Towards Music Download and Radio Broadcast Convergence in Mobile Communications Networks

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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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Outline

• Research background

• Research problem

• Research method

• Results and analysis

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• Research background

• Research problem

• Research method

• Results

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

• 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

)

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% EMI 13% War ner 12% Sony 16% BMG 8% Source: IFPI (2002)

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A taxonomy of mobile music

Audio/ video

clips

streaming

Ringtones

download

Music

download

Playback from

physical media

Digital

media

playback

FM radio

reception

Music playback

over portable

devices

Multimedia mobile terminal mobile music capabilities

Super-distribution

Music content

delivered

through mobile

networks

Mobile

music

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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

•

3 rd

_{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

• 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

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• Research background

• Research problem

• Research method

• Results

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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?

___________

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• Research background

• Research problem

• Research method

• Results

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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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• Research background

• Research problem

• Research method

• Results

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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

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First order service architecture

Radio

broa

dcas

t

Synchronize

_{d online port}

al

(including “re

_{verse chann}

el”)

Synchronized portal

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

Radio station

- online portal synchronized with radio broadcast

Content aggregation

- hosting of encoded

audio content

Re

co

rd L

abe

ls

Music downlo

_ad

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First order business model

Synchronized portal

Consumer

Mobile Operator

Radio station

Content aggregation

1. Pays bill

_{to mobile o}

perator,

including m

usic down

_{load fees}

(content +

_{bearer cha}

rges)

3b. Royalties

3a

. co

_m

m

iss

_io

n

$ (bearer

charges +

Service

commission)

$ (content fees

- operator commission

- radio station

commission

- record label

royalties)

$ Royalties

2. Content fees - commission

$ “Marketing

Commission”

Re

co

rd L

abe

ls

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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

one-click 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.

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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:

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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 <<1€/3MB. Aim at small

margins and high volumes.

• Role of complementary access technologies. Delayed transactions.

• Service providers/portals:

• Rise of a new class of MVNOs? Existing music brands / co-branding (e.g. radio

stations, music TVs).

• Device manufacturers:

• We are getting there in terms of technical features.

• Role of network operators should not be forgotten!

• Car stereos, other consumer electronics…

• Consumers:

• Ubiquity,

• Immediacy,

• Flexibility,

• Convenience and

• Personalization.

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Limited coverage

(delayed delivery),

service fee only.

Wide-area coverage

(immediate delivery),

service fee + transfer fee

Multi-access

Dual mode

Cellular/WLAN

device

ADSL Service

NID

_DSLAM

_BRAS

“Subscriber Premises”

RNC

SGSN

GGSN

MIP HA

PDG

WCDMA/HSPA Node B

“Internet”

BSF

Content aggregators

NAF

Multi-access

service core

Charging

machinery

Based on 3GPP(2)-WLAN interworking

WLAN

AP

Dual mode

Cellular/WLAN

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“Single sign-on” through 3GPP GAA

UE

HSS

BSF

Ua

Ub

Zh Zn

NAF

• Avoids requiring a registration with

each content provider

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• Research background

• Research problem

• Research method

• Results

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Conclusions

• Music download over mobile communication networks will need

to coexist with several other forms of music purchases

• Integration with broadcast radio reception as a driver for

mobile-impulsive music download

• Volume is key

• Enabling technologies are already in place or will be deployed

shortly

• Several business players involved. A lot of experimentation with

various services is expected.