3 Your Mind:
3GSM Round Up

Music services and functionality were key to this year’s 3GSM and the music and mobile industries are looking to a bumper year for the music-to-mobile market. Here Gary Smith overviews the key developments and announcements, considering where and how the sector will develop. With so many services launching, where will interoperability fit in?

In amongst the 35,000 participants and innumerable stands at this year’s 3GSM conference it is not hard to forget the fact that a river of red ink underscores the world of mobile phone operators. Such was the showboating and the dubiously posited optimism that there was more than a whiff of that time - a mere five years ago, in fact - just before the Internet bubble burst.

The big difference this time, though, is that the debts are so huge and the investors largely corporate (as opposed to private) that the mobile phone industry will not be allowed to fail, even though 3G uptake is sluggish and coverage is patchy even in cities like London and Paris.

Operators and vendors are, however, convinced of the potential of music and video downloads and an announcement from Europe's first 3G operator suggests that the optimism prevalent at both Midem in January and 3GSM may be well founded. Hutchison-Whampoa-owned 3 UK announced last month that it has seen in excess of 10M music videos downloaded by its customers on their mobiles since the launch of its Video Jukebox service six months ago.

The significance of Microsoft's tie-up with Nokia, which will allow music files to be transferred from PCs to Nokia devices, lies in its promise of the sort of fixed-line-to-mobile interoperability that both the mobile and content industries know is crucial for the long-term growth of the mobile content market. On top of that, Sony Ericsson’s President, Miles Flint, announced it would be selling music-oriented devices under Sony's Walkman brand. “We intend to introduce a credible music player in our next generation of phones,” Flint said during Wednesday’s Fireside Chat session, “which will, like our Quick Share technology has done for taking and sending pictures, drastically cut down the number of clicks needed to perform functions such as downloading and browsing music.”

There was, nevertheless, a large black cloud present in the form of the announcement in the lead-up to the event by licensing body MPEG-LA of a $l (£0.52/€0.76) levy on each handset running the OMA’s DRM software, plus a 1% fee for each content transaction. This took the majority of operators by surprise and, given the fact that a company like Vodafone can expect to sell anything up to 100M handsets in a year, was met with barely disguised fury. “We will not be held hostage,” Guy Laurence, Global Consumer Marketing Director at Vodafone, said. “If the OMA partners are going to be greedy it will slow market growth.” Behind the scenes however, negotiations are underway accompanied by the feeling that MPEG-LA’s announcement was primarily an opening gambit.

Another announcement, by Swiss company SDC, contains the seed of something much more positive. SDC has invented a tagging system - which has been licensed to music-recognition service Shazam - which finally gives some credibility to the lip service paid to ‘the power of the impulse’ in mobile music sales.

By enabling people to buy the music that has just been identified by Shazam, SDC has created a true impulse engine. “Impulse buying requires the ability to be impulsive,” Michael Bornhausser, CEO of SDC, said. “From the point at which the music is identified it takes three clicks to buy the song.”

Despite the SDC/Shazam deal, Bornhausser has mixed feelings about the mobile music market. “It’s a mistake to talk about mobile music,” he said. “You need to include downloads to fixed-line devices and set-top boxes, then you start to have real convergence and a real commercial proposition.” Customers undoubtedly want interoperability. From a technical standpoint it is already possible, but there are still barriers, coming mainly from the mobile operators. “They should be talking to ISPs and the marketing departments of record companies,” Bornhausser said.

The levels of interoperability and reintegration that could offer the levels of value for money that will really drive the content market forward will, somewhat ironically, most probably come from old school monopolies such as France Telecom and Deutsche Telecom, both of whom are perfectly placed to encourage interoperability by virtue of the fact that they own fixed-line and wireless networks.

Gary Smith
Gary is a freelance reporter specialising in content and convergent media.