Both the wireless carriers and the big music labels have been counting on a huge explosion of mobile music sales to respectively boost and save their industries. Not going to happen, says Jupiter’s Mark Mulligan.
While the ringtone fad made it logical to assume that over-the-air (OTA) music sales would be the next big thing — people use their phones to pay for 15-second song clips, so of course they’ll buy entire songs! — ringtone sales are flattening and OTA sales have yet to take off. OTA sales now look much less promising given that Apple (AAPL) and other handset makers have made it easier to transfer music you already own directly to your phone from your PC. And while the process of actually buying a song via your phone is getting better, it’s still clunky and slow. Mark’s really interesting argument: This isn’t the worst news the music business could hear.
These inherent limitations mean that mobile music will remain a single track dominated business for the midterm future at the very least. The music industry is already close to crisis point with PC digital music with single track downloads accounting for the vast majority of downloads, thus pushing consumers away from buying full albums and thus reducing label revenues and margins. But whereas the industry can realistically try to tackle that trend and drive sales of albums on PC stores, that is prohibitively difficult on mobile.
Thus the more weight of expectation that the record labels place on mobile music to drive digital revenues, the less able they will be to reverse the return-to-singles trend. The risk is that their short-term gain will be at the expense of long-term loss. More consumers may buy more mobile digital music over the next couple of years but those consumers will increasingly rely upon mobile for music buying and in turn become less likely to buy albums. In short, mobile music consumers will buy more digitally, but will spend less on music overall. Jupiter