Cell phones take iPod challenge

Backers say new mobile music services will be big in Europe but admit the United States could be a problem. Photos: Vodafone's 3G explosion

When Gilles Babinet looks at a cell phone, he sees a music store, an iPod and even a nascent platform for a tiny-screened MTV.

The curly-haired Parisian is the chairman and founder of Musiwave, the company that powers Vodafone's new mobile phone music download service, which launched across Europe this week. He's sure that huge numbers of people will eventually find it natural to buy and listen to music on cell phones--but in some countries more than others.

"In Europe, phones are probably the only effort that can really compete with iTunes," Babinet said, noting that more Europeans are likely to adopt music on cell phones than they are to buy songs from Apple Computer's download service. "The attraction for customers in the United States may be less, because iTunes is so much more developed."


The potential of mobile devices as a music delivery platform is clear. There are hundreds of millions of cell phone owners, particularly in European countries, where penetration rates can be as much 80 percent of the population. That pool represents a vastly larger potential market than the millions of people who use iPods or other MP3 players.

But companies that sell content for mobile devices face different marketing and technological challenges compared with businesses that deliver PC-based online services. Some now see the markets as distinct rather than competitive. That's raising the specter of two kinds of service, with separate pricing models and possible walls that would prevent music purchased on cell phones from being transferred to a PC, and vice versa.

Different strokes
Vodafone, the world's largest mobile phone company and a trendsetter, is aiming to bridge that gap with its splashy new European service. Contradictorily, the service is also a sign of a split--it underlines the growing divergence in the way Americans use technology to find and listen to music compared with the way people in Europe and Asia do.

The U.S. market remains dominated by computer-based services and by devices such as the iPod and its related iTunes service. A handful of music services for cell phones have been launched, but these largely involve downloading music to a PC and then transferring it to a phone.

In Europe and Asia, cellular carriers and record labels are thinking more ambitiously. They see the latest generation of Internet-connected, multimedia phones as the natural extension of Sony's Walkman--devices that will be vastly more common than the iPod and able to make it easy to impulse-buy music at any time.

The idea is still young. Music for cell phones is relatively expensive and scarce--just 3,000 songs are available through Vodafone's music download store, although the company promises that will rise to 50,000 in just a few months.

Formats, too, are in flux. Vodafone offers full versions of songs. In contrast, German carrier T-Mobile sells re-edited, two-minute versions of songs that are faster to download. In addition, record labels in Europe distribute albums on memory cards that can be slotted directly into phones--most notably, the recent EMI promotion of Robbie Williams' newest album.

Phone carriers, particularly in Europe, see the music and upcoming music video services as a way to attract people to their new third-generation, or 3G, networks that can deliver broadband access to cell phones. Collectively, European carriers have spent more than $100 billion on purchasing the wireless spectrum needed to offer broadband service, and they're desperate to make that money back.

On the content side, sales of ring tones indicate that the mobile market is already a gold mine. Research company Strategy Analytics esti-

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