Commentary

Musical Phones

Musical Phones

According to recently published research from Telephia, there are now 23.5 million mobile subscribers in the U.S. who have phones with integrated music players. The number of consumers with music-enabled phones is up five times from the same period in 2005 and nearly 20 percent of the new phones purchased in Q3 2006 were music capable.

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Many of these subscribers report loading music on to their phones via their PC, but only a small number have actually downloaded music over the air from a wireless carrier music store. In Q3 2006, only about 8.5 percent of subscribers with capable phones reported any purchases of music via OTA downloads.

The report summarizes mobile data services as well:

  • Mobile data services business is growing in all areas. Data services revenue is up 88% YOY in the US, with revenues at nearly $3.5 billion in Q3 2006.
  • The number of wireless subscribers also continues to grow, topping at 221 million subscribers in Q3 2006, as compared to 195 million a year ago.
  • While text messaging represents about 39% of revenue for all data services, MMS has posted triple digit growth rates in terms of both revenue and the number of mobile consumers sending and receiving MMS.
  • Mobile download content revenue (games, audio, applications, and video/TV) hit $727 million in the US in Q3 2006. Mobile video/TV revenue in particular had tremendous growth in 2006, posting revenues of $141 million in Q3 2006 and matching mobile game revenues.
  • While the penetration of U.S. mobile video/TV subscribers is still small at 2.3 percent in Q3 2006, the number of mobile video/TV subscribers has doubled to 5.1 million since the beginning of the year.

Kevin Burden, Senior Manager, Mobile Devices, Telephia, says "...carriers are experimenting with pricing models and working to improve the user experience... The ability to facilitate impulse music purchasing will allow the wireless music stores to capture some portion of the larger digital music market..."

Uptake of Music Phones and Over the Air Download Services (U.S.)

Q3 2005

Q3 2006

Subscribers with music players on their handsets

4,603,688

23,495,033

As percent of all mobile subscribers

2.3%

10.5%

Subscribers who have downloaded

full tracks over the air

NA

2,004,228

As percent of subscribers with music players

on their handsets

NA

8.5%

Source: Telephia U.S. Device Census Report, (Q3, 2005-Q3, 2006)

Mobile phones with integrated music players have been in the U.S. market for more than two years and have gone through substantial improvements in memory capacity, file format capability and sound quality. Nearly all of the major device manufacturers are featuring music-capable phones as an important part of their current product portfolios.

Mobile operators have launched their music stores much more recently and OTA purchasing is still not available on all the major carriers. Sprint, introduced in October 2005, and Verizon Wireless in January 2006 represent the majority of the two million OTA downloaders. Of the more than $3.5 billion of carrier advertising dollars that was spent in 2006, $234.3 million or 6.7 percent, promoted music phones and music download services.

"... the widely anticipated product launch announcement from Apple this week... could greatly accelerate adoption of music phones and OTA purchasing," added Burden.

For more information, please see the complete release here.

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