Discuss With Examples The Potential Impact Of Mobile Phone Technology On The Related Revenues Of The Music Business

Discuss with examples the potential impact of mobile phone technology on the related revenues of the music business Mobile phone technology is improving at an exponential rate. Everything is now available in one handheld device smaller than a packet of cigarettes. You can call, text, watch TV, take photographs, record videos, play games, surf the internet and of course listen to music. Smartphones are available from all the mobile phone manufacturers such as Nokia, Sony, Blackberry and Apple. A mobile phone manufacturer creates the physical product of the phone. To contact other people or access the internet with a phone handset you must have a network operator. “Your choice of network determines the coverage you receive, the price you pay for calls and the phones that are available”( http://www.uswitch.com/mobiles/networks/ [Accessed: 09/12/09]), for example until recently in the UK the Apple iPhone was only available with the O2 network provider but is now also available with Vodafone and Orange. There are currently five mobile phone network operators in the UK, 3, O2, TMobile, Orange and Vodafone. To use most of the online functions available on smartphones a high-speed 3G data connection is required. “According to telecoms regulator Ofcom, more than 87 per cent of the UK is now connected to the 3G network” (http://www.uswitch.com/mobiles/networks/ [Accessed: 09/12/09]). Companies such as Virgin are Virtual Network Operators, they do not own a network themselves but buy airtime from other neworks and rebrand it under there own company’s name. Collecting societies provide a way to ensure that the correct sources of musical material are accredited and paid. To make music available for mobile users in the UK through either streaming or download three rights must be accquired from collecting societies depending on the type of download. The sound recording right must be accquired from PPL which is owned by the the record companies and represents performers and owners of sound recordings. Each time a recording is downloaded or streamed the performer Matthew Young

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who made that specific recording will receive an income. In the context of a ringtone that is not full-audio recording nothing needs to be payed to PPL. The rights to the song must be obtained from PRS who represent the songwriters and composers. PRS ensure the correct source of the creation of the song receive payment. This applies to all downloads and streamed songs even if the orignal recording is not being used the original songwriter must receive payment unless the songwriter/composer has been dead for over 70 years. In this situation the song is in the creative commons so free to use. The mechanical right is provided by MCPS and represents reproduction of the song in sound recording, creation of a physical copy. In the case of mobile music no physical copy exists but “the download of a computer file containing music on to an MP3 or similar player or a computer hard disc is treated as a reproduction akin to a physical reproduction such as a CD and this is now accepted in the EU and confirmed in UK legislation by the 2003 amendment act”(Harrison 2008: 91). When streaming music on a mobile device mechanical rights do not need to be paid as the listener has not bought the right to own the track but is just listening to it from an online library. The owner of the library however will have to pay mechanical rights but only once for the song. Digital and mobile music has created a strong new revenue stream for the music industry and has moved from ringtones to full track downloads but as digital sales continue to increase mobile music is currently suffering falling sales in most of the world except for the “BRIC nations mobile has for a while been the only real means to access legal digital music for the mass market” (Musically: The Report, Issue 224, 06/08/09, P6). In 2008 UK mobile music sales fell -10.6% which was the smallest decrease among the top five European markets, Spain’s -77% was the biggest drop in mobile sales. The “top five European markets decreased by -6.4% in 2008” (Musically: The Report, Issue 224, 06/08/09, P6) the only anomaly among them was France which managed to increase mobile sales by +16.7%. The fall in mobile music sales cannot be attributed to the “current economic climate since it was recorded before the recession began to bite” (Musically: The Report, Issue 224, 06/08/09, P6). The same decrease in mobile music sales has also

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occurred in the US which fell “by -9.8% from $474.6m to $428m” (Musically: The Report, Issue 224, 06/08/09, P7) in 2008. South Korea has 45 million mobile subscriptions (NOTE) which is nearly one for each of the countries 48.5 million population; it is more importantly “the first market in the world where digital music sales surpassed physical” (Musically: The Report, Issue 224, 06/08/09, P10). Part of the reason digital music has been such a success in South Korea is the “subscription services offered by the local telcos SK Telecom and Korea Telecom” (Musically: The Report, Issue 224, 06/08/09, P10), the network providers are offering various download and streaming subscription packages with there usual services. With an estimated 50% market share (NOTE) MelOn, a digital music provider ran by SK Telecom, offers it’s customers unlimited music downloads and streaming to there mobile phones, PC’s and MP3 players for “$3.6 USD per month” (Musically: The Report, Issue 224, 06/08/09, P10) but also offer a streaming only service for $2.4 USD. MelOn have had over “10 million single track downloads in the first half of 2009” (Musically: The Report, Issue 224, 06/08/09, P10). South Korea have also recently changed there royalty system to ensure that the rightsholders of the music are receiving a fairer income from mobile downloads. In Columbia music piracy both physical and digital are high, “many Colombians remain unaware there are legal options to buy music digitally” (Musically: The Report, Issue 230, 29/10/09, P9) and digital only accounts for “one-fifth of all music sales” (Musically: The Report, Issue 230, 29/10/09, P9). There are 40.7m mobile subscriptions and mobile downloads are the market leader in digital music sales “accounting for 86% of all digital sales” (Musically: The Report, Issue 230, 29/10/09, P9). As in South Korea the main digital music services are ran by the telcos but are less effective with songs being sold individually for as much as $2.7 USD. In Serbia where there is virtually no legal protection for copyright material “piracy is still the preferred method of music consumption” (Musically: The Report, Issue 215, 02/04/09, P7) digital music appears to be doing rather Matthew Young

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badly accounting for “just slightly more than 0% of recorded music sales” (Musically: The Report, Issue 215, 02/04/09, P7). But as with South Korea and Columbia the local telco, Telenor, is offering a mobile music download service and “claims to be selling in the vicinity of 40,000 to 50,000 full track downloads per month” (Musically: The Report, Issue 215, 02/04/09, P7) which considering the small amount of mobile subscriptions in the country, 8.453 million (2007), is flourishing. With piracy being so rife in Serbia to ensure it’s success Telenor has had to offer its music service users “music before it’s available anywhere else (including p2p networks)” (Musically: The Report, Issue 215, 02/04/09, P7). America’s neighbour to the north, Canada are showing an increase in digital sales and “mobile content grew by around 5%” (Musically: The Report, Issue 229, 15/10/09, P10) in 2008. Although there mobile download sector isn’t as affluent as those mentioned above “Canada’s big three mobile operators — Bell, Rogers and Telus — now provide an over-the-air music download and subscription service. “(Musically: The Report, Issue 229, 15/10/09, P10) But Canada is suffering from heavy BitTorrent based piracy and massive physical copy piracy also which is damaging the mobile music market. Mobile music markets succeed where this is the simplest option to access legal music. Even in countries where piracy is uncontrolled and collecting societies are not operating people still want access to legal music. The local telcos supplying a music download service is proving successful and is offering an easy to use easily incorporated legal method to access music within a billed subscription service. It would appear that being offered the service by a network provider rather than phone manufacturer makes all the difference as well. Nokia’s unlimited download service ‘Comes With Music’ is proving less successful where “total uptake across nine markets around the world stands at a mere 107,000” (Musically: The Report, Issue 229, 15/10/09, P1) over a year after its launch. One of the main problems with the CWM service was peoples failure to believe that unlimited music downloads where an option “consumers approached it cautiously or cynically, looking for the Matthew Young

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“catch”” (Musically: The Report, Issue 229, 15/10/09, P3). People are concerned that if it seems to good to be true it probably is and the complicated nature of the packages involved with the product are slowing sales dramatically, “the statistics are it takes 15 seconds to sell a phone in Carphone Warehouse, but takes over a minute to sell a solution like Comes With Music” (Musically: The Report, Issue 226, 03/09/09, P12). Only serving one unlimited download service is standing in the way of CWM’s success. In surveys conducted by Ipsos MORI it was shown that “20% preferred à la carte purchasing and granular billing” (Musically: The Report, Issue 227, 17/09/09, P2) one of the subscription options available with South Korea’s MelOn service. It’s easy to see why people are dubious of what CWM is offering when Spotify’s App for Apple’s iPhone offers its premium users only streamed music with no ownership for £9.99 a month. Incorporating music downloads into the cost of subscription does seem to be the way to go judging by its success in other countries but Nokia just don’t seem to have got the business model right. Or are they just aiming at the wrong market? The majority share of CWM’s users are based in the UK but only 27% of UK adults listen to music on there mobiles once a month (Musically: The Report, Issue 226, 03/09/09, P10) which is a very small share compared to China where the statistic is 70%. This is much more significant when you consider that China has 628 million mobile phone subscriptions and “the total end user spend on mobile music will hit USD $2.225 billion for 2009” (Musically: The Report, Issue 226, 03/09/09, P8)

Listening to music on a mobile phone is not a new concept but being able to stream it from the internet for free on the move is. The launch of Apples ‘App Store’ in July last year has seen “more than 800 million downloads” (Musically: The Report, Issue 215, 02/04/09, P5). The other phone companies aren’t missing out on this action either with all of them jumping on the ‘App Store’ band wagon. Amongst the 26,000+ apps on offer by Apple there are various music streaming apps, some free and some with added costs.

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Pandora, a free radio streaming website, had “the most downloaded iPhone application last year, and by March this year had notched up more than four million downloads.” (Musically: The Report, Issue 224, 06/08/09, P1). Apple has also recently accepted Spotify’s App into its store. This will allow Spotify’s premium users who pay £9.99 a month to listen to full albums on the move without ever having to purchase the songs. Although these mainly advert funded music players seem like an unfeasible business model with even the founder of Pandora Tim Westergren stating “We've been at this for four years now and we're fighting to get into the black” (Musically: The Report, Issue 232, 26/11/09, P3) free legal music is the best competitor to illegal downloads. Even though free streaming is contributing to falling mobile download sales at least these services still have to pay out to some collecting societies so are more profitable to the music industry and the artists. By streaming free music mechanical don’t need to be paid as the listener never owns a copy of the song. Illegal downloads will always be a problem and major source of competition to the mobile download market “a new generation of music fans are growing up believing that music should be free” (Musically: The Report, Issue 224, 06/08/09, P6) and in the digital age where it is so easy to download music from a Torrent site or get it bluetoothed from a friend who already has it’s no surprise. Laws to cut internet access on a three strike basis for internet users who continue to use P2P file sharing services are continually blocked by the EU and UK claiming we don’t have the right to block someone’s internet access. But statistics show that 42% of UK adults think P2P should be illegal (Musically: The Report, Issue 230, 29/10/09, P11) and most internet users would stop file sharing if these laws where to be brought into place. In countries where such laws have been brought into place they do work “60% of Swedish file-sharers have stopped illegal downloads since the introduction of IPRED law” (Musically: The Report, Issue 230, 29/10/09, P11). So if downloading files illegally is breaking copyright law then why can’t the government step in and do something about it, not stopping internet access for stealing Intellectual Property because everyone deserves access to the internet is like saying ‘we won’t send you to jail for robbing that bank because Matthew Young

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it’s not fair for you to be locked inside a jail all day’. If piracy is such an issue in the music industry and is more importantly illegal why don’t the relative forces step in and do something about it when an option is available.

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REFERENCES http://news.bbc.co.uk/1/hi/8225731.stm [Accessed: 09/12/09] http://www.uswitch.com/mobiles/networks/ [Accessed: 09/12/09] http://www.powerupmobile.com/ [Accessed: 09/12/09] http://www.telegraph.co.uk/technology/apple/6254098/Apple-flexes-iPhonemuscle-with-mobile-networks.html [Accessed: 09/12/09] http://www.intomobile.com/2009/12/06/apples-lala-acquisition-points-tostreaming-itunes-music.html [Accessed: 09/12/09] http://www.mustard-mg.com/musbiz/mechanicalrights.htm [Accessed: 09/12/09] http://www.mustard-mg.com/musbiz/copyrightgeneral.htm[Accessed: 09/12/09] Ann Harrison (2008) the copyright and related rights regulation 2003: music the business the essential guide to the law and the deals: fully revised and updated 4th edition: London: Virgin Books Ltd Musically: The Report, Issue 215, 02/04/09, P5 & P7 Musically: The Report, Issue 224, 06/08/09, P6, 7 & 10 Musically: The Report, Issue 226, 03/09/09, P8, P10 &P12 Musically: The Report, Issue 227, 17/09/09, P2 Musically: The Report, Issue 229, 15/10/09, P1, P3 & P10 Musically: The Report, Issue 230, 29/10/09, P9 & P11 Musically: The Report, Issue 232, 26/11/09, P3 (All statistical data taken form the above Musically reports)

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