In 1999 the record business achieved all time highs in income; approximately 14.5 billion in the U.S. and 38 billion worldwide. By 2007 that amount of money had precipitously declined to 7 billion in the U.S., and 16.5 billion worldwide. Some blame piracy. Some believe this was exacerbated by increasing sales of single downloads displacing sales of CD albums, which are more expensive and brought in more money for the labels, but included songs that fans didn't really want. Whatever the reason, there may be a way for the record industry not only to stem the tide of devastating financial set-backs, but in fact make a full recovery! And that hope can be summed up in one word "mobile", or two "smart phones."
80% of the world's population now has a mobile phone. The number of mobile phones in the world is 5 billion. Of that number more than a billion are smart phones. In the U.S. there are approximately 100 million smart phones alone. Now imagine that for each smart phone in the world the service provider or the device manufacturer was paying the record industry 2 dollars to carry a music service such as Spotify or Muve. That would mean 24 billion dollars payable to the copyright owners -- record companies and indie artists. That would fully make up for lost sales.
Sound like a dream? Perhaps, but the future is already happening: Billboard reported in last week's edition ("Turn On, Tune In, Pay Up") the following deals: On Sept. 2, Cricket Wireless began putting digital music into the hands of its new subscribers. Muve Music, previously an opt-in service, become a standard feature on all new Android smart phones. "In a few months we expect Muve to become the NO.1 subscription music service in the U.S." Muve senior VP Jeff Toig says. Cricket is helping popularize and refine a concept that exists all over the world. Deezer has partnered with mobile carrier Orange in France. Spotify has teamed up with mobile carrier/ISP Telia in Sweden. Rdio has paired with mobile carrier Oi in Brazil. MOG has partnered with mobile carrier Telstra in Australia. There are many other examples ( see story on page 21), but each represents ways to offer better bundles of service and improved billing options. Also Nokia has launched its own service available on its new smart phones. Although sales are weak in the U.S. Nokia continues to be a major player in the smart phone market abroad.
Up to now the most popular business model for interactive streaming was "opt-in" systems where consumers were invited to pay more if they want mobile service. Spotify, for instance charges $10. But so far best estimates are only 5 million have subscribed to Spotify's mobile service. If on the other hand, the service or some device manufacturer offer Spotify or other music service like Muve Music "free" then you would have an indefinite number of new subscribers. If the service or device manufacured just charged a couple of extra bucks a month (payable to the owners of the recordings), the recording industry could make a complete discovery and then some!