The 3-year-old Internet radio service Mercora on Monday introduced "M," the first wireless, over-the-air mobile media application for smart phones. The software gives phones running Windows Mobile 5.0 the ability to play music wirelessly from a PC without compromising sound quality.
The company's president and CEO Srivats Sampath said he believes the service will give the two computing giants a run for their money.
"We've beat Steve Jobs to the . Our software delivers all the same capabilities. And we've beat Microsoft to the Zune," said Sampath, because the device lets users share music wirelessly.
Those are pretty sweeping statements from Sampath, who is also the former CEO of McAfee. And analysts say that though it may be true, actually prying music lovers away from their favorite MP3 player will be hard with a niche as small as smart phones, which have about a 2 percent penetration rate in the U.S.
Mercora's M works by giving subscribers access to their digital music library--only WMA, MP3 or Ogg Vorbis formatted files--from any location via their phone. The software encodes and decodes all files to Ogg Vorbis, a low bit-rate format of near CD quality, before it reaches the earphones. Sounds cool, but forget about playing songs bought from Apple's iTunes Store--Apple uses a proprietary format called AAC, which Mercora M can't play. Music ripped from a CD to an iTunes library, though, is fair game, according to Avikk Ghose, Mercora's director of business development.
Because the files are not carried on the phone, storage is limited only by the size of the computer on which they are kept. This means there is no need to sync or update any device with a music library. With a dedicated portable music player, however, users' songs must be downloaded to a computer hard drive and manually synced with the player. In addition, M lets subscribers tune into 100,000 Internet radio stations, searchable by about a thousand genres and sub-genres.
The all-you-can-eat fee of $4.99 a month or $49.99 for a year of M is "very competitive," according to Richard Doherty, research director of the Envisioneering Group. It's the same as the fee for Yahoo Music, a flat-rate, unlimited model for downloads from Yahoo's music store to a PC.
Mercora's Sampath thinks he's got Microsoft beat with his software that goes beyond the forthcoming Zune music player. Microsoft has taken pains to emphasize its player's niftiest feature: sharing certain songs with other Zune users within wireless range. But those songs .
Mercora cuts through the Zune's limitations by letting an M subscriber log on to the home music libraries of up to five other people anywhere in the world. Of course, their permission must be granted. Mercora has also taken pains to make sure no wires are necessary, ever. Any of the songs can be broadcast with Bluetooth over a car stereo or in a home entertainment center.
Mercora's founder says his inspiration for M came from Europe's 3G broadband network. While most European phones don't have enough storage for music files, they've been using a robust data connection that sends more information (a phone call and downloaded data like e-mail, music, pictures or video) more quickly. Sampath noted that most Europeans were simply sending and receiving e-mail, which he thought was "a waste of a network." Music files, he thought, would be a perfect application.
Mercora can stream music to phones operating on 3G and higher mobile networks, like Edge, EVDO, HSPDA and Wi-Fi. Ghose says phone carriers are looking for more "consumer-friendly applications" that will enable sharing of information, like pictures, videos and music.
The NPD Group's Neil Strother says that though the concept is interesting, it's unclear how practical a service like M would be for wireless carriers that provide wireless phone service.
"I don't know if carriers are going to like that. They might think, 'That's a drag on our bandwidth.'"
Mercora's Ghose said he isn't concerned about that, as M would transfer music files at 56 kilobits per second, which takes up less space on a network than video at 200 to 300 Kbps. And, he added, many smart-phone customers have unlimited data plans provided by their employer.
Strother countered that that's not an open invitation by carriers to clog up the bandwidth with huge files 24 hours a day.
American consumers' love affair with their iPods might be hard to disentangle, as might their perceived reticence toward listening to music and making calls on the same device. But Sampath says he sees Americans coming around and catching up to their European counterparts.
"The next generation of music players is going to be a phone. It's not going to be a dedicated device," he said. Indeed, retail trends seem to back him up, as more people are buying . From the second quarter in 2005 to the same quarter in 2006, music-enabled phones grew from 7 percent of all phones sold to 19 percent, according to The NPD Group. But owning a phone capable of playing music doesn't mean users necessarily take advantage of that feature, said Strother, NPD's research director for mobile devices.
Motorola and Apple's music phone, the Rokr, failed because of poor strategy, according to Sampath. The Rokr could be synced with an iTunes playlist, but was limited to about 100 songs, which isn't feasible in a world where playlists can reach into the thousands.
"Consumers are smart," he said. "You can't give them some lame device and call it a music phone."
The LG Chocolate attempts to solve the Rokr's space problem by including a Micro SD card slot, allowing for 2GB worth of songs to be plugged in. While a phone's battery would run out long before that size playlist in that situation, it's still too much fuss for casual users who just want to hear their music when they want it, according to Doherty.
"Someone who is PC-savvy will put (a data card) in, but that takes several minutes. It's not something I'm going to do as I'm racing into Manhattan for a meeting," he said.
Strother, for his part, believes "music-enabled phones are here and they're coming in a pretty big way. I think (Mercora is) going to have a crowded market, not now, but in the next six to 12 months. The (LG) Chocolate phone is just starting to get out there. A lot of non-smart phones have MP3 players in them. The storage issue isn't necessarily going away, but you're beginning to see mid-tier phones starting to have data cards."
Strother said he's not a big believer in the myth of an "iPod killer" coming out anytime soon. He says that growth in music phones "doesn't start to cannibalize iPods as much as grow the pie. The iPod's not going to go away that quickly."