AT&T'S MULTIFACETED MUSIC PLANS

In a few short months, AT&T has gone from having no wireless component for its digital music service to having the largest wireless download platform in the industry. Last month at CTIA Wireless I.T. & Entertainment, the carrier unveiled a new deal with its yearlong partner Napster to create a full-track download service bringing 5 million tracks to its network — 3 million more tracks than Sprint and Verizon Wireless, its competitors in the wireless music space. That builds on a similar deal AT&T signed a month before with eMusic, covering another 2.7 million songs from artists on independent labels.

AT&T still has some catching up do. Sprint and Verizon Wireless have been in the market for more than a year, while AT&T waited for its UMTS/high-speed downlink packet access network to come online in enough cities to support an over-the-air (OTA) music launch. But its work may be helped by the fact that Sprint and Verizon Wireless have already warmed the mass market to the idea of the phone as a music device — an initiative boosted by the launch of the iPhone over AT&T's own network. But unlike its competitors, AT&T isn't launching a white-label music store that relies solely on its own brand. It's leveraging Napster's — and to a lesser extent eMusic's — prominent name recognition in the digital music space as well as tapping into their existing user bases.

“We're going to advertise this; we're going to market this going into Q4,” said Mark Nagel, director of music and personalization products for AT&T Mobility. “But we're going to talk to the customer in a voice that already has credibility in the music industry.”

The breadth of AT&T's music offering, however, may not be as impressive as its variety. In addition to dealing with eMusic and Napster for the OTA service, AT&T is supporting both companies' regular online businesses by using phones that have players for sideloaded music originally downloaded to a computer. The carrier has another such agreement in place with Yahoo! Music, a linear radio deal with XM Satellite Radio, and even support of off-deck content downloads from third-party providers like Groove Mobile. That's to say nothing of the huge music presence AT&T has gained with the iPhone — even though the operator sells no music to the device.

AT&T's attempts to provide choices to the customer hints at a wider strategy for music and wireless data, said Roger Entner, an analyst for IAGR. AT&T wants to get as much music loaded onto its devices as possible, regardless of the means, Entner said. The profit margin for individual song downloads is small, while the overall volumes are tiny compared to the online world.

But once customers are listening to digital music on their phones, other digital media and applications are likely to follow. “Music is a stepping stone to create this idea of the phone as a digital Swiss Army Knife that has everything from music to Internet,” Entner said.