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Will the Music Cellphones
Sweeping Japan Play in the U.S.?
By GINNY PARKER WOODS and LI YUAN
Staff Reporters of THE WALL STREET JOURNAL
September 19, 2005; Page B1
As companies rush to offer cellphones that play music to American consumers, a look at Japan -- where these phones are already abundant -- would seem to offer a preview of what's in store for the U.S.
But a variety of factors, including cheaper American music downloads and more advanced Japanese cellular networks, means that the music-cellphone formula that has worked in Japan -- where most of the music is sold by cellphone carriers -- won't necessarily play in the U.S.
In Japan, cellular handsets regularly come equipped with music players, stereo speakers and remote controls for adjusting volume and moving through songs, as well as a variety of other nifty features. When users hold their phones up to a speaker playing music, for example, some models will try to recognize the song, search for it in the carrier's online music library and offer it for sale.
The revenue from the music sold over mobile phones -- from simple ringtones to full songs -- accounts for about 20% of Japan's total music market, says consulting firm Bain & Co. Though full-song cellular downloads started here less than a year ago, analysts estimate that revenue from them will hit $449 million in 2005.
"That's pretty steep development," says Jean-Philippe Biragnet, a Tokyo-based partner at Bain who specializes in technology. "This market has been growing very fast."
KDDI Corp., Japan's No. 2 cellular carrier, launched its music service in December 2004. Already, users have downloaded some 17 million songs. KDDI gets 9% of the proceeds from selling the songs, with the rest going to record labels and distributors. Files come with a feature that recognizes the phone number of the original buyer, preventing the song from being played on any other device. Cellphone music is becoming such a force that some record labels are launching local artists' albums for cellphones before releasing them on CDs.
The music is pricey. Just one song costs $2.75 to $3.60. But Japanese users say they're willing to pay the steep charge to get the music they want when they want it. Yuko Kojima downloads a couple of songs a month from KDDI while she's shopping or on the subway. "It's better than having a separate music player," says the 18-year-old cosmetology student, who uses the downloaded music to practice karaoke. One added benefit: She can review the lyrics on the phone's small screen when she wants to sing along.
The cellphone-music market in Japan has already surpassed the market for music downloaded using a PC, which is often for later use on a digital music player. In the first six months of 2005, total revenue from PC-based music downloading was just $4.8 million, compared with $122.1 million for music -- not including ringtones -- downloaded to cellphones, according to the Recording Industry Association of Japan.
Music cellphones in Japan aren't likely to fully replace dedicated music players, which generally offer longer battery life, greater storage capacity and better sound quality. Apple Computer Inc., which has acknowledged that it makes little or no profit on its music sales, recently opened up its iTunes online music store to Japan, so downloads to computers -- which are cheaper than cellular ones -- could become more popular here.
Nonetheless, many believe Japan's music cellphone market is still growing. The Japanese unit of the U.K.-based cellular giant Vodafone Group PLC announced this month that it will soon start its own full-song music download service in Japan. To go with it, the company has developed a special music-playing handset with an extra screen for scrolling through songs that shows up when the clamshell-shaped phone is closed.
Japan's third-generation cellphone service, known as 3G, is also a factor in the music cellphone's success, because it makes downloading large music files quick and easy. With KDDI's service, an average song takes just 30 to 40 seconds to download. With the older networks that are still the norm in the U.S. and Europe, it would take much longer.
In the U.S., cellphones that play music have been available since the beginning of the year, but cellular carriers aren't selling the songs. The handsets with music players offered by Sprint Nextel Corp. and Verizon Wireless let cellphone users download music files from their computers to their phones, which means the music comes from their own collections as well as online music stores. That's also the case with the new Rokr phone from Motorola Inc., Apple and Cingular Wireless, which is tied to Apple's iTunes music program.
Both Sprint and Verizon Wireless have announced they will launch full-track, over-the-air music downloading services by the end of this year and early next year, respectively. But both companies have declined to disclose the details of their service and pricing models. Verizon Wireless is owned by Verizon Communications Inc. and Vodafone.
Some industry analysts believe U.S. wireless companies will have to give consumers better reasons to pay cellphone carriers for music than the convenience of carrying only one gadget. "I carried both my cellphone and my iPod in the past year," says Mike Goodman, an analyst with the Yankee Group. "And I didn't have any problem with that at all."
Certainly, most consumers accustomed to paying 99 cents to download a song to their PC for use on their iPod aren't likely to want to pay double or triple that to download to their phones, despite the instant gratification. A Yankee Group survey in 2004 found that Internet users' likelihood of downloading music from a licensed service declined 58% if prices were raised from 99 cents to $1.49, an indication of how attuned U.S. consumers are to price.
What's more, in an online survey this year, Forrester Research Inc. found that among more than 5,000 adults, only 1% said a digital music player was a must-have feature for cellphones. More desirable, they said: longer battery life, a built-in camera and high-speed data access.
The "phone as a music player isn't bringing anything new to the table," says Yankee Group's Mr. Goodman. "Americans don't view their cellphones as entertainment devices but more as communications devices."
Adds Charles Golvin of Forrester: Cellular carriers have to acknowledge that in the U.S. the PC has established itself as the center of the digital music market.
That could change as storage capacity on phones grows, prices for the combo devices fall, and cellular networks are upgraded. But cellular companies won't necessarily be the beneficiaries. Asked about a model in which American consumers would buy relatively expensive music from cellphone carriers, Apple Chief Executive Steve Jobs replied recently: "Customers are smart." He also acknowledged that Apple will "probably" one day offer iTunes songs for sale on wireless networks. And industry analysts speculate that those phones could include Apple's own, possibly running over an Apple network.
http://online.wsj.com/article/0,,SB112709506549744541,00.html?mod=gadgets%5Fprima ry%5Fhs%5Flt
Sweeping Japan Play in the U.S.?
By GINNY PARKER WOODS and LI YUAN
Staff Reporters of THE WALL STREET JOURNAL
September 19, 2005; Page B1
As companies rush to offer cellphones that play music to American consumers, a look at Japan -- where these phones are already abundant -- would seem to offer a preview of what's in store for the U.S.
But a variety of factors, including cheaper American music downloads and more advanced Japanese cellular networks, means that the music-cellphone formula that has worked in Japan -- where most of the music is sold by cellphone carriers -- won't necessarily play in the U.S.
In Japan, cellular handsets regularly come equipped with music players, stereo speakers and remote controls for adjusting volume and moving through songs, as well as a variety of other nifty features. When users hold their phones up to a speaker playing music, for example, some models will try to recognize the song, search for it in the carrier's online music library and offer it for sale.
The revenue from the music sold over mobile phones -- from simple ringtones to full songs -- accounts for about 20% of Japan's total music market, says consulting firm Bain & Co. Though full-song cellular downloads started here less than a year ago, analysts estimate that revenue from them will hit $449 million in 2005.
"That's pretty steep development," says Jean-Philippe Biragnet, a Tokyo-based partner at Bain who specializes in technology. "This market has been growing very fast."
KDDI Corp., Japan's No. 2 cellular carrier, launched its music service in December 2004. Already, users have downloaded some 17 million songs. KDDI gets 9% of the proceeds from selling the songs, with the rest going to record labels and distributors. Files come with a feature that recognizes the phone number of the original buyer, preventing the song from being played on any other device. Cellphone music is becoming such a force that some record labels are launching local artists' albums for cellphones before releasing them on CDs.
The music is pricey. Just one song costs $2.75 to $3.60. But Japanese users say they're willing to pay the steep charge to get the music they want when they want it. Yuko Kojima downloads a couple of songs a month from KDDI while she's shopping or on the subway. "It's better than having a separate music player," says the 18-year-old cosmetology student, who uses the downloaded music to practice karaoke. One added benefit: She can review the lyrics on the phone's small screen when she wants to sing along.
The cellphone-music market in Japan has already surpassed the market for music downloaded using a PC, which is often for later use on a digital music player. In the first six months of 2005, total revenue from PC-based music downloading was just $4.8 million, compared with $122.1 million for music -- not including ringtones -- downloaded to cellphones, according to the Recording Industry Association of Japan.
Music cellphones in Japan aren't likely to fully replace dedicated music players, which generally offer longer battery life, greater storage capacity and better sound quality. Apple Computer Inc., which has acknowledged that it makes little or no profit on its music sales, recently opened up its iTunes online music store to Japan, so downloads to computers -- which are cheaper than cellular ones -- could become more popular here.
Nonetheless, many believe Japan's music cellphone market is still growing. The Japanese unit of the U.K.-based cellular giant Vodafone Group PLC announced this month that it will soon start its own full-song music download service in Japan. To go with it, the company has developed a special music-playing handset with an extra screen for scrolling through songs that shows up when the clamshell-shaped phone is closed.
Japan's third-generation cellphone service, known as 3G, is also a factor in the music cellphone's success, because it makes downloading large music files quick and easy. With KDDI's service, an average song takes just 30 to 40 seconds to download. With the older networks that are still the norm in the U.S. and Europe, it would take much longer.
In the U.S., cellphones that play music have been available since the beginning of the year, but cellular carriers aren't selling the songs. The handsets with music players offered by Sprint Nextel Corp. and Verizon Wireless let cellphone users download music files from their computers to their phones, which means the music comes from their own collections as well as online music stores. That's also the case with the new Rokr phone from Motorola Inc., Apple and Cingular Wireless, which is tied to Apple's iTunes music program.
Both Sprint and Verizon Wireless have announced they will launch full-track, over-the-air music downloading services by the end of this year and early next year, respectively. But both companies have declined to disclose the details of their service and pricing models. Verizon Wireless is owned by Verizon Communications Inc. and Vodafone.
Some industry analysts believe U.S. wireless companies will have to give consumers better reasons to pay cellphone carriers for music than the convenience of carrying only one gadget. "I carried both my cellphone and my iPod in the past year," says Mike Goodman, an analyst with the Yankee Group. "And I didn't have any problem with that at all."
Certainly, most consumers accustomed to paying 99 cents to download a song to their PC for use on their iPod aren't likely to want to pay double or triple that to download to their phones, despite the instant gratification. A Yankee Group survey in 2004 found that Internet users' likelihood of downloading music from a licensed service declined 58% if prices were raised from 99 cents to $1.49, an indication of how attuned U.S. consumers are to price.
What's more, in an online survey this year, Forrester Research Inc. found that among more than 5,000 adults, only 1% said a digital music player was a must-have feature for cellphones. More desirable, they said: longer battery life, a built-in camera and high-speed data access.
The "phone as a music player isn't bringing anything new to the table," says Yankee Group's Mr. Goodman. "Americans don't view their cellphones as entertainment devices but more as communications devices."
Adds Charles Golvin of Forrester: Cellular carriers have to acknowledge that in the U.S. the PC has established itself as the center of the digital music market.
That could change as storage capacity on phones grows, prices for the combo devices fall, and cellular networks are upgraded. But cellular companies won't necessarily be the beneficiaries. Asked about a model in which American consumers would buy relatively expensive music from cellphone carriers, Apple Chief Executive Steve Jobs replied recently: "Customers are smart." He also acknowledged that Apple will "probably" one day offer iTunes songs for sale on wireless networks. And industry analysts speculate that those phones could include Apple's own, possibly running over an Apple network.
http://online.wsj.com/article/0,,SB112709506549744541,00.html?mod=gadgets%5Fprima ry%5Fhs%5Flt
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