We have identified two business models for accessing music downloads, based on the Korean and Japanese experiences. The Korean business model is a subscription-based access to music, and the Japanese business model is more of a traditional, unit-based purchase of songs.
Both models have had a positive impact on carrier performance. In Japan, KDDI’s 3G mobile data ARPU vaulted ahead of the competition’s 3G data ARPU after the launch of mobile music. In Korea, SK Telekom’s mobile data ARPU is 10 percentage points higher than that of its closest competitors.
This report provides an in-depth analysis of these two mobile music business models, their impact on mobile operator performance and whether they can ultimately be replicated elsewhere. We find that the key catalysts to successful mobile music models will be 3G+ wireless technologies, flat rate bandwidth pricing and extensive libraries. The best practices highlighted in this report also show that mobile music will be a key catalyst application in the roll-out of fixed mobile convergent services.
Table of Contents
Executive Summary
Section 1: Single Entrées and Buffets: Business Models for Full-Track Downloads
1.1 KDDI’s “Chaku-Uta Full”: The Traditional Music Model Goes Mobile
Market Impact: Chaku-Uta Carries KDDI’s 3G Portfolio
Lessons: The Music Industry’s Favorite Model
1.2 SK Telecom’s “MelOn”: Merging Convergence and Innovative Payment Models
Market Impact: Redefining Korea’s Music Landscape
Lesson: Good for the Consumer, But Not as Attractive for Content Providers
Section 2: Charting the Mobile Music Value Chain
2.1 Understanding Stakeholder Value Propositions
2.2 Making the Technology Work
Data Transfer Rates
File Compression
“Form Follows Function” — Device-Specific Requirements
Digital Rights Management
Section 3: Replicating the Japanese and Korean Models: Edging Towards the Subscription-Based Model
3.1 Can Over There Be Over Here?
3.2 Subscriptions the Long-Term Winner?
List of Exhibits
Exhibit 1: Sample FTD Pricing and Download Libraries
Exhibit 2: Chaku-Uta Full Number of Downloads Through June 2005
Exhibit 3: Japan Market Share of 3G
Exhibit 4: Mobile Music Impact: Comparative Evolution of 3G Mobile Data ARPU
Exhibit 5: Evolution of MelOn Subscriber Base
Exhibit 6: Mobile Data ARPU Differential: SK Telecom vs. Competition
Exhibit 7: The Various Requirements of the Mobile Music Value Chain
Exhibit 8: Approximate Download Times (Minutes) for an MP3 Music File
Exhibit 9: Sample Mobile Music Packages
