Wireless Industry Pushing For Broader Mobile Music Adoption

ORLANDO, Fla. -(Dow Jones)- The wireless industry hopes that consumers will be humming to a different tune as carriers and handset makers more aggressively push people to listen to music on their cellphones.

While enabling handsets to play music isn't new, customers still resist the feature. The industry is addressing the problem. On Monday, AT&T signed a deal with Napster to give its customers a year of free music downloads, while Sprint Nextel cut the price of its over-the-air music download service to 99 cents a song.

These moves, as well as a new slate of music-centric cellphones which are easier to use, underscore the steps the industry is taking to improve the experience. It's a key theme at this year's CTIA Wireless trade show.

"At CTIA, we're seeing more products that address this particular niche that targets mainstream price points with storage and accessory," said Avi Greengart, an analyst for market research firm Current Analysis Inc. "The problem is well-known, and we are starting to see some companies address it."

The ability to play music proved to be a draw for consumers last year. Sales of music-enabled phones doubled in 2006 from 16% of new phones in the first quarter to 32% in the fourth quarter, according to the NPD Group.

Carriers such as Sprint and Verizon Wireless - jointly owned by Verizon Communications and Vodafone Group - are looking to music downloads as an additional source of revenue, while AT&T's Cingular Wireless, which only offers music transfers from the computer, use the feature as a way to improve customer loyalty.

The handset makers, meanwhile, see it as another way to push their products. The best example may be Apple Inc.'s (AAPL) iPhone, set to launch later this year. The company's mix of cellular capabilities with its iPod music and video features has captured much industry buzz.

AT&T unveiled a partnership with Napster that gives customers a year of free music downloads on the service. To access Napster, customers either sign up for a two-year wireless plan and either the Samsung Electronics's Sync or Blackjack phones, or sign up for high-speed Internet service.

Sprint, meanwhile, hopes that the price cut to 99 cents from $2.49 for a music download will spur more purchases. The carrier had previously said that customers would be willing to pay a premium to download the music anywhere they want, but the move suggests a reversal of that belief. The price point is similar to Apple's iTunes music service, which only works on the computer.

"They're not making any money on this, but they're driving adoption," said Roger Entner, a long-time wireless industry observer who now works for advertising research firm IAG Research.

Sprint still has a lot of work cut out for it, Entner said. While the cellphone experience is positive, the carrier still needs to work on its experience on the computer, which iTunes dominates. Both the PC and cellphone experience will support customer adoption.

"Wireless carriers have to create an integrated experience," he said. "If they have only one leg, they'll fall over."

Better Handsets

In addition to the service, much of the experience is dependent on the handset itself. Motorola attempted a partnership with Apple with the Rokr phone, which was able to link up to the iTunes music store. But the phone was criticized for its dated design and limited memory capacity, and never took off. In many cases, consumers don't use their phones as music players because of the limited battery power and the complicated user interface, and instead opt for a dedicated Mp3 player such as the Apple iPod.

An example of a successful music phone is the Sony Ericsson Walkman line. Over the past year, the company has made strides in taking market share with its line-up of high-end phones tied to Sony brands.

"We're a clear leader in the area," Chief Executive Miles Flint said. "Other people getting into this is a validation of our strategy."

Other phones haven't been as successful. "A vast majority of the phones on the market today play music, but that doesn't necessarily make them music players," said Greengart, the Current Analysis analyst.

Problems include little memory, which restricts the amount of songs a phone can hold, missing accessories like a suitable headphone for the music, and a complicated user interface for many of the phones. Carriers such as Sprint have made it difficult to transfer music from the computer to the phone because they want to push the direct download service, Greengart said.

The newly launched Samsung Upstage, a unique two-sided device with a phone form on one side and a music player on the other, hopes to rectify that problem.

"This is one device clearly focused on music," said Peter Skarzynski, in charge of mobile strategy in the U.S. for Samsung. "This product was developed around Sprint's music store."

Packaged with the phone will be new software for the computer which Sprint said will make the transfer of music an easier process.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 28th March 2007