and new phones with more storage.
But crafting a workable revenue-sharing plan among carrier and partners remains a big hurdle. Rhine said that from the carrier’s perspective, music is no different from the business model for other content, including ringtones and games.
But what’s making it difficult is that before ringtones or mobile games were introduced, users had no price history for them.
With music, online services are selling tracks for 89 or 99 cents, firmly establishing a ceiling.
That pricing model excludes a cut for the carrier, which would like to recoup the cost of the subsidized handsets and network upgrades.
“If we were in the business of selling printers, we’d make money on the cartridges,” Rhine said.
Nigel Rundstrom, Nokia’s vice president of North American sales and channel management for multimedia, said that when developing a handset, Nokia factors in the carrier’s take.
“The operator is key to any mobile model,” he said. “We have to consider them in the value chain.”
Still, even with hurdles to jump, Don Davidge, Melodeo’s senior vice president of sales and marketing, said he expects to partner with a carrier in the U.S. and launch Melodeo domestically by the end of the year. So does Loudeye’s Brochu.
“We feel like we picked the right business to start 1-½ years ago,” Davidge said. “This is going to be a big year for music.”
Tricia Duryee: 206-464-3283 or email@example.com