Mobile Service Providers Must Face the Music
Wireless carriers are charging too much for music downloads to effectively compete with Apple's iTunes Internet music service, according to a new study from Usable Products. "Key Drivers to Mobile Media Downloads," includes analysis of 14 stakeholder interviews, 12 focus groups, and 1,088 survey responses.
"Consumers will reject music services that charge more than $1.25 per music download to multiple devices, such as mobile phones and MP3 players," says Scott Weiss, Usable Products CEO. "Our findings are a wakeup call to Verizon and Sprint, which charge far too much for media downloads to multiple devices." Verizon V CAST charges $1.99 for V CAST music and the Sprint Music Store charges $2.50 per download, compared to $0.99 per download for iTunes.
The prevailing feeling among the wireless carriers is, consumers will pay more for downloads to their phones due to the convenience, but this theory is full of holes, Weiss says. "They're turning a blind eye to reality. According to our survey, only 2 percent of people would pay 30 percent more [to download to a telephone], 11 percent would pay 20 percent more and 30 percent would pay 10 percent more."
Weiss acknowledges that the wireless carriers have higher costs and more complex technologies (data and telecom, rather than just data) involved in providing the music downloads, so they may not be able to cut the price much, if at all, for this to be a profitable part of their businesses. Additionally, while iTunes shares revenues only with music owners, the carriers also need to share them with service administrators and other third parties in a more complex supply chain. Another unanswered question is how well the carriers' networks could handle downloads if the pricing was cut and the actual number of music downloads spiked, according to Weiss. Therefore, Weiss sees major challenges in the continuing viability of the wireless carriers' music download services.
Weiss sees similar problems facing the currently profitable ring download business as well. According to the survey, 42 percent of 14 to 17 year-olds report downloading ring tones at least once per month. However, only 21 percent of consumers 25 and older report equally frequent ring tone downloads.
Though the ring tone business is profitable for wireless carriers now, there's a huge gap between being able to download the ring tones and being able to install them, a gap that could mean the collapse of this part of the business, Weiss says. "A lot of people try again, because they think that the problem is their own failing rather than one of the provider. The mobile phone manufacturers and wireless carriers act like they don't care. They need to improve the usability or the business model could fail."
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