Mobile: Dialing For Dollars

Selling 50 million singles in 18 months is no mean feat. That's how many individual tracks were sold via the Chaku-uta Full mobile phone-based music-download service from Japanese telecom operator KDDI between its November 2004 launch and May 2006. Although exact figures aren't available, it's safe to say that none of Japan's computer-based download services come close to matching Chaku-uta Full's sales tally. Mobile phones are overwhelmingly the digital-download medium of choice for Japanese consumers and will likely remain so as new music services and bigger capacity handsets are launched during the next several months. Meanwhile, Japan's three major telecoms—NTT DoCoMo, KDDI and Vodafone—along with such companies as Apple, Microsoft and Softbank are forging alliances and jockeying for position in the rapidly growing mobile-music market.

Revenue from mobile-music applications—including full-length tracks, polyphonic ringtones, master ringtones and other related content—totaled 10.9 billion yen ($97 million) in the first quarter of 2006, up 63% from the first quarter of 2005, according to the Recording Industry Assn. of Japan.

The value of computer-based download sales by the RIAJ's 42 member companies during the January-March quarter totaled 1.2 billion yen ($10.8 million), a rise of 293% over the previous year.

Mobile phone-based music applications thus account for roughly 90% of Japan's digital-music market.

Helping power Japan's mobile-music boom is a plethora of new music services aimed at mobile-phone users.

One service that got a lot of attention when it was introduced last December by KDDI and Warner Music Japan is WAMO Pack, billed as the world's first "mobile music bundle," comprising audio, video, graphic and textual products in a single, downloadable file. The service's initial offering was a package featuring vocalist Sean Paul.

Also offering bundled content for mobile users is Universal Music Japan with its Chaku-uta Full plus image service, which features master ringtone and full-track versions of songs along with artists' images. UMJ launched the service with a selection of Bon Jovi's greatest hits and photos taken during the band's most recent Japan tour.

"I believe this product will be able to show new possibilities for our music business," says Ryo Miyamae, senior manager of Universal Music Mobile Japan.

"Technology will continue to give us opportunities to create new products," he says.

Warner Music Asia Pacific president Lachie Rutherford says bundling is an example of how mobile phones are more than just another distribution channel for music.

"With bundling, you can [offer] 100 different product lines from just one artist," Rutherford says.

This new way of packaging and marketing content has major implications for the music industry, he adds.

"The liberating factor for the music business is the 'unbundling' of the album [into single downloadable tracks]," Rutherford says. "This changes the way we do business."

WMJ made some more news in the mobile-music sector when a May 26 concert by teenage singer/songwriter Ayaka—one of the label's bright new hopes—could see be seen as a streaming live broadcast on three major mobile carriers. One song from the concert was made available for download immediately after the show.

Another new service launched in December is free radio-by-mobile from Tokyo-based radio network Nippon Cultural Broadcasting. Jointly developed with information content developer Frontmedia, the service—billed as the first of its kind in Japan—allows users to download music programs (including commercials) from its Web site and play them back on their handsets.

In April, Tokyo-based cable-radio operator Usen and NTT DoCoMo launched a mobile-based streaming audio and video service called Docodemo Usen consisting of various music programs offered by Usen.

Users can access online services selling ringtone and master ringtone versions of the song currently being played by clicking an icon next to the song's title. They can also save information about the song so that they can access the stores later.

One of the most significant developments in Japan's mobile-music sector came in May when KDDI became the country's first telecom to launch a Web site featuring full-length tracks and master ringtones that can be downloaded onto personal computers. The move was seen as yet another sign of KDDI's commanding position in the Japanese mobile-music business.

Users of KDDI's new Lismo service can transfer downloaded tracks from their computers to mobile phones designed to be used with the service. The au Music Port software package that comes with Lismo phones enables users to copy songs from CDs and manage their song library as well as videos, photos, calendar and e-mail.

And Lismo's au Music Player has Global Positioning System technology to let users know what other people using the service within a radius of a few miles are listening to, reinforcing the sense of community that's so important for mobile users.

Could Japan eventually develop the mobile-music platform to threaten the iPod's digital-music dominance? Right now, the services in Japan are targeting different demographics, observers say.

"While most Japanese iPod users are in their late 20s and 30s, KDDI seems to be targeting teenagers first, most of whom are learning about non-ringtone digital music for the first time, know little of file sharing and don't have $300 to spend on a dedicated music player," says Steve Myers, president of Theta Music Technologies, a Tokyo-based software developer.

Myers says he expects KDDI to actively court this group in its promotional campaigns during the next few months.

May saw a flurry of activity on the mobile-music front in Japan, starting with the announcement by DoCoMo and Microsoft on May 10 of a collaboration that paved the way for the June 7 launch of DoCoMo's own mobile-based music-download service. Two new handsets being introduced by DoCoMo this summer will support Microsoft's Windows Media Audio and Windows Media Digital Rights Management 10 for portable devices. That will allow users to play music downloaded to a computer from more than 100 online music sites.

Among the new handsets coming from DoCoMo is the NEC N902iX High-Speed, the first mobile phone in Japan to feature high-speed downlink packet access, with transfer speeds of up to 3.6MB per second—about 10 times as fast as currently available FOMA handsets.

Content providers have been quick to introduce services aimed at users of the new generation of high-capacity handsets. For example, music trade paper/music chart compiler Oricon is launching a mobile-based album-download service on DoCoMo's upcoming "Music Channel" this summer and will be available on the FOMA N902iX High-Speed handset. Users will pay 300 yen ($2.67) to download all of a CD's tracks, which they can listen to for a week before it expires.

It remains to be seen whether Japanese mobile users will go for a subscription-based music-download service such as Napster, although there are already many subscription-based services in the mobile sector. Tower Records Japan, now partly owned by DoCoMo, launched Napster Japan in November.

"DoCoMo has been falling behind [rival telecom KDDI] in terms of music services," one industry source adds. "And Tower Records Japan must have thought that it should do something to compete with iTunes and other download services."

The next hot news on the Japanese mobile-music scene was a report in the influential Nihon Keizai Shimbun economic daily on May 13 that Tokyo-based Internet service provider Softbank and Apple were jointly developing handsets with built-in digital music players capable of directly downloading songs from Apple's iTunes Music Store. Neither company would confirm the report.

Industry observers expect Softbank, which bought Vodafone's Japanese unit in March, to place particular emphasis on music services as a way of attracting younger users to Vodafone, which has fallen behind DoCoMo and KDDI in terms of market share.

Not to be outdone, KDDI announced May 22 the June launch of a mobile handset with a built-in Sony Walkman music player capable of storing some 500 songs.

The Walkman Keitai W42S handset, which KDDI jointly developed with Sony, will be able to operate for about 30 hours on a single charge when used as a music player and will retail for about 20,000 yen ($179.15).

And on June 7, DoCoMo became the third Japanese telecom to offer mobile phone-based, full-song downloads. The service will initially be available only on the new Panasonic P902iS FOMA third-generation handset, which was also launched June 7. The device can store up to 2GB of music content or nearly 1,000 songs—the latest entry into a fast-paced, innovative and potentially lucrative market.