Thursday, February 24, 2005

Music to the ears?

Inspired by an article in yesterday's Financial Times (registration required, etc., I'm not even going to bother posting a link), I had a look in Warner Music's S-4 filing with the SEC. A notable quote is:

" networks and phone handsets become more sophisticated, our music is
increasingly becoming available on mobile platforms through wireless service
providers via ring tones, ringback tones and music video downloads... We believe
the wireless market offers a more secure environment than does the internet,
with built-in digital rights management features operating inside privately
controlled networks, and thereby reduces our exposure to piracy."

They’re not alone in their bullishness – Universal Mobile is quoted in the same FT article projecting that the market will grow in value to €10 – 12bn by 2008 – 10.

Where I am having a bit of trouble is in the “privately controlled networks” assumption. For the physical networks themselves, yes, but human networks are formed by people with devices, and people tend to do strange and unorthodox things. Where, for example, is the operator control in transactions like Bluejacking, or its offshoot? And aren’t things only going to get more complicated with more onboard storage and Wi-Fi (and others) in the mix?

Assuming that the new consumer handsets incorporate some form of zero-conf (interestingly, the N900iL pictured above has a Linux OS and supports instant messaging and presence for up to 240 persons in a corporate WLAN environment, albeit via a server), I can see these ingredients setting the stage for a proliferation of applications along the lines of Pocketster. Maybe the labels will be able to insinuate themselves into this scenario and monetize it somehow – they are making moves in this direction in the wired world, and there are other options available with a more extensive social aspect. Simultaneously, some of them are clutching sticks as well as carrots.

As usual, the carriers are caught out on a limb in this scenario. Last week’s announcement from Nokia and Microsoft seemed like a pretty clear two-finger salute (note to non-British readers – this is a rude gesture, do not use it when on holiday here, unless Fight Club is your favorite film) to the carriers for getting carried away with their own perceived importance in the value chain (as was Motorola/Skype, and an earlier Nokia announcement on Python, in my view). Add in handset-to-handset connectivity, with no audit trail, and a business model based on the £1.50 download starts to look pretty ropey.

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