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Making Mobile Music Work

The large number of stakeholders in the mobile music value chain is the key obstacle in developing a workable business model. �The addition of mobile operators to the downloadable music value-chain adds a layer of complexity; operators have to be able to successfully navigate this environment or they stand to lose out completely,� comments Pyramid Research senior analyst Nick Holland, author of the new report �Get on Track with Mobile Music: Exploring Mobile Music Best Practices.�

While mobile music presents one of the greatest mobile market opportunities, operators must reach win-win agreements with publishers and vendors to provide over-the-air downloads or they will miss the opportunity to boost data ARPUs.

�Mobile carriers will wield all their power to become a key part of the value chain. Their main leverage is handset subsidization, but that�s a vulnerable leverage as handset manufacturers will increasingly partner with publishers like iTunes, Napster and Real Rhapsody, cutting operators out of the loop� adds Holland. Once converged portable music player/mobile phone handsets have sufficient storage and functionality to replace both devices at a comparable price the subsidization threat will decrease.

Holland concludes, �There are too many parties in the mobile music value chain all vying for a slice of $1 per downloaded song.� Operators may be the first to be excluded from the value chain, but as networks increase in sophistication, operators can push over-the-air downloads to increase data ARPUs, but must be able to price downloads at a slight premium to the psychological barrier of $1 per download set by Apple�s iTunes.

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