Getting the hang of the music industry Part 5: Music services from 3, the operator's perspective

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December 15, 2006 Getting the hang of the music industry Part 5: Music services from 3, the operator's perspective	[Back]

Taking our music series a step further, Sony Ericsson Developer World spoke to the global 3G operator, 3, about the music download services they offer their mobile phone subscribers. In addition to talking about their market leading position in Sweden, 3 also discuss the importance of music in other geographical markets, current trends and future services.

In case you missed them, part one in the series presents the key stakeholders within the music business, part two introduces data compression, bandwidth management and a technical overview of audio codecs, part three outlines licensing, copyright ownership and DRM, and part four gives examples of music-related mobile phone content and audio support available for Sony Ericsson Java ME and Symbian OS mobile phones:

3 is number 1 in Sweden

3, the global 3G operator owned by Hong Kong's Hutchison Whampoa, has found tremendous success in the digital music download market. 3 Scandinavia, a joint venture between Hutchinson Whampoa and Investor and part of the global 3 group, commands 55 percent of the digital download market in Sweden, making it number one in that country. According to Anders Svensson, the music content manager for 3 Scandinavia, this puts the operator in a unique position, "In almost every other country, Apple's iTunes is the market leader," he says.

Market leader
3 holds 3G licenses in Australia, Austria, Denmark, Hong Kong, Ireland, Italy, Norway, Sweden, and the UK and serves more than 13 million customers worldwide. The company focuses on mobile entertainment services, with a strong emphasis on mobile TV and music. 3 was the first mobile network to launch full-length music videos in 2004 and has maintained its status as a front runner in the market with promotions such as launching the Robbie Williams single "Misunderstood" on the 3 network ahead of TV and radio.

Screenshot from 3's UK website featuring the Sony Ericsson W850 Walkman phone.

Users can subscribe to a music package that offers unlimited streaming of on demand audio and video programming based around both user-created and pre-programmed playlists. In addition to the music package, 3 supports streaming radio channels as well as an audio and video download store that supports the unique option of dual download for audio content. In Sweden and Denmark 15 percent of 3's customers subscribe to the music services.

3 in the UK
Sweden is not the only country where 3 is making a mark. According to the Official Charts Company (OCC), the body responsible for compiling the UK music charts, with average sales of over 200,000 tracks per month, 3's UK audio service has made up over 53 percent of mobile audio track downloads as of March of 2006. UK recording artist James Blunt alone has sold over 80,000 copies of his single "Goodbye my Lover" in the UK with more than 10 percent of those downloads delivered via the 3 network. OCC figures also showed that 3's audio sales accounted for 3.7 percent of the combined singles chart and 7.5 percent of the download chart for the first quarter of 2006.

3's brand
Music has been an invaluable tool for developing 3's brand as well.

"Most of the marketing campaigns have been built up around music and artists," says Svensson.

"3 stands for Music whereas compared to Tele-2/Comviq who promote themselves based on low prices for voice. So from a branding and positioning perspective, we work closely with music."

To that end, 3 runs a wide variety of music-themed promotions including TV-commercials, music magazines sent together with invoices, and MMSs to all music subscribers every week.

Anders Svensson, Music Content Manager for 3 Scandinavia.

Ease of use: dual download
Dual download is both popular and convenient says Svensson.

"Users can download a song up to five times, to both phones and computers. You can buy a song on the web portal, download it to your computer and send it to your phone at the same time. There is no need to connect your phone to your computer to synchronize your music library. This feature works in both directions as well. A song purchased from the mobile portal can be downloaded directly to your computer as well," he says.

Online playlists are also proving quite popular. Playlists are managed on the website. Users can choose any song from 3's library and as soon as it is created it is available to be streamed on the phone with no downloads required. Svensson reports that since the introduction of the on demand playlist service, streaming has been growing at a faster pace than downloads, but demand for both services continues to increase.

Ease of use is important to the success of the service.

"Now people can get songs right away," Svensson explains, "The charges come directly on the phone invoice. People want to get songs immediately. If they hear it on the radio, they should be able to buy it right then," he says. "Studies have found that if a user has to wait a week or more to buy a song, they will probably download it illegally before then."

3's online music store, 3MusicStore.

Trends
Svensson, who worked for Sweden's top commercial radio station, RIX FM, before going to work for 3 has seen big changes in record companies attitude toward the digital download market.

"All the record companies are now ready to begin working in the digital market," he says. "This is new in the last two years. Before that they didn't know what to do. Contracts didn't cover the digital market then. Now the record companies have their own digital departments."

The hardware landscape is changing also. More and more music-capable phones such as Sony Ericsson's Walkman line are being sold. Svensson quotes a recent survey covering consumer's attitudes to using phones as digital music players as opposed to traditional, stand-alone players. 80 percent of the people surveyed said they would be willing to use a phone as a music player as long if it had sufficient memory capacity for their music library.

New services from 3

The company is not content to rest on its laurels, however.

"We constantly develop the existing offering by adding new functionality and services, both on a service level and in packaging towards customers," says Svensson.

The first step to expanding the service is to add depth to the offering.

"We want artists and labels to give us as much content as possible – music, live versions, music videos, and more. Also exclusive things for operators to sell," says Svensson. "We are interested in services that make it easier for 3 customers to buy a song," he says.

TrackID
Sony Ericsson has worked closely with 3 in several makets to maximise the attractiveness of Sony Ericsson's TrackID service to the end user by closely integrating it with 3's Music Store. On the Sony Ericsson W850 and W950, in some markets (currently Sweden, Denmark, Italy and the UK) when a user identifies the desired track using TrackID and the Gracenote database, he or she is directed to the specific identified track (if in existence) on 3's Music Store and is presented with the option of purchasing it. In other 3 markets, users are directed to the 3MusicStore in general. The end result is that a consumer, with only a few clicks, can go from hearing the desired track on the radio or in their surroundings to purchasing that specific track from 3: a great opportunity for 3 and Sony Ericsson as well.

X-Series: broadband internet
The X-Series from 3 marks the beginning of the internet via mobile broadband, and heralds a new way of doing business for mobile network operators. It extends several of the core applications and uses of the broadband internet to the mobile phone, with a new pricing model. The X-Series from 3 is supported by the leading internet companies, cutting-edge handsets from the world's leading mobile manufacturers and premium customer service. The X-Series from 3 will be priced like fixed line broadband, offering use of mobile internet services free at the time of use, for a flat fee.

The Sony Ericsson W950 is one of two mobile phones on which the X-Series will initially be offered. The W950 Walkman phone is a strong multilmedia device with its 4GB memory and large touch screen, and is a strong showcase for the X-Series web and music services and applications.

In 3's press release, Miles Flint, President of Sony Ericsson said, "Today's sophisticated consumers want complex services at their fingertips and our devices are the physical touch-point between Internet services and the consumer. But consumers don't just want a functional device, they want something highly individual. That's what the W950i Walkman phone brings to the X-Series." Read more>>

Beyond streaming and downloading
Svensson sees a great deal of potential in services that go beyond simple streaming and downloading.

"Name tones, in which an artist records a special message that incorporates the caller's are becoming popular."

Music related games such as quizzes could also be valuable additions to the portfolio.

Music fans are flocking in droves to web-based community sites such as MySpace where they can get current news, photos, touring schedules and music clips from their favorite bands. Svensson thinks the mobile environment is a perfect fit for this type of activity.

"I would like to see community sites move part of their operation into the mobile world," he says. "In the future it would be great if bands could upload information and music to the 3 portal in the way they do it with MySpace now."

Svensson also sees a great deal of potential in music recommendation services like last.fm and Pandora. Last.fm analyzes music played on a user's computer to create a listener profile which it then uses to make personalized recommendations, connect users who share similar tastes, provide custom radio streams, and more. Pandora, which is an offshoot of the Music Genome Project, analyzes the unique properties of a song to create a "musical DNA profile." It then uses these profiles to make recommendations based on user preferences. Music recommendation services aim to introduce listeners to artists they may not be familiar with, but might enjoy.

"You should also be able to discover new music in the 3 portal," says Svensson.

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