Music execs look to cell phones for cash

With sales of CDs on a three-year slide, the music industry sees mobile phones as powerful outlets for promoting artists and distributing music for profit -- something it failed to do in the early days of Internet music-swapping.

In recent months, recording labels have entered deals with wireless carriers and other companies. The music companies are selling rights to their musicians' recordings and images for use in screen savers, digital images and song snippets that are then sold to mobile phone users.

Using text messages
Madonna and other artists already send text messages to cell phones on new albums or tour dates. Nelly sent similar ones to fans who had submitted their numbers at concerts.

In June, members of Radiohead plan to reach fans on their mobile phones -- exactly how has yet to be disclosed -- on the same day the band releases its new record, said Vijay Chattha, spokesman for San Francisco-based IPSH!net, which developed the promotions.

The recording industry hopes to drive CD sales and, eventually, direct sales of songs over mobile phones.

That vision remains far from becoming reality, however. The U.S. wireless market is about two years behind Europe and Asia, and it's not clear how interested Americans will be in using their phones to buy or listen to music.

"The phone is really still a communications device. It's not a substitute for an MP3 player or any of those other things," said Jupiter Research analyst Lee Black.

Mobile marketing
Despite such obstacles, the industry is pushing ahead. Music companies "are really embracing mobile in a way that has not been seen before," said Ralph Simon, director of the Mobile Entertainment Forum, a trade association. "They see it as an important part of the marketing rainbow."

Music industry officials also are optimistic that mobile phone networks will be less susceptible to rampant pirating seen on the Internet, which the industry blames for sagging sales.

But while recording companies may be eager to get a foothold in a new medium, they're also cautious about how much music to free up.

"Until everyone is fully convinced they're not going to be Napsterized in this space ... (the) attitude is 'Make me some fire and I'll bring you more wood,"' said Shawn Conahan, president of Los Angeles-based Moviso LLC, which develops ring tones and other features for wireless devices.

Demand growing
This year's U.S. mobile music market for all content will reach $51 million, according to Ovum, a London-based consulting firm. It could reach $400 million to $500 million by 2007, according to Seamus McAteer at the Zelos Group, an advisory firm in San Francisco.

Analysts and recording executives believe demand for mobile entertainment will grow as Internet-connected and text messaging-capable handsets become more common. Now, only 10 percent to 15 percent of the handsets in the United States are capable of receiving such messages, Simon said.

The top revenue producers for mobile music are downloadable ring tones. Music fans can buy electronic snippets of popular songs by artists such as Carl Perkins and Iggy Pop to replace their phones' generic ringer sounds.

Moviso had $15 million in U.S. sales last year and hopes to generate between $40 million and $50 million this year, Conahan said.

But some would-be customers are turned off by the rising costs of mobile products. Lynn Fernandez, a 22-year-old psychology major at California State University, Los Angeles, stopped downloading ring tones.

"It used to be 10 cents and they would bill to your cell phone," Fernandez said. "Now, it's like $1."

Launching experiments
Still, the labels see potential.

"At a time when other parts of the music business have been contracting, there's a high premium on finding new ways to" generate sales, said Paul Vidich, executive vice president for business development for Warner Music Group.

Warner, part of CNN's parent company AOL Time Warner, has entered trial agreements with wireless carriers and sold "tens of thousands" of ring tones in a three- to four-week period, Vidich said.

The draw of ring tones and other content is driven by mobile phone users' desire to personalize their handsets, said Thomas Gewecke, Sony Music senior vice president of business development.

Sony has launched a site for AT&T Wireless customers to browse information about recording artists' tour dates and song releases. Sony is working on providing clips by phone of original recordings of songs, images and animations.

"Ring tones are today's business," Vidich said, "and the downloads are tomorrow's business."