Mobile Music: Digital Music Distribution over Mobile Networks

MOBILE MUSIC: DIGITAL MUSIC DISTRIBUTION

OVER MOBILE NETWORKS

Abstract

The transition from physical to digital music distribution is bound to have profound implications on the music industry. So far, most of the activity related to digital music distribution has been centred on the fixed Internet. In the meantime, mobile operators have been making significant investments in extending their network capabilities to support data services. This paper includes an analysis of the current situation of music delivery in mobile networks, as well as future prospects enabled by the technical evolution of mobile networks. The overall feasibility, and the potentially most viable forms of, mobile music business are studied.

Key Words

Music industry, mobile communications, digital distribution, e-commerce, information economics.

1. Introduction

Until recently, ownership of recorded music has been always tied to a physical medium. The introduction of new encoding techniques, most notably the MP3 format, together with other technological developments towards the turn of the millennium have detached music from any physical medium. One of the most fundamental implications of this technological development is that it enables digital distribution of music. This has profound implications on the music industry, which heavily relies on physical distribution models. Initially disdained by the incumbent industry players, this new distribution channel has until recently only been successful as a channel for pirated content, enabled by a wave of peer-to-peer distribution technologies, effectively draining revenues from the incumbent players.

A second wave of digital music distribution soon followed, with the intent of diverting users from pirated content from peer-to-peer networks, while still offering the benefits enabled by digital music distribution. So far we have witnessed the success of at least one of the commercial services that is based on digital music distribution, namely Apple iTunes, which currently dominates the market success. The aim of this paper is to study the potential of mobile operators to repeat their success in mobilizing voice telephony also for digital music distribution.

There is a wide range of definitions of mobile music, some limited to music playback over portable devices, and full-fledged distribution and consumption of music tracks on multimedia cellular terminals on the other extreme. This paper focuses on the latter definition, i.e. music download of entire music tracks over mobile networks for later consumption. As Figure 1 shows there are many other services that can fall under the definition of mobile music, but are out of the scope of this paper.

Figure 1 - Mobile music taxonomy (focus of this paper highlighted)

Before mobile operators can leverage any opportunities enabled by digital music distribution there are various technological gaps that need to be addressed. But more importantly, new business models and value chains need to be devised. This paper outlines the technical evolution that will shape the mobile music market place. The business aspects are studied with respect to a specific distribution chain which leverages the assets that differentiate mobile communication from fixed Internet.

The rest of the paper is organized as follows. Section 2 presents the music industry foundations. This is followed by an overview of the mobile industry, in section 3. In section 4 a value chain for mobile music distribution is presented. The technical and business implications of mobile music are studied from the perspective of each of the various players in the value chain. Finally, section 5 summarizes the conclusions from this study

2. Music industry foundations

Before embarking on any discussion about mobile digital music distribution, this section gives an overview of the foundations that form the music industry. Economic properties, history of innovation and market structure of the current music industry are covered in the following subsections.

2.1 The economic properties of music

In economic terms, recorded music is non-rival and non-excludable, i.e. once the good is provided, additional resource cost of another person consuming the good is zero and to prevent anyone from consuming it is either very expensive or impossible. Consequently, recorded music exhibits the economic properties of information. One of the fundamental economic properties of digital information deals with its cost structure characterized by low reproduction costs. Another noteworthy attribute that can be associated with music is its nature as an experience good. According to the definition by Shapiro and Varian, (1988), music can be classified as an experience good since it needs to be experienced to know what it is. According to other definitions by Hampe and Schwabe (2001), music is a repetitive good, since unlike many other types of information, if one likes a song, one is inclined to listen to it over and over again. It is essential to keep these economic properties in mind when considering mobile music distribution.

2.2 History of innovation in the music industry

The history of music distribution sees its birth in the early days when music printing was the only means of distribution. Subsequently, the ability of audio recording and duplication emerged, eventually giving rise to mass-production capabilities using various technologies as storage media (Figure 2).

Despite the continuous stream of innovation, the record labels have remained largely unchanged in the way they organize themselves to produce, market and distribute music. In 1947 six labels controlled 90% of the industry. Today, five of their successors still control 84% of the industry (Millennium Group, 2001).

Figure 2 вЂ" Timeline of innovations in the recorded music industry

Towards the turn of the millennium, a new wave of innovations of a totally different nature started to emerge. Ever since the introduction of convenient audio codecs, CD burners and sound-card hardware became readily available to computer users, new forms of music distribution have been enabled. Coupled with an Internet connection and the development