Sony Ericsson updates the mobile music business model

While music is one of few services capable of eliciting strong emotional ties and response from consumers, it hasn’t corresponded with revenue when offered on the mobile handset. Wireless carriers and other music providers have traditionally relied on an a la carte business model, but that is giving way to monthly and even yearly subscriptions as music searches for a wining mix on mobile.

Sony Ericsson, the third largest handset OEM, paved the music category in 2005 and has since sold more than 100 million Walkman phones. Through this time, the a la carte business model has only produced a slim margin for both Sony Ericsson and its carrier partners, according to Martin Blomquist, head of content acquisition and management for Sony Ericsson. He called the business model outdated – the same thing the music industry has been working since the ’70s. Subscription services, on the other hand, have had had varying success depending on the value consumers attach to the service.

“It’s difficult to price it right, and no one makes money besides the labels,” Blomquist said. “If you do it in the correct way, which we have, there is a possibility of using music service as a revenue driver for both us and the carrier. But for carriers, it’s more of an acquisition of customers. With all due respect, in subscription, it can be music or whatever type of content transferred to the network. They don’t make money from the music, it’s just the subscription.”

At this week’s Mobile World Congress, Sony Ericsson showed off its new services-oriented image dubbed Entertainment Unlimited, what it calls the fusion of communication and entertainment, encapsulated in its new Idou smartphone, which will be the first to run the new open-source Symbian operating system. This revamped strategy includes bringing entertainment to its line of Walkman music phones, camera, gaming and messaging-oriented handsets, as well as taking it across screens including the PC and TV. Also inherent in the strategy is a focus on its PlayNow music service.

The company launched PlayNow in September to give consumers unlimited access to 1,000 recent songs preloaded on the phone as well as millions of additional songs that can be downloaded for free. PlayNow is powered by subscription music provider Omnifone, which negotiated deals with the individual record labels. The service launched with Swedish operator Telenor in the last quarter of 2008 on the Sony Ericsson W902, a Walkman phone.