Mobile Music is Hot Topic, but Consumers Remain Cool
Playing and downloading music to mobile devices is one of the most-discussed trends in wireless data services today. Yet for all the hype, the industry is still in an experimental mode.
To clear the proverbial air surrounding mobile music, The NPD Group’s wireless practice recently asked consumers about their mobile music experiences. The data was designed to help the industry get a better idea about mobile music consumer behavior, pricing models and price sensitivity. In general, NPD found that mobile music may be a hot topic, but consumer behavior has yet to really sizzle.
What follows is a list of 10 critical facts gleaned from NPD’s research, and information about how those facts specifically affect the mobile music business:
1. Sixty-five percent of consumers interested in listening to music on their phones say it is “extremely” or “very important” for them to also be able to listen to these songs on their PCs and MP3 players.
- Consumers clearly want device freedom and interoperability. Cumbersome Digital Rights Management (DRM) schemes only put a damper on this market. For greater success, carriers, handset manufacturers and record labels should develop mobile music services that offer more integrated solutions.
2. Nearly six percent of mobile phones sold in the fourth quarter of 2005 were music-player enabled – that’s just two million devices.
- The sales volume of the current crop of music-enabled mobile phones - those that hold dozens or hundreds of songs - is dwarfed by hard-drive digital music. However, these types of phones are beginning to make a push into the lower-end, flash-based player market that tends to appeal to consumers who are not hard-core music collectors or who have limited financial resources.
3. More than one million mobile phones capable of downloading full songs over the air (OTA) via the Sprint Music Store or Verizon’s VCast Music have been sold, as of February 2006.
- Though not a jaw-dropping figure, the fact that more than two million downloads from the Sprint Music Store – and some volume approaching that from Verizon – shows consumers will download full songs on a trial basis. As prices fall for OTA-download-capable phones, we expect more consumers will buy them, and OTA download volumes will rise in the near term.
4. A little more than half of consumers who pay to download music online return to buy more songs over a six-month period.
- If this behavior is indicative of OTA downloading, we can expect a quick ramp up in sales volumes, as music-enabled handsets get into the market and consumers try OTA downloading. This situation puts additional pressure on the carriers to continue attracting a steady stream of new buyers, or else they run the risk of a flattened growth curve.
5. In an average month, digital music player owners transfer 253 songs to their players.
- Consumers use their digital music players to collect large volumes of music -- more than they can typically listen to over a short period of time. For typical digital music player owners, limited storage below this level may not be enough to attract them as buyers or users of music-enabled phones; however, there is still ample demand for phones with more limited song capacity.
6. Three percent of songs transferred to digital music players are legal online purchases or tethered subscription tracks.
- Most music on digital players does not come from legal online music services, so it is critical for carriers and handset manufacturers to allow consumers to side-load content. If they don’t, there won’t be enough content to compel consumers to listen to music on their phones. Side-loading will also encourage more listening, which leads to more spontaneous purchases.
7. Three out of four consumers interested in MP3 player functionality on their phones say their desired song capacity is 100 songs or fewer.
- This number is far fewer than the average number of songs uploaded to digital music players per month, and it indicates these consumers aren't necessarily the same ones who have digital music players and actively use them. Also, many do not envision using a mobile music phone the same way they use a digital music player. Listening to music on a mobile phone might be what’s described as “snack listening” – behavior that focuses on the latest song releases, weekly favorites, and so on.
8. More than 86 percent of wireless subscribers interested in music-enabled phones say they would continue to use their current digital music player the same amount, or slightly less than they did before using a mobile phone to listen to music.
- For these consumers, the value proposition of a converged phone-music player is in always having such a device with them, so they can listen to music at times they did not expect to do so. Plus they can purchase music on the fly from OTA services. For carriers and handset manufacturers, it’s also crucial to target consumers who do not already own a digital music player.
9. Among consumers who purchased at least one song legally online, they purchased an average of 13 tracks in total each month in the fourth quarter of 2005.
- With an average track price of $0.99 online, consumers are spending about $13 per month on average on new digital music. But consumers are likely to download and spend less on OTA downloads, because they use them primarily to supplement their online music purchases.
10. The optimal price point for a full track OTA download is $1.75.
- Consumers are willing to pay a premium over the standard online price of $0.99 for the convenience of downloading songs to mobile devices whenever and wherever they might be. In addition, the price points of $2.50 (Sprint) and $1.99 (Verizon) will not be acceptable to most mass-market consumers. Right now these carriers can maximize revenue from early adopters, but they must eventually lower prices if they want to continue to attract new and repeat customers.
- Drew Hull, Research Director, Mobile Content
© 2006 The NPD Group
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