Music industry hopes upgrades boost mobile sector

Mon May 12, 2008 8:36am EDT

A customized, bejewelled Apple iPhone is pictured at the premiere of the film ''Tyler Perry's Meet The Browns'' in Hollywood, California March 13, 2008. REUTERS/Fred Prouser

A customized, bejewelled Apple iPhone is pictured at the premiere of the film ''Tyler Perry's Meet The Browns'' in Hollywood, California March 13, 2008.

Credit: Reuters/Fred Prouser

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DENVER (Billboard) - Perhaps no single device has had more impact on mobile music than Apple's iPhone. While only 6.7 percent of overall mobile customers use their phone to listen to music, rising to 27.9 percent for smartphone users, a full 74.1 percent of iPhone owners reported using the device as an MP3 player, according to M:Metrics.

The majority of this music, however, is transferred from the computer, rather than purchased through the phone and downloaded wirelessly. That may change this summer once Apple unveils what many expect will be a new version of the iconic device, featuring access to high-speed third-generation (3G) wireless networks.

The company has not made an official announcement, but signs point to an early June release. Apple has stopped restocking retailers with the current iPhone version, which analysts say is a sure sign that a new model is imminent. Apple's Worldwide Developers Conference is scheduled for June 9, and CEO Steve Jobs will deliver the keynote address.

Existing iPhone models connect to an older, slower wireless network but compensate with access to high-speed Wi-Fi Internet networks. Those using the iPhone to download music from iTunes, for instance, must use this Wi-Fi connection. While certainly faster than cellular networks, Wi-Fi does not offer nearly the same range of coverage.

Apple has sold more than 5 million iPhones worldwide, but many tech-savvy buyers, particularly in Europe, have been holding out for a 3G version. Upgrading the iPhone to 3G is considered crucial if Apple is to meet its stated goal of selling 10 million iPhones this year.

SMARTPHONES GET SMARTER

Even if Apple manages to reach its goal, the iPhone would still represent only about 1 percent of all mobile phones available. For the music industry, as significant as the iPhone mobile music usage figures are, the greater significance is how they inspire other device manufacturers to reach for similar levels. The company with the most to lose from the iPhone's momentum is Research in Motion, maker of the popular BlackBerry.

In the United States, RIM leads the smartphone market with a 40 percent share, but Apple is close behind at 28 percent, according to research group Canalys. Apple has begun incorporating support for Microsoft-based corporate e-mail applications into the iPhone, which is considered a direct attack on the BlackBerry.

So RIM is fighting back on the iPhone's turf -- entertainment. The two newest BlackBerry devices, the Pearl and the Curve, are aimed directly at the high-end consumer market. Available music applications include a MediaGuide service that identifies songs played on the radio; streaming XM Satellite Radio; a still-pending full-track downloads service from PureTracks; and a service called NuTsie from Melodeo that enables users to play their iTunes library on either device. It also plans to unveil a 3G version of the BlackBerry, expected later in August.

VERIZON'S VISION

But smart phones cover only a small part of the market. In the United States, there are only about 20 million smart phones, compared with 250 million mobile phones. What the music industry wants most is to turn every mobile phone into a music-playing device.

Which is why there are high hopes for Verizon Wireless and its plans with partner Rhapsody. Record labels are looking to Verizon -- with more than 67 million subscribers and a nationwide advertising campaign that heavily incorporates music -- as the standard-bearer for mobile music in the coming year.

When MTV Networks merged its Urge music service with Rhapsody in 2007, Verizon agreed to be the mobile platform for the service. The vision is that Rhapsody will become the default music service for Verizon Wireless, but exactly how that is implemented won't be clear until this summer.

Verizon Wireless and Rhapsody originally planned to launch the service in spring 2008, but RealNetworks CEO Rob Glaser says the process is three months behind schedule because Verizon Wireless wanted to make the service available to the widest spectrum of phones possible.

The upshot is that the mobile music effort will receive a double shot in the arm -- a few iPhone and BlackBerry owners using their phones to access a lot of music, as well as a whole lot of Verizon subscribers using their phones to access just a little.

Reuters/Billboard

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