Mobile Music Wars

Mobile Music Wars
During the past few days the top two Tier 1 wireless operators have reported their first-quarter earnings results, and now the industry is anxiously awaiting Sprint's results, which are scheduled to occur Wednesday morning. What I found particularly interesting about Verizon's first quarter earnings was that at the end of the analyst call, COO Denny Strigl made a few comments about content downloads and touted the company's mobile music portfolio. Strigl said that during the first quarter, Verizon customers downloaded 106 million content clips, including videos, games, ringtones and ringback tones. He also said that the firm had 30 million paid digital music downloads in first quarter. That figure includes full songs, ringtones and ringback tones.

Of course, Verizon's mobile music download revelation comes in the face of some fierce competition. In March, Sprint made a splash at the CTIA Wireless 2007 conference when it announced that it was reducing the price of over-the-air music downloads to 99 cents from the original price of $2.50. More competition will likely come in June when the much-anticipated iPhone launches.

I wrote about Sprint's price reduction back in March. Recently, I heard from one Sprint insider that the price cut has caused a significant jump in music downloads. Despite this, Verizon has remained steadfast in its pricing, and with 30 million downloads in first quarter, perhaps it won't have reduce its fees. The carrier charges $1.99 per over-the-air download. But for 99 cents, customers can download the music directly to their PCs. Both Verizon and AT&T reported strong data growth in first quarter 2007. Verizon reported that its retail data ARPU topped $8.95, a 54 percent increase year-over-year. AT&T reported a data ARPU of $7.88, a 51 percent increase year-over-year.

In the past, I've written about how much of the carrier's current data ARPU is based upon messaging revenue. While that's still true, business data usage--e-mail and Internet access--also accounts for a big portion of the data ARPU. Verizon reports that 60 percent of its data revenue growth is from services other than messaging and the bulk of that (39 percent) comes from business applications such as Internet access and email. But messaging still provides a lot of data traffic and revenue. AT&T reported huge amounts of MMS and SMS messages. In first quarter, the operator delivered 230 million multimedia messages along with 15 billion text messages. Let me know your thoughts on the mobile music paradigm. Will we see carriers such as Verizon drop their OTA download fees once the iPhone hits the stores? - Sue