Wireless carriers, record labels banking on mobile music

LOS ANGELES (AP) _ When someone dials Leah Balecha's mobile phone, it doesn't ring. It jams with the sounds of 50 Cent, OutKast, Gwen Stefani and Kelly Clarkson. <br/><br/>Like a growing number

Monday, September 26th 2005, 1:13 pm

By: News On 6

LOS ANGELES (AP) _ When someone dials Leah Balecha's mobile phone, it doesn't ring. It jams with the sounds of 50 Cent, OutKast, Gwen Stefani and Kelly Clarkson.

Like a growing number of mobile phone users, the 30-year-old videographer and student has taken to customizing her handset, sometimes paying more than $3 for just a snippet of a single song to turn it into an audible fashion accessory.

``I love the reaction I get when people hear my phone ringing,'' Balecha said. ``All of my girlfriends have a different ring.''

With U.S. mobile phone users like Balecha already spending hundreds of millions a year on ringtones, wireless carriers and the music industry are banking on taking music lovers to the next step: using the phone as a portable music player.

They're taking advantage of the fact that mobile handsets and the data networks that feed them are becoming more sophisticated.

Consumers in Japan, South Korea and Great Britain are already transferring songs directly from their computers to their phones, a practice known as sideloading, or downloading full-length tracks over their mobile networks.

Ringtones may be big in the United States now, but full-track downloads and sideloading are the future, said Thomas Hesse, president of global digital business at Sony-BMG Entertainment.

Still, there's some doubt about whether U.S. music fans _ who have grown accustomed to using their home computers to buy, listen and organize their digital music _ will fully embrace the phone as their music device of choice, said Charles Golvin, principle analyst for Forrester Research in Los Angeles.

Balecha has purchased about 15 ringtones in the past three months but isn't sold yet on full-length songs.

``It would depend a lot on how much it costs and how easy it was to use,'' she said. ``The sound quality on my cell phone when it plays the song is not like listening to my stereo.''

Sprint Nextel Corp. will likely be the first carrier to offer downloads of full songs over its wireless network. It plans to launch the service in the United States this year. Separately, Sprint recently struck a deal with RealNetworks Inc. to offer music videos, news and music streamed over its network.

Verizon Wireless, which is affiliated with a British carrier that already offers full-song downloads in Britain, is also planning a similar U.S. service.

Online music retailers including Napster Inc. and Apple Computer Inc. are also vying to capture download sales by promoting handsets that users can hook up to their personal computer. The idea is to get users accustomed to sideloading before plunging into pay-per-song downloads.

Earlier this month, Apple unveiled its ROKR, a mobile phone by Motorola Inc. that holds up to 100 songs and comes with Apple's iTunes software. It's being offered through Cingular Wireless, which is planning a separate download service next year.

Napster has partnered with wireless equipment maker Ericsson to launch a mobile music service under the Napster brand. Slated to launch in Europe within a year and in the United States eventually, the service would allow users to purchase individual tracks and download them wirelessly.

The growth of the U.S. mobile music market has been encouraging.

Ringtone sales are now estimated at about $400 million and projected to double by the end of the decade, said David Card, an analyst with Jupiter Research in New York.

Sales of mastertones _ clips from an actual recording label release _ have in some cases eclipsed sales of full versions of the same song in other formats like CD.

Nearly one-quarter of U.S. cell phone owners, or about 30 million people, had downloaded musical ringtones as of January, up from 5 percent a year earlier, according to a study by market research firm Ipsos Insight.

The study also showed 6 percent of mobile phone users reported having downloaded complete songs to their handsets.

Card sees great potential in sideloading, though he's a bit skeptical about users paying to download full tracks.

Apple's iTunes Music Store became popular because people fell in love with Apple's iPod music player, not the other way around, Card said, so companies shouldn't believe they can stir interest in mobile music simply by setting up a store.

``People who think you're going to spend boatloads of money to fill up anything with downloads, by far, there's not enough evidence to support that yet,'' he said.

Many handsets have come on the market with the ability to store scores of songs, but they don't have enough capacity to keep complete libraries nor the screens to make browsing through music files anything but laborious.

Pricing is another obstacle, Golvin said.

With desktops, consumers already pay an Internet service provider for data transmission. Wireless carriers must account for such costs, Golvin said.

Published reports suggest that Sprint plans to charge around $2 for its full-length song downloads, which would be double the desktop price. Although Nancy Beaton, Sprint's director of entertainment and personalization, declined to discuss details, she said ``customers will put a premium on the convenience.''

Adam Klein, an executive vice president at EMI Music, said full-track downloads mean instant gratification.

``In other markets we see it as appealing to the sense of instantaneous, 'I hear it, I push buy, I get it,''' Klein said.