Towards Music Download and Radio Broadcast ... - TKK - TML

Towards Music Download and Radio Broadcast Convergence in Mobile Communications Networks Sandro Grech and Sakari Luukkainen Wireless Telecommunications Symposium 27-29.04.2005

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Towards Music Download and Radio Broadcast Convergence in Mobile Communications Networks

Sandro Grech and Sakari Luukkainen

29.04.2005

Outline • Research background • Research problem • Research method • Results and analysis • Conclusions

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29.04.2005

• Research background • Research problem • Research method • Results • Conclusions

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The music industry in a nutshell • Mature oligopoly (“big five” record labels) • In 1947 six labels controlled 90% of the music industry • In 1999 five of their successors still controlled 84% of the industry • Market size: 40 billion euros annually • Music = information

• Public good = non-rival, non-excludable • Experience good • Repetitive good

Univer sal 24%

Other s 28%

Sony 16%

BMG 8% EMI 13%

War ner 12%

Source: IFPI (2002)

• Current dominant value chain and cost structure (physical distrib.):

Based on values reported by G. Prem Premkumar (2003)

• Declining sales attributed to online piracy (pirated digital distrib.) • From physical to digital distribution models (legal digital distrib., e.g. iTunes) • 99¢/track of which Apple gets 4¢ (source: BusinessWeek, April 4th 2005) 4



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A taxonomy of mobile music Mobile music

Music content delivered through mobile networks

Music playback over portable devices

Playback from physical media

Ringtones download

Digital media playback

FM radio reception

Superdistribution Audio/ video clips streaming

Music download

Multimedia mobile terminal mobile music capabilities

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Mobile music: state of the art • To date mostly limited to various flavours of ringtones • 2002 global ring tone sales of $1.5 billion • 3rd party content providers take up vast part of the revenue • Operators missed a sizeable revenue opportunity (keeping only SMS revenue)

• New wave of mobile music services launched from 2004 • • • •

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Enabled by 3G performance. Streaming (also video), Browse & download, Recognize & download,…

* Annouced on 27.04.2005

* FM radio * 4 GB HDD * 3G + WLAN * MP3, AAC, WMA & M4A * USB 2.0 + Bluetooth * 3.5mm stereo headset jack



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Research problem • Given, - Consumers are willing to pay for legal content obtained through digital distribution channels** • Then, - What are the assets and barriers of mobile digital music distribution vs. digital music distribution in the fixed Internet? - How can we introduce a service that builds on these assets and minimizes the barriers? - What are the business and technical implications? - What is the role of the various key business players? - What key innovations in infrastructure and business process are necessary in order to complement application software? - Can mobile operators repeat their success in mobilizing voice telephony also for digital music distribution? ___________ ** “iTunes Music Store sells 3.3 million Songs in one Week” (Apple press release, May 2003) 8



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Research method • First identify the key success factors for mobile music download • Then we turn these factors into a service model • We present and analyze a novel model for music download over mobile networks • We study the research phenomena taking into account all relevant players

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Key success factors • Music delivery over cellular networks needs to offer something unique, or • Provide a better, more convenient way of doing something that consumers are already familiar with • Several available music acquisition channels existing, and • Handheld devices are limited by UI, • BUT… how many times have you listened to a new track on the radio and couldn’t wait till it was aired again? • Would you be ready to pay to get instantaneously transferred to your music device at the touch of a button?

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First order service architecture i Rad

t dcas a o r ob

Synchronized portal

Radio station - online portal synchronized with radio broadcast

Record Labels

Synch ro (inclu nized onlin d in g “ e revers portal e chan nel”) Music down load

Mobile Device - FM broadcast reception - application client - 2.5/3G data - DRM client - media player

Mobile Operator - 2.5/3G infrastructure - billing platform - DRM platform

Content aggregation - hosting of encoded audio content

Other channels e.g. fixed Internet portals 13


Other channels e.g. traditional retail stores


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First order business model

Synchronized portal Radio station $ “Marketing Commission”

. 3a mm co

3b. Royalties 2. Content fees - commission

Mobile Operator $ (bearer charges + Service commission)

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Record Labels

ion iss

1. Pa ys inclu bill to m ding o musi bile oper (cont c at ent + d beare ownload or, fees r cha r g e s ) Consumer

Content aggregation $ (content fees - operator commission - radio station commission - record label royalties) Sandro Grech and Sakari Luukkainen

$ Royalties

29.04.2005

Assets and barriers • Assets: - Sampling (through FM radio), download (through cellular and WLAN), store (GB HDD), manage (incl. possibility to transfer), listen (including streaming towards your favorite stereo kit), purchase (including payment) from a single device at any time, in any location. - FM radio broadcast provides the “experience event”, followed by oneclick download. - FM radio acts as an implicit “advertising channel”. No need for heavy marketing campaigns as is required currently for ringtone downloads. - Intuitive user interface (no need to browse for content) - No stringent QoS requirements (as may be for music streaming) • Barriers - New business processes required. - Big players involved. - Everyone wants a slice of the pie… 15



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Roles and implications (1/2) • Music development:

• Transaction cost economics. Physical distribution requires a distribution market mechanism. • Record labels distort the market by over promoting a small number of works. • New communication model between performers and audiences. Attenuation of biased control?

• Music production and publishing:

• Potential to become a new revenue channel. • Demand for DRM schemes. • Some performers may choose to bypass this step (no physical distribution channels required).

• Music acquisition and aggregation:

• Existing music aggregators from the fixed Internet. • Radio stations.

• Mobile platform and application providers:

• Incumbent mobile players as well as new players are already active here.

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Roles and implications (2/2) • Network operators:

• Provide the wireless channel and possibly micro-payment, and single sign-on echosystem. • Need to device a viable business case based on