Consumer spending on Mobile Music will surpass $32B by 2010.

The amount of money that mobile phone users worldwide spend on music received on mobile handsets will reach US$32.2 billion by 2010, up from US$13.7 billion in 2007, according to new global forecasts from Gartner Inc. This is despite competition from various digital music players and a host of challenges faced by telecommunications carriers in delivering these services.

Mobile music, which includes services from basic ringtones, realtones and ringbacktones to more sophisticated full track downloads and streaming, has existed since 1998 when the first ringtones were commercialised. It is the second most popular mobile data service, although considerably behind short message service (SMS) in terms of use and revenue.

According to Gartner, two distinct factors are driving the use of mobile music: personalization and entertainment. The use of ringtones and ringback tones is part of the trend to personalize mobile phones as a form of self-expression. However, the mobile phone can now be used to play music, in some situations replacing portable music players like the popular iPod for entertainment.

Stephanie Pittet, principal research analyst at Gartner, said that while mobile music was growing from a small base, it represented a good revenue opportunity for providers that “get it right”.

“Mobile carriers have a strategic advantage when it comes to delivering ringtones, as they already know the end-user’s network settings, handset and personal preferences. However, when it comes to the ‘entertainment’ side of mobile music like streaming and full track downloads, they risk losing share to other players, which might include device vendors, record companies and other solution providers,” said Ms Pittet.

More recently, Apple announced its entry into the device market with the iPhone. Mobile access to iTunes, along with other digital music shops such as Microsoft’s upcoming Zune offering (that will allow WLAN access to its music shop) will compete directly with mobile carriers’ portals. However, Gartner says a range of factors are helping mobile carriers to secure a new revenue stream.

“The mobile phone has become the device that people carry everywhere, in all circumstances,” said Ms Pittet. “Over-the-air downloads mean that people no longer have to be at a desk to plug in the device. Billing via a mobile phone is secure and easy, and for operators, it is easy to target customers with personalized content because one mobile phone SIM card is used by one person most of the time.”

Ms Pittet said “Carriers must figure out how to develop the right content partnerships, pricing strategies, content partnerships, licensing deals, distribution channels and marketing. There are also a host of technical challenges to be addressed, such as Digital Rights Management (DRM), storage capacity on the mobile device and network coverage.”

Spending varies dramatically from region to region, with the market in Asia Pacific (including Japan) worth more than twice that in North America (US and Canada). In 2005, people in Asia-Pacific and Japan made up more than 41 percent of the worldwide spending on mobile music, and while that proportion will decrease slightly by 2010, the region is still forecast to be the biggest spender.

Western Europe is the second largest region for mobile music, with total spending forecast to top US$9.1 billion by 2010, while North America is forecast to reach US$7.1 billion. In mature markets, growth in ringtone revenue is starting to slow, and will start to slump in North America in 2007 and Western Europe in 2008. This slowdown does not mean that the market will become unattractive, since download volumes are staying healthy. However, realtones are now the “cash cow” for mobile music in these markets. They represent 65 percent of ringtone downloads in North America and 70 percent in Western Europe.

Asia/Pacific will lead the way when it comes to downloads of full track content to mobiles. Countries like Japan and South Korea already account for the majority of full track downloads to mobiles. The opposite is true in North America, where users favor PCs and prefer to “sideload” content to their mobiles. User-generated content (bands and musicians making their music available via the web for download) will make its way to the mobile phone, helping mobile carriers to avoid digital rights issues. Gartner is already seeing this in some Asian markets.

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For more information at http://www.gartner.com