Mobile’s Holy Grail

Music

(From Billboard Magazine,  October 5, 2013)  Beats Music and other music companies are pushing to partner with some of the larger cellphone carriers in America.  Currently no music company is partnered with one of the major cell providers.  The music subscription industry seems sure that partnerships with companies like Verizon and AT&T, the two largest carriers in the US, will create huge boosts in their sales.  There are 238.8 million mobile phone subscribers over half of which are smartphone owners.  Digital music services have only 20 million subscribers.  This is a large reason why the streaming industry wants to partner with mobile phone companies.

There are three basic factors in getting a cellphone company to team up with music:

1.The partnership’s ability to gain new subscribers to that phone company,

2. The ability for cell companies to increase revenue under the partnership, and

3. The ability for both parties to retain subscribers.

There have been a couple of partnerships with very small cellular companies, but the companies both had something to gain from it.  This isn’t necessarily the case for the larger cell companies.  These businesses are growing and doing so well that the added music benefit doesn’t really interest them because they know they will sell phones regardless.   There has been a lot more of this kind of partnership overseas where music streaming is much less popular.  There has also been a case where a cell company has partnered with ESPN for digital sports streaming.

One of the challenges for the music streaming companies like Spotify is that it is hard to get people to pay when there are services offered for free.  They have a hard time converting free users to premium users.  They are convinced that a partnership with a phone company would streamline the payment process so customers would pay their phone bill and not have to worry about making any other payments.  One theory is that it only needs to happen once.  One partnership would get the ball rolling for all of the other companies, and pretty soon everyone would want digital music services on their phone.