The convergence of digital music and mobile phones is likely to develop at a steady pace according to a new report published by The NPD Group. The report, which explores consumer demand for mobile music, is based on a survey of more than 8,200 teens and adults. It takes an in-depth look at subscriber interest, how they'd like to access tunes and just how much they're willing to pay for the privilege.
"Mobile music is poised to be the breakout content category of 2006," says Clint Wheelock, vice president of wireless research for NPD, who supervised the study. "With a major emphasis and heavy promotion by wireless carriers, device manufacturers, and the music industry itself, you can bet that consumers will be hearing a lot about new music services, and NPD's research indicates that many of them are ready to listen."
According to the report, 20 percent of all consumers surveyed are interested in purchasing an MP3-capable phone - the interest level is even higher among teens, 56 percent of which are interested in such a phone. Three quarters of these intenders are willing to pay a premium for MP3 phones, an average of $25 extra for the option. Equally compelling, especially to record companies, they're willing to pay a premium for songs. According to NPD's price sensitivity analysis, the optimal price point for mobile music downloads is $1.75, compared to the typical $.99 in the PC digital music domain.
While MP3 device manufacturers have been concerned about phones cannibalizing their business, they can finally rest easy. Only 14 percent of respondents say they would replace their MP3 player with a phone. Among higher-capacity users, that's even less of an issue, since 75 percent of consumers say they anticipate phones being able to handle 100 songs or fewer, an expectation that seems to be in line with the prevailing reality.
Not surprisingly, the PC appears to be the preferred method for consumers to get music on their phones. More than half of respondents claimed they'd prefer to synchronize their phone with their PC via a data cable. That could be because it's the place where most users' music currently resides. In addition, 37 percent of consumers prefer the option of downloading music directly to their phones over the cellular network.
"More and more consumers are migrating their music libraries to their PCs," said Russ Crupnick, president of the NPD Group's Music & Movies division. "It's a simple process to download tracks directly to the desktop from the Web; then synch the entire music list with existing home audio systems and portable MP3 players - including MP3-enabled mobile phones."
Next on the Horizon: Ringback Tone... and Satellite Radio?
But it's not just MP3s that have the potential to rock the mobile phone world. Ringback tones, songs that play in lieu of a ring tone after you dial a number, could well be the sleeper hit among mobile music services. Among wireless subscribers, 25 percent say this service that has piqued their interest - even more than MP3 phones. It's also grabbed the attention of record labels and service providers, says Wheelock, because ringback tones reside on the network and involve far fewer Digital Rights Management (DRM) issues. And where there are no rights issues, there are no concerns about illegal file sharing.
Meanwhile, there also appears to be an opportunity for satellite radio companies to partner in the mobile music space. A solid 21 percent of consumers said they'd be interested in purchasing a phone that gave them access to either Sirius or XM Satellite Radio services.
And Don't Forget About Ringtones
All of which is not to discount the demand for ringtones. Since last year, the number of ringtone purchasers has nearly doubled, from nine to 17 percent, with another 12 percent expressing an interest in purchasing ringtones within the next year. NPD's Mobile Music study also found that the three most popular genres are Alternative/Modern Rock, Rap/Hip-Hop and TV/Movie Theme Songs.
In fact, 61 percent of mobile phones currently have the capability to download a ringtone, making it the largest addressable base of any wireless data or multimedia service. By comparison, only 48 percent of those same phones offer the option of downloading a game. Phones capable of downloading ringtones even outnumber those with color screens. The number of teens with the ability to download ringtones (75 percent) is significantly greater than adults (58 percent).
"Mobile Music: Who's Listening?" was an Internet-based survey among members of NPD's online consumer panel. A nationally balanced sample of teens (13-17) and adults (18+) was invited to complete the survey, and NPD collected 8,261 total responses, of which 5.948 were current wireless subscribers and thus qualified for the Mobile Music survey. Price sensitivity analysis was conducted using the Van Westendorp Price Sensitivity Meter methodology.