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Sprint Nextel Launches Over-the-Air Music Downloading Service

Posted on: Monday, 31 October 2005, 21:00 CST

By Leslie Brooks Suzukamo, Pioneer Press, St. Paul, Minn.

Nov. 1--Cell phone carrier Sprint Nextel Corp. launched the nation's first over-the-air music downloading service on Halloween Monday, but industry analysts considered it more of a trick than a treat and predicted consumers would shun it.

The service will charge subscribers $2.50 a song to download music directly into a cell phone. Analysts said that was too expensive for consumers who are used to free peer-to-peer file sharing or 99-cent music downloads.

"It's ludicrous," said Michael Goodman, a senior analyst at the Boston-based technology research firm Yankee Group. "Why would I pay a 250 percent mark-up for something I can get for 99 cents?"

"It's too early to say," Sprint spokeswoman Jackie Bostick answered. "We definitely think there's value and convenience here."

The music store operates on a new high-speed network that is available to 130 million people nationwide, including those in the Twin Cities area.

Cell phones that play music are not new, but buying music over the airwaves to play on a cell phone is new in the United States. The practice is more commonplace in cell phone-saturated countries like Japan, where carrier KDDI recently announced 20 million song downloads over the air to cell phones since it launched its service last December.

The major U.S. carriers now are investing billions of dollars into their networks to make over-the-air music and video downloading a reality. Each is hoping to bump trend-setting computer maker Apple and its iPod music players off their perch as the kings of the nascent music downloading industry.

Cingular, the largest U.S. cell phone carrier, in September unveiled the Rokr, a phone that downloaded songs from Apple's iTunes music store through a cable.

Some hailed it as an "iTunes phone" but sales so far have been disappointing, its manufacturer Motorola has acknowledged.

Sprint Nextel Corp., the product of the merger of the No. 3 and 4 carriers, is the latest to attempt to dethrone Apple with an "iPod killer."

Analysts who watch the wireless industry said better luck next time, though.

"People are expecting 99 cents" a song, said Roger Entner, a vice president in Boston for the European technology research firm Ovum. "Two dollars and fifty cents gives you instant sticker shock."

"My instant reaction is $2.50 is too pricey," said Tole Hart, mobile and wireless research director for Gartner Inc.

The problem facing Sprint Nextel and any cell phone company is the economic model is stacked against them. Even Apple only breaks even on 99 cents a song.

Instead, Apple makes all its money off of its iPod music players, which sell for several hundred dollars apiece. Record iPod sales helped propel Apple 's fourth-quarter 2005 net income up more than 300 percent to $430 million, the company's best quarter ever. .

Wireless carriers, on the other hand, subsidize their phones to sell their services, dropping the handset prices to less than $100 or even free. They need to boost the price of the songs to make a profit, analysts said.

The quality of music delivered to cell phone isn't anywhere close the quality of an iPod either, said Lisa Pierce, an analyst and vice president at Forrester Research.

"I don't see the music download industry moving (in a big way) to generic mobile devices until this problem is resolved. Which, by the way, will also help with the quality of voice for a mobile voice call -- (it) would not sound nearly as scratchy as it does now," she said.

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Copyright (c) 2005, Pioneer Press, St. Paul, Minn.

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Source: Saint Paul Pioneer Press (St. Paul, Minn.)

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