Verizon makes music on the go

NEW YORK--Verizon Wireless wants to make music.

Or at least it wants to help record labels and artists make music. More importantly, it wants to provide new, innovative ways for them to make money from the music they create.

"Artists are frustrated with the traditional music-producing model, which is broken," said Ed Ruth, director of digital music for Verizon. "They are frustrated that labels aren't innovating. And we think we can help. We think we can bring some innovative approaches to the whole process."

In addition to its music store, V Cast Music, which is designed to sell digital music, including full tracks, ringtones, and ringback tones, that can be played on Verizon mobile phones, Verizon is also sponsoring a new program it calls Mobile Producer in Residence. Essentially, the company has rented a bus outfitted with equipment to make a traveling recording studio. In February it announced it was working with the rapper-turned-music producer Timbaland as the first producer in residence.

The deal is that Timbaland will use the traveling recording studio, which has been paid for by Verizon, to work with artists anywhere in the country. Every month, Timbaland will work with a guest artist to record a new track. As the bus tours through various cities, Verizon will release singles and behind-the-scenes video clips of the recording sessions exclusively through the V Cast music store.

So far Timbaland has already begun working with R&B singer Keri Hilson on the bus. Also on the bus, he produced some of the songs used on Madonna's recently released Hard Candy album.

Verizon showed off the bus in New York at the launch concert for Madonna Wednesday night. Ruth was on hand to give reporters a tour of the bus before the concert at the Roseland Ballroom in Midtown Manhattan.

Ruth said Verizon isn't looking to replace the record labels. But he said he feels the company is in a unique position to bring innovation to the industry.

"We don't want to disintermediate between the artist and the record label," he said. "What we're trying to do is help the label save some money by introducing a more streamlined process. And we can also help the artist market their songs by offering them in a variety of different formats."

Specifically, Ruth said that record labels save money because they don't have to rent expensive studio space or fly artists to a specific city to cut an album. Artists can be touring the country and the mobile music studio can literally go to the artist as opposed to doing it the other way around.

Verizon also believes it can help artists market their albums before they are fully released by using the creative process itself as a promotion tool. It will do this by releasing behind-the-scenes video clips of the recording sessions on its V Cast music store. It can also turn singles into ringtones and ringback tones before the full tracks are released or even release single songs before the entire album is finished.

Verizon also believes it can help the music industry make money by providing multiple ways to sell the same piece of content.

"The big problem that the music industry is facing is that physical sales of music are failing," Ruth said. "And digital music is trying to catch up. But what we offer is a unique ability to offer consumers content in multiple formats."

For example, consumers who really love Madonna's "4 Minutes" single can spend $2.99 for a standard ringtone, $1.99 for a ringback tone, and another $1.99 if they buy the full track using their phone or 99 cents if they download it from their computer. (Verizon also offers a 20 percent discount for subscribers buying the song as both a ringtone and ringback tone.)

This ability to sell the same piece of content in multiple ways is likely the main reason artists and record labels are working with mobile operators like Verizon.

But just as much as the music industry may need Verizon, the carrier also needs the music industry. Music is an important piece of Verizon's overall mobile content strategy. And the company has been racking up deals for the past couple of years with individual artists, such as Prince, John Legend, and Shakira, in an attempt to promote its music store and service.

Verizon claims that V Cast is the second largest music store on the market behind Apple's iTunes, with more than 3 million songs in its library. And in the first quarter of 2008, it sold a total of 34 million "units," which included ringtones, ringback tones and full music tracks, Ruth said.

Mobile music, along with other data services such as mobile Web surfing and e-mail, are important for Verizon as it tries to get its customers to spend more each month on additional services. So far, its efforts seem to be working.

On Monday, the company reported that mobile data, which includes music downloads, accounted for over 20 percent of the company's total wireless revenue in the first quarter of 2008. And it said that customers on average spent nearly $12 a month on data services. These are fees that are above and beyond what customers pay for basic voice minutes.

"Music is a very important piece of our content business," Ruth said. "It not only can be a profitable business for us, but it also attracts a lot of interest, and over the long term, it creates a loyalty lock-in with customers."

While most of Verizon Wireless' music efforts have been focused in the U.S., the Madonna concert was the first time Verizon Wireless collaborated with its European parent company Vodafone. Part of the concert Wednesday evening was simulcast live to Verizon Wireless subscribers in the U.S. and in over a dozen other countries over Vodafone's wireless network. Ruth said that in the future, Verizon Wireless plans to work more closely with Vodafone on more music initiatives, but he wouldn't divulge any specifics. So stay tuned.