Learning mobile music success from Japan and Korea
March 6, 2005
Vectis International has just released a new market report entitled "MOBILE MUSIC BEST PRACTICES FROM JAPAN AND KOREA: The future of Ringtones, Real Tunes, Ringback Tones and Full-Length Song Services from the World's Most Advanced Markets".
The report provides the most in-depth analysis of these highly successful and sophisticated services in two markets widely regarded as global leaders in mobile music content. It also demonstrates that, despite distinctive cultural and market characteristics, mobile and music industry executives can benefit from understanding Japanese and Korean best practices.
"Mobile music services adoption are already well above those of western markets", says Benjamin Joffe, Vectis' Japan market analyst. "Japanese operators recorded a whopping 2 billion polyphonic ringtones downloads in 2004. While there were over 200 million master-recording based ringtones (real tunes) downloaded sold since the service launch two years ago, the market has not even reached its full potential due to the relative low penetration of compatible handsets."
At the same time, Korea has maintained a clear advance in ringback tone service quality and adoption level. The service was first introduced in March 2002. Within six months, monthly revenues from ringback tones exceeded ringtone revenues. Today, close to 45% of SK Telecom subscribers use ringback tones, generating roughly U$100 million in annual revenues for the operator.
"With such long experience, Korean operators were able to implement clearly-defined business models for all aspects of the music value chain: from the creation of ringback tone content, management and collection of copyrights, promotion of new soundtracks, operation if servers and platforms to the collection and sharing of end-user fees", says Simon Bureau, managing director and co-author of the report. "When we compare the distinct service deployment paths followed by operators in the two countries, it becomes apparent why ringback tone services have not been successful in Japan so far".
While operators worldwide are still making announcements about future full-length music song download services, both countries have already made significant headway. In 2004, Korean operators sold an estimated 2.2 million handsets equipped with an MP3 player, which have now become standard features in all new handsets. In Japan, a different approach is taken by introducing services that allow users to download full songs through the operator's 3G networks. KDDI's new "chaku-uta full" service topped 2 million downloads in ten weeks. "The direct connection combined with fixed service data service plans introduced by operators are key to higher adoption" said Joffe.
While telecom and industry executives worldwide all realize that music sells mobile phones as much as mobile phones sell music, the point remains in knowing how. Japanese content providers have signed up millions of paying users, accumulating a wide range of best practices for service design and deployment, marketing, promotion and brand building, key issues for long-term sustainability in mobile content markets worldwide.
The report is written from an actionable market-development perspective for companies wishing to understand and apply best practices and business models pioneered by Japanese and Korean companies, to build or help maintain a strong position in other markets. This study allows to:
-- Discover what factors lie behind the wide popularity of ringtone and ringback tone services in Japan and Korea and what factors are independent of cultural or regional characteristics.
-- Identify mobile music best practices for business and revenue-sharing models, pricing, service offerings design and service deployment and find out how they can be applied overseas.
-- Learn about successful and novel marketing and promotion campaigns carried out to exploit the benefits of the service and minimize the potential negative attitude of users.
-- Learn what new and innovative services have been developed and which are user-friendlier and help increase service take up by mobile subscribers.
-- See how the world's most advanced broadband countries cope with DRM issues and MP3 phones, in the context of fast declining record sales.
-- Understand how mobile operators are repositioning themselves in the music distribution value chain and how record companies have carved a role in the mobile music industry.
-- Understand how regulations influence the mobile music offering in two countries, where copyright frameworks were updated to meet the requirements of digital music distribution.
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