THE LEFSETZ LETTER: Music On Mobiles

Don't believe the hype. The major labels are going to kill music on mobile phones, along with a dash of help from the providers themselves.

It's all about the price.

Blame it on ringtones. With a tone going for between two and three dollars, somehow the idiots far removed from the street/reality think that a TRACK, a COMPLETE SONG, is worth THREE BUCKS!

Think about that. Doesn't it remind you of the CD single debacle? A format that basically went extinct because of price?

I ask you, why pay three bucks a track if you can buy the whole CD for FIFTEEN?

Well, that's the logic that got the labels into hot water to begin with. Making the CD such a value proposition that people resorted to STEALING the music. Sure, the complete CD looks like a good value compared to the CD single, but compared to a free download, it looks like a TERRIBLE value proposition.

Then again, it's been proven that people will buy tracks, they're doing so at the iTunes Music Store.

Well, faithful readers will know that the iTMS is a sideshow, a pimple on the ass of the music business, dwarfed by ILLEGAL downloading. The fact that some people will pay a buck for convenience does not indicate EVERYBODY WILL!

Still, the price has been established. A buck a track. It's a well-known fact that the labels think this is too cheap, and now they've got the chance to increase their margins! Or so they think. Having no clue what the public will bear.

But it's not only them. The providers need the tracks to be three bucks to make a PROFIT!

Nobody's in business to lose money. God, with the heinous price the label charges, and billing and other infrastructure costs, you've GOT to charge more than a buck. Unless, of course, the music is the razor to the blade. Yes, Apple knows that the music is irrelevant, that the iTunes Music Store is essentially a break even aid to making money selling iPODS!

Oh, don't quote me ringtone sales figures. That's about fashion, about branding, identity, not listening to music. FURTHERMORE, it's getting easier and easier to make YOUR OWN ringtones, will this business even EXIST in a handful of years?

And don't tell me about selling this video or that. Whenever you investigate the sales of so-called music video downloads on mobile phones, it's always the same story, the videos are essentially PORN! Mix porn with novelty and you've got sales. Come to the party late, with just a clip of a band, and someone's gonna pay three bucks for it??? Are you kidding? Hell, you can watch a video FOR FREE on the Web, and how many times do you want to watch the damn thing ANYWAY??

And it gets worse. All the mobile phone songs are DRM'ed up the ass, something labels like, but people abhor. Furthermore, there are MASSIVE incompatibility issues. You can't play music from one service on another. AND, you can't load YOUR OWN music on the cell phone you buy. This is what's holding up the Motorola iTunes phone, the providers are not looking for CONVENIENCE, but PROFITS! They subsidize the phones and make it up on service, they're not going to subsidize a music phone that they're not going to make any money filling. As for getting the music off your phone and on to your computer, if you can do this, you've got the DRM issue again. Ain't gonna play on your iPod, will it play on anything else??

So, the mobile phone is essentially a whole new format. Wherein you buy new product essentially only usable on it for a high price. And THIS is threatening the iPod???


First the labels have to realize they've got to lower the price of their wares, DRAMATICALLY, and with ease of access, make it up on volume.

Then the mobile providers have to allow easy transferability and pass the aforementioned cost-savings on to customers. Knowing that they've got no hope unless the music is cheaper than it is at the iTunes Music Store.

And these aren't the only issues facing the mobile sector. There's the huge issue of BATTERY LIFE!

It's not about who has the best technology, it's about who has the MOST WIDELY ADOPTED technology. Just look back at VHS and Beta for instruction. The major labels see the mobile carriers as their savior, which is so screwed up I can't believe it. Music is a gnat on the ass of the mobile business. It's like having floor space at Best Buy to sell batteries. Sure, Best Buy would like to sell AAs, but they don't NEED TO! It's not why people are coming to the store. And the profits are SO low. The manufacturer has NO SAY, Best Buy dictates terms, which will be the same case with mobile providers and music.

No, it's clear. The major labels have to license P2P at the ISP level, so they can collect the lion's share of money, a VAST POOL of money, cutting out all the middlemen, the P2P rip-off companies AND the mobile sector. And then use their leverage, their product, to dictate terms to others who want to use the music. Insisting that mobile companies offer interoperability and ease of use at a cheap price.

But no, the assholes in the music industry are so busy going to conferences, so busy looking at the number of mobile handsets used in China, as to have absolutely no idea where the street is at. Sure, music on mobile phones is a cool idea, if it's executed BETTER than the available alternatives. But now it's overpriced and clunky and it makes the iPod look like the genius product it is.

Contact Bob Lefsetz | View Lefsetz Letter Archives

NOTE: The views expressed in this editorial do not necessarily reflect the opinion of CelebrityAccess, Encore or its employees.

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