Stuck In First Gear? Growth Questions Surround Mobile Content, Music

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The mobile industry has one of the most explosive growth curves in history.

Over the past two decades, industrialized nations have shifted from niche usage to super-saturation, and less-developed nations have leapfrogged nonexistent landline infrastructures.

Current estimates peg the total number of active mobile subscriptions at roughly 3 billion, and recently-released data counted 500 million music-enabled phone shipments last year alone.

Analysts debate the specifics, though few would argue that mobile telephony is a technology enjoying massive adoption.  All of that has enriched a range of companies, investors, and executives, and transformed economies in the process.

But flattening voice revenues are shifting the attention towards content, and not everyone is pleased with early-stage adoption levels.  In Las Vegas on Monday, a certain level of frustration was palpable at Billboard Mobile Entertainment Live, a pre-CTIA symposium.

Across various forms of mobile entertainment, executives widely agreed that mobile content evolution remains in its earliest stages.  But carriers, manufacturers, content owners, and investors struggled through internal disagreements and disappointing adoption levels.

Others were more philosophical on the prospects, and optimism was certainly evident.  NBC Universal chief digital officer George Kliavkoff also acknowledged the “early days” of a developing market, and suggested that ambitious investors were pressurizing a formative stage.  Others, like Matthew Knowles, are drawing massive mobile-related profits from artists Beyonce and Kelly Rowland.

But those revenues are not the norm for the mobile music sector.  Ringtone sales are now sagging, and alternative assets like ringback tones, over-the-air (OTA) downloads, and mobile-based subscriptions are failing to cover the gap.

Asian markets like Japan and South Korea offer exceptions to this profile, though Europe is starting to resemble the United States when it comes to broader mobile music consumer adoption trends.  Instead of a totally mobile-centric experience, the device seems better placed within the context of a multi-platform setup, one that includes the all-important PC.  “The PC is central to acquisition, and the phone becomes the listening environment,” explained Yankee Group analyst Mike Goodman.  “You have to separate listening from acquiring, they are two totally different things.”

That distinction helps to explain the rapid rise of sideloading, a practice that involves the porting of PC-based content to the mobile device.  In fact, carriers like Alltel in the United States are taking steps to facilitate sideloading behavior, rather than fight the trend.  “That’s where my music is sitting, on my PC,” Goodman continued.

The result is a flatter OTA growth trajectory, especially in the United States.  Jeff Dodes, senior vice president of Digital Business Operations at Zomba/Jive, pointed to a 154 percent growth curve in OTA content last year.  But Dodes acknowledged that absolute volumes were “modest,” and a minimal revenue contributor at best.

But a market this big undoubtedly carries multiple demographics, especially on a global scale.  Napster president Brad Duea, a staunch advocate of both mobile and PC-based subscription platforms, pointed to an Asian experience that begins and ends with the mobile device.  And few would contest that Asian countries – as well as developing nations – are more tightly wrapped around mobile devices.

But on Western soils, a different consumer pattern appears more dominant.  In fact, the biggest sideloading threat could be coming form a decidedly non-mobile device, the iPod.  “When an iPod gets into a user’s hands, they don’t want to give it up,” Goodman asserted.  “This is a device with very high satisfaction levels.”

Report by publisher Paul Resnikoff in Las Vegas.