MMW-66 -- The Changing Face of Mobile Music in Japan, Part 2

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J@pan Inc Magazine Presents:
M U S I C M E D I A W A T C H
Commentary on Japan's music technology news
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Issue No. 66
Thursday, November 11, 2004
Tokyo

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CONTENTS

++ FEATURE: The Changing Face of Mobile Music in Japan, Part 2

++ NOTEWORTHY NEWS:
** DoCoMo to Offer Single Downloads of Ringtones and Realtones
** Yamaha Releases New Authoring Tool For Synching Video To SMAF
** Vodafone Displays New "Music" Phone

++ EVENT: MMC 2004: The Mobile Music Conference

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++ FEATURE: The Changing Face of Mobile Music in Japan, Part 2

In Part 1 of this feature, we looked at some of the differences between
ringtone providers, whose main business is selling MIDI-like instrumental
renditions of songs, versus realtone (chaku-uta in Japanese) providers
who are focused on selling audio files that sound more like the original
CD recording of a song. While ringtone providers are still making strong
revenues in Japan, they are also losing customers at a staggering rate,
as more and more mobile subscribers here upgrade their handsets to 3G
models capable of playing realtones and video clips.

So what are ringtone providers doing in response to the rise of realtones?
Although MIDI-like ringtones cannot hope to compete long-term in the mobile
contents marketplace with realtones, the companies who provide these files
have nonetheless managed to impressively extend the lifespan of their
services. In addition, these companies are doing everything they can to
maximize their two main assets - the MIDI catalog and the subscriber base.

The main strategies used by the ringtone providers can be summarized
as follows:

1. Go overseas
Japanese ringtone providers have spent more than five years building up
catalogs of 15,000 or so 16- and 32-voice polyphonic ringtones, which
include a high percentage of Western artists. Simply by adapting their
download system to match that of foreign carriers, they are able to
quickly establish new revenue streams and maintain a jump over local
providers, who must invest in building their own catalogs. Some
providers are able to work through their overseas subsidiaries
(Yamaha, Kanematsu), while others have opted to buy foreign companies
(Forside.com, Index) or establish a new subsidiary (Faith).

2. Join the realtone club
In order to offer realtone versions of a song, a provider must obtain
a license to the master rights for the song. In Japan, these are usually
held by the record labels, giving them a huge advantage in the realtone
market. However, ringtone providers have been able to start realtone
services by using cover versions of the songs (which only require
publishing rights), and by working with "indies" artists who aren't
signed to a major record company. They are then able to advertise their
own "chaku-uta" realtone service on their ringtone portal sites. In
fact, at present there are very few providers left who offer only
ringtones; rather most services have evolved into hybrids that offer
a mix of ringtones, realtones and videoclips.

3. Get back to what you do best
Prior to becoming big players in the mobile ringtone market, many
providers were focused mainly on markets involving MIDI technology.
These include manufacturers of MIDI instruments, sequencer and music
creation/education software such as Yamaha, Roland and Faith (whose
MIDI technology was boosted considerably by the addition of several
ex-Roland employees). Karaoke companies such as XING and Daiichi
Koushou also are also strong in MIDI and general music technology.
While all of these companies have enjoyed a huge (and for the most
part unexpected) boost in income that resulted from selling ringtones
to the mass market, their core customers have always been musicians
and digital music creators. As the Japanese market for ringtones
decreases, these companies are going back to focusing on their base
of music creators and players by offering mobile services and
software devoted to particular instruments and music learning.

4. Diversify
Finally, several providers are using their income from ringtones to
move into entirely new fields. Last year, Faith acquired WebMoney, a
Japanese firm offering Internet payment services, with an eye toward
expanding into that market. Index is now offering a new service called
"Bowlingual" that facilitates communication with dogs. Nearly all
ringtone providers have at least one service devoted to video clips
and another devoted to games. Some providers are also moving into
areas such as mobile shopping, sports news, and social networking
systems.

So, while Japanese ringtone providers will no doubt continue to lose
subscribers to realtone services, they still have means for gaining
income from revenues as they transition their service offerings.

Within a few years, it is likely that the only providers who are still
doing strong business with mobile MIDI-based catalogs will be those
companies who make also MIDI software for PCs and karaoke systems
(such as the providers who are adopting the Get back to what you
do best strategy above).

The content offered by these companies will be come much richer,
and should expand to include mobile sequencers (such as Yamaha's
QY series), rhythm machines, and visual songbooks and players that
could eventually replace sheet music and guitar tablature.

Next in Part 3: An in-depth look at Japanese realtones (chaku-uta)
and mobile music video (chaku-motion)

++ NOTEWORTHY NEWS

** DoCoMo to Offer Single Downloads of Ringtones and Realtones
In brief: After nearly six years of offering only subscription-based
services, NTT DoCoMo has announced that it will allow content providers
to begin offering 'single' downloads of content such as ringtones,
realtones and video. The new single download scheme will be available
starting December 1. The maximum price that can be charged for a single
download is 525 yen (US$4.95).
Source (Japanese only):
http://k-tai.ascii24.com/k-tai/news/2004/11/05/652393-000.html

** Yamaha Releases New Authoring Tool For Synching Video To SMAF
In brief: Yamaha Corp. announced last week that it is now offering
a new authoring tool that allows ringtone creators to synchronize
video to music events in a SMAF file. The tool is being offered free
of charge on Yamaha's web site, and supports all SMAF-capable phones
that use an MA-2, MA-3 or MA-5 sound generator.
Source (Japanese only):
http://www.yamaha.co.jp/news/2004/04110101.html

** Vodafone Displays New "Music" Phone
In brief: On November 6, Vodafone began displaying a few handsets that
are currently in development at their R&D labs. Included in the exhibit
was a Bluetooth-enabled phone called "Music," which sits in a cradle
between two high-quality stereo speakers, and is intended to serve as
a replacement for home audio devices.
Source (Japanese only):
http://www.itmedia.co.jp/mobile/articles/0411/05/news101.html

++ EVENT: MMC 2004: The Mobile Music Conference

The MobileMusiCon 2004 will be held November 18-19 in Miami. The
conference brings together more than 400 music, carrier, handset and
technology executives, and focuses on the challenges, opportunities,
models for success and solutions for the successful development and
growth of music-based mobile entertainment and services.

More information:
http://www.mobilemusicon.com

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Subscribers: 3,074 as of November 11, 2004

STAFF
Written by: Steve Myers (steve@thetamusic.com)
Steve Myers is president and chief enthusiast of Theta Music
Technologies, which specializes in the development of music-related
software applications.

Edited by J@pan Inc editor: (editors@japaninc.com)

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