Cell Phone Music Plans Have Labels Listening

Dick Wingate spent the late 1990s on a largely futile mission: trying to persuade the major record companies to use Liquid Audio Inc.’s technology to sell songs that could be downloaded to computers.

By the time top label executives were gung-ho about downloading, the market had been overtaken by free file-sharing services on the Internet. And Liquid Audio, which had morphed from pioneer to also-ran, had been gutted by dissident shareholders.

Now, Wingate is president of BPOD Network Inc., and he’s trying to talk the labels into selling downloadable songs for what he thinks will be the next hot platform -- cell phones.

This time, label executives acknowledge they can’t afford to move as slowly in the wireless market as they did on the Internet. And Wingate has noticed the difference.

“Back then, it was like screaming into the Pacific Ocean,” he said. Now, “You’re not speaking to people who are not listening.”

Wingate expects a deal with a major mobile phone company that would offer downloadable songs within two months, potentially reaching millions of customers in more than 30 states. The downloads would be made available through DotPhoto Inc., a digital media software company that New York-based BPOD is assisting.

Meanwhile, Sprint Corp.’s Sprint PCS wireless unit and AOL Time Warner Inc.’s Warner Music Group are days away from offering an online jukebox with full-length songs that customers can play on their cell phones.

The success of these ventures -- and whether more will roll out quickly -- will depend in part on how well music fans respond to the diminished sound quality produced by today’s wireless phones and networks. Another important factor is whether concern about piracy gives the labels cold feet again.

Mobile phone networks are the next great opportunity for distributing digital music; they can deliver songs on demand to hundreds of millions of music fans wherever they go. But in most of the world, wireless technology isn’t up to the task. Downloads are painfully slow, transmissions are unreliable and sound quality is poor.

Many mobile carriers are limited to offering ring tones based on popular songs or, for those with advanced phones, rings that are snippets of the songs themselves.

Consumers have shown a voracious appetite for custom ring tones. The number of U.S. Internet users who have bought a ring tone exceeds the number who have paid to download a song to a computer by more than 50%, according to Jupiter Research. And ring tones sell for as much as $3 each, which makes them two to three times more expensive than a downloadable song for a computer. Worldwide, consumers have spent about $2 billion on ring tones, according to Strategy Analytics, a technology research firm.

That kind of money is what’s driving the development of music-oriented applications for cell phones, despite the technological hurdles. Labels and technology companies are working on novel ways to promote concerts and CDs, introduce people to new music and let artists create short works specifically for cell phones.

Sprint and Warner Music are likely to be the first to offer full-length songs to cell phone users across the United States. The companies already offer unlimited access to 30-second samples of songs for a little less than $16 a year. Within a week, they expect to let customers play full-length songs from an online jukebox for the same price.

Paul Vidich, executive vice president for business development at Warner Music Group, acknowledged that the sound quality “is not as good as we’d like it to be.” Nevertheless, he said, the samples attracted a “meaningful” number of subscribers.

“People have a lot of curiosity about how they can use cell phones in new and exciting ways,” Vidich said.

At BPOD, Wingate is negotiating deals with the major record companies that would let his company and DotPhoto offer 50 to 100 downloadable songs to cell phone users for about $2 apiece.

To prepare them for wireless transmission, Wingate said, the “JukePhone” songs would be squeezed to about one-sixth the size of the typical MP3 file -- yet they would still take at least 10 minutes to download. To make room for a new song, the previous one would have to be erased. And to deter piracy, songs would be stored in a portion of the cell phone’s memory that cannot be copied or forwarded.

BPOD and others are trying to make up for those limitations with perks such as access to songs before they are officially released.

Glenn Paul, president of West Trenton, N.J.-based DotPhoto, said his company developed the JukePhone technology as an extension of its popular Pictavision program that lets people send photos to cell phones. Verizon Wireless, Alltel Corp. and United States Cellular Corp. have deployed Pictavision, but no carrier has signed up for JukePhone, Paul said.

SMS.ac Inc. of San Diego, whose technology enables about 10 million people worldwide to send text and multimedia messages across wireless networks, also wants to tweak its technology to handle music. SMS.ac says it has conducted customer surveys that found that people want to listen to, download and buy songs through their cell phones more than any other application.

“If you give consumers a viable alternative, they’ll pay for it. If you give them a good product, they’ll pay for it,” said company co-founder Greg Wilfahrt, a former executive at MP3.com. “That’s one of the lessons we learned on the Internet.”

With wireless networks expanding in capacity and manufacturers moving quickly to offer high-fidelity phones, said SMS.ac Chief Executive Michael Pousti, the main remaining hurdle is persuading the labels to recognize the opportunity and “not get too focused on the security issue.”

Thomas Gewecke, senior vice president of business development at Sony Corp.’s Sony Music Entertainment, said the labels are relatively comfortable experimenting in the mobile arena because wireless networks and cell phones are less susceptible to piracy than computers on the Internet. More advanced networks and phones will need better security, he said, but manufacturers and carriers seem committed to developing it. He even allowed that he looks forward to the day when people share music between their phones -- legally.

Still, Gewecke said, the industry is “quite a ways away” from the day when mobile phones are full-fledged entertainment devices. And notwithstanding the enthusiasm of technologists, some record company executives believe that consumers are too sophisticated to accept low-quality music on a cell phone just because it’s novel.

Said Ted Cohen, senior vice president of digital development and distribution at EMI Group’s EMI Music: “The ability to do it poorly just isn’t a satisfactory experience anymore.”