Carriers should embrace the beat

Consumers have demonstrated that their music libraries are nearly as indispensible as their mobile phones, and they seem to be happy with both. According to KPMG and the Mobile Entertainment Forum’s latest survey, 84% of U.S. consumers are satisfied with both their downloading and listening experiences for mobile music. It’s a significant increase from the MEF’s 2007 survey, when only 26% were satisfied.

Where they are not satisfied, however, may be with the price they are paying for their tunes. Of those surveyed, nearly 30% said they’d like to see advertising in exchange for free songs. They also ranked the cost of the service, along with clear pricing information, in the top four considerations for downloading mobile music.

To date, sideloading — not paying for over-the-air downloads — has dominated the mobile music experience, and for Verizon, its relatively new subscription service still is not attracting consumers the way its a la carte model has. It is ringtones that historically have been the most common revenue generator for mobile operators, but even that is starting to change, as sales of ringtones took a hit in 2008. The newest business model venture — unlimited downloading services — is taking off overseas from both Nokia and Sony Ericsson, but carriers in the U.S. remain reluctant to branch out in this direction, either on their own or with the handset-makers.

While the business model still is being worked out, carriers already are experimenting with mobile music services. Verizon offers a la carte downloads of full-track music or a subscription offering through a partnership with Rhapsody, while AT&T’s expansive music offerings include a partnership with Napster, eMusic for independent labels, Yahoo! Music, XM Satellite Radio, Music ID, Groove Mobile and others. Diversification of music options is a great move, but carriers also should consider more diversification of the business model — including into advertising.

As I heard from many in the industry following last week’s column on mobile advertising, mobile ads still remain challenged by trepidation in spending due largely to a lack of a common metric system for tracking them. At the same time, consumers are showing their willingness to accept ads in exchange for free songs and the ad industry is working to overcome these challenges. When it comes to music, successful ad models could be something as simple as a banner ad for a ringtone of the song the consumer has searched for, which could have the added effect of helping to pick ringtone sales back up.

It’s a good time for wireless operators to consider experimenting with new business models for mobile music. Even if they aren’t ready for a Comes with Music–inspired all-you-can-eat service, they could learn from the handset-makers’ foray into unlimited music. Advertising also should be top of mind as operators consider more experimentation. With consumers more cost-sensitive than ever before, there’s a balance to be found between a love of music and a reluctance to spend.

E-mail me at sreedy@telephonyonline.com.