HolidayBuyer's Guide

Apple's long shadow over mobile music

Handset makers are introducing plenty of phones that play music. But it's hard to imagine any besting the iPod or the soon-to-be-released iPhone.

The wireless industry is finally offering a long list of phones with the music features some pundits have long predicted would diminish Apple's control of the market for digital music.

Last week at the CTIA Wireless trade show in Orlando, Fla., Sprint Nextel reduced the price of its over-the-air music downloads to 99 cents per song, while AT&T announced it would offer new subscribers free access to the Napster music service for a year. Handset makers Samsung and Sony Ericsson , and mobile virtual network operator Helio introduced a new device specifically designed for tunes.

But guess what? The most talked-about and sought-after device at the three-day conference was , which wasn't showcased at CTIA and doesn't even ship until June.

"I think 2007 will be a huge year for mobile music," said John Burris, vice president of data services at Sprint. "There won't be anyone who doesn't know that a mobile phone will be able to play music."

But will they want it if it's not made by Apple? There are still lots of issues that need to be worked out before mobile music can really live up to the hype, say experts. From their difficulties with incompatible digital rights management technology to their struggles with short battery lives and poor user interfaces, mobile operators and handset makers have a long way to go before the experience of purchasing and listening to music on mobile phones--even the ones made by Apple--lives up to consumer expectations.

"I think the hype around the iPhone has confused people, because many consumers aren't aware of what music phones can and can't do."
--Suzanne Cross, head of marketing, Sony Ericsson

"Apple is known for hitting home runs consistently," said Suzanne Cross, head of marketing for Sony Ericsson. "But I think the hype around the iPhone has confused people, because many consumers aren't aware of what music phones can and can't do. So (phone makers) have to make sure expectations are met and the consumer experience is positive."

The wireless and handset industry has been trying to jump on the mobile music craze for years. In 2005, Cingular Wireless, now the new AT&T, launched Motorola's Rokr, a music phone that allowed subscribers to play songs from the iTunes music store. But the Rokr was a major flop. The phone had limited memory capacity and allowed only 100 songs to be stored.

Other phones have been introduced that also offer music-playing capability, such as Motorola's Razr and Krazr, but few consumers believe they are replacements for an iPod or any other MP3 music player. When used to play music, most of these phones run out of battery life very quickly. Using them to navigate through the music library can also be difficult, and loading songs can be cumbersome.

Mark Nagel, director of premium content at AT&T, said the company learned a lot from the Rokr experience. As a result, AT&T is not only adding new phones, such as the iPhone, to its lineup, but it's also introduced a subscription-model service that will allow consumers to pay a monthly fee to listen to as much music as they like from services like Napster and Yahoo. To promote this business, the company is offering new subscribers a free subscription to Napster for a year.

Mobile music ready for prime time?
There are signs that mobile music is catching on. Record companies' digital music sales are estimated to have nearly doubled in value in 2006, generating about $2 billion in revenue, according to the industry group IFPI, which is affiliated with the Recording Industry Association of America. Mobile music accounted for half of this revenue. The split varied greatly among markets around the world, with Japan leading the pack with around 90 percent of its digital music sales accounted for by mobile purchases.

New phones specifically designed for music will likely fuel the trend. At least three new music phones were introduced at CTIA. The Ocean, a new handset manufactured by Pantech for Helio, is designed to help alleviate some of the issues plaguing earlier phones, such as short battery life. For example, it uses a separate microprocessor to run the media player, which Helio claims allows the device to play up to 15 hours of music on a single battery charge. The phone will be available later this year and will cost about $295 with a two-year contract.

Samsung's , available through Sprint, is a "flip" phone with one side designed to be a regular phone and the other designed to play music. The regular phone side has a number pad and small screen for dialing calls and typing text messages. The other side looks like an MP3 music player, with a large screen and touch-sensitive controls that allow the user to navigate through a song library and view videos. There's a button that lets users switch between the sides and functions of the phone, which costs $149 with a two-year Sprint contract.

Sony Ericsson, which has already been selling its Sony Walkman phones in the U.S. through AT&T, introduced its latest addition to the music playing family of phones this week. The W580 is a slider phone that the company claims can offer up to 30 hours of music playing time. Sony Ericsson didn't provide pricing information, and it hasn't announced which carrier will sell the phone. But given the company's relationship with AT&T, it's likely the phone will appear there first.

Then, of course, there is the iPhone, which, despite its absence at CTIA, still created a buzz. AT&T's COO Randall Stephenson said during a speech at the convention that 1 million people had already signed up on the Web asking for more information about the iPhone.

While new music-playing phones should spur excitement among consumers, there are still issues that need to be worked out. One of the major hurdles will be making sure people can buy and transfer music easily onto their wireless devices. The ability to download music over the air is seen as a crucial piece of this puzzle--and it's something the iPhone can't do.

"Isn't the whole point of putting music on a wireless device so you can download tracks over the air?" asked Sky Dayton, CEO of Helio. "I think that is a glaring omission in terms of the iPhone. It's great for side loading, but the lack of over-the-air downloading will be a huge disappointment to people."

Right now, Sprint, Verizon Wireless and Helio offer their own music stores with over-the-air downloads. Sprint announced this week that it has reduced the price of songs sold this way from $2.49 a song to 99 cents a song. Meanwhile, AT&T does not yet offer over-the-air downloads. This means subscribers use their PCs to purchase individual songs or access subscription services like Napster; then they can sync their phones to the PC to load the music onto their devices.

But Cross of Sony Ericsson said the industry is not quite ready for over-the-air downloads, because today songs purchased over a cellular network can be used only on specific handsets. The limitation is due in large part to the fact that mobile operators use different digital rights management technology to distribute copyrighted songs.

"The song is only playable on your phone," she said. "You can't transfer it to another MP3 device or burn it onto a CD. So the music has very limited use. And I don't think that is what consumers want."

Operators have tried to get around this limitation by sending copies of songs to subscribers' PCs. But Cross said the industry needs to rally around some sort of DRM standard so there is interoperability among devices. Until that happens, she doesn't believe mobile music will live up to its fullest potential.

"Over-the air downloading isn't nirvana, but it's necessary to grow the market," she said. "And today when people download music on their laptops, they expect to reuse it on other devices. As an industry, we have to be careful about educating people what they can and can't do with their music or risk disappointing them."

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