MOBILE MUSIC: HUGE IN EUROPE

U.K. carrier Vodafone said recently its 3G Live service had sold 1 million individual full-track song downloads at 1.50 to 2 euros a pop since its launch four months ago. Meanwhile, its U.K. foe 3 said its Video Jukebox service had streamed or downloaded 10 million music videos in its first six months.

The wireless industry has downplayed the role of mobile music in recent years, questioning the business model and the difficulties of adding value to a service already served by wireline portals like iTunes. But the activity in Europe has breathed new life into mobile music, showing that customers will pay for music downloaded to their phones — and even pay more than they would at their PCs.

“One million full track downloads in three months is impressive, no matter how you look at it,” said Nicolas Pelletier, CEO of Musiwave, the content publisher powering Vodafone's 500,000-song music catalog. “Common logic was that carriers couldn't meet online competition for music downloads because they couldn't charge a premium for mobility. Well, you can charge a premium. You just can't charge twice as much or three times as much.”

Admittedly, the digital music file isn't a mobile-only service, so carriers can't charge what they would for a ringtone for a song download, Pelletier said. But, the price points for mobile music are quickly being set at 50% to 100% of the cost of an online track, he said. A typical song might cost 1 euro over an online service like iTunes, 1.50 euro as a wireless download directly to a phone and 3 euros as a ringtone. In addition, the industry is looking into blurring barriers between online and mobile music.

In the U.S., carriers have been more cautious, in part due to slower 3G network rollouts, but also because of the highly competitive market for digital music. The only live 3G consumer service, Verizon Wireless's Vcast, has a video download service, but with prices as high as $5 per download and a very limited selection. AT&T Wireless has launched a service powered by Loudeye, but while the portal allows customers to preview short song clips, it only allows them to buy music, not download it to their handsets.

“The challenge in the U.S. is the business model,” said Linda Barrabee, senior analyst at the Yankee Group. “A ringtone is a true mobile application, and the value to customers is obvious, but if a customer can go online and purchase a song for $1 for their iPod, why would they pay twice that from their carrier? I think there's a commitment from carriers to see a music service happen, I just don't think we're there yet.”

RECENT MOBILE MUSIC ACTIVITY

3 — UMTS carrier launched its Video Jukebox service in August 2004 and now claims it has streamed or downloaded 10 million music videos since.

VODAFONE — 3G Live service has sold 1 million full-track downloads to customers. Recently expanded its library to include 500,000 music tracks

NOKIA, MICROSOFT, LOUDEYE — Partnered to create a cross-platform music service, allowing customers to transfer music easily between PC and handset. O2 Germany became the service's first customer last week.

WIDERTHAN — Launched a full music download platform in the U.S. and is now targeting carriers.