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Lost in transition


By Robert Clark


Who can disagree with Vodafone chief Arun Sarin, when he says the industry giant is in a period of “transition”.


So goes Vodafone, so goes the whole cellular sector.


The T-word is a nice way of putting it. We know we’re leaving the old voice-dominated business behind us. But while Vodafone and the rest of the GSM camp are desperately keen to rev up the mobile data engine, the car’s still idling at the curb.


Even though Vodafone saw a 25% increase in its mobile data revenues last year, 96% of that is messaging. Just as distressing to Sarin must be the fact that his major W-CDMA operation, Vodafone KK in Japan, has just 1% of the 3G market.


The slow takeup of 3G and of non-SMS data are very obviously related. SK Telecom and KDDI, using cdma2000 1x, are seeing non-messaging data account for half of their data revenue.


Vodafone has just launched its first European 3G phone, a Samsung. Let’s see how that goes.


But even more significant, Convergence suggests, is Vodafone’s content deal with Sony Music, announced last week.


Vodafone and Hutchison aren’t going to win the 3G wars by sharp technologies and handsets. But they can compete by offering access to as much musical experience as they can – ringtones, ringback tones, preview singles, new releases, artists’ greetings and the rest.


Music is the most viral and accessible content available. As we’ve seen with ringtones and Apple’s iPod experience, consumers will actually pay to have their favorite music close to hand, or to be able to customize their devices and services with musical content.


Apple has shipped more than a million iPods, the world’s sexiest device, while iTunes saw 70 million downloads in its first year.


Better than that, music enables the creation of communities -- people who forward songs and grabs to each other, or want to know the latest news about favorite artists and their concert schedules.


Thanks to new technology, the music industry, too, is in transition. The problem is that the record labels, having been burned by free file-traders, are uncertain about which way forward.


Apple was unusual in being able to sign deals with all the major record industry labels. But mobile operators, like Vodafone, are having to sign them up one by one. That’s a brake on growth.


The new release of the mobile industry’s digital rights management system (DRM 2.0) might give the record industry more confidence. The new version allows users to forward music other devices which are also DRM 2.0 compliant. It will be another year or so before we see that in mass deployment.


But mobile operators too need to shake off some old habits, like taking a 50% cut for each song. Cellcos need to decide whether they want to be mobile data pipes – and there’s nothing wrong with that – or do they truly want to be mobile content players, but knowing that that will limit their ability to offer broad range of content.


The mobile ringtone market has shown just how lucrative the combination of mobile and music can be; already the European labels earn twice as much from ringtones as from regular singles.


Both industries are in a state of transition. Maybe together they can find where they want to go.


Robert Clark is managing director of independent consultancy Protocol Research [e-mail]


http://www.telecomasia.net/telecomasia/article/articleDetail.jsp?id=96728