MMW-93 -- NTT DoCoMo and the Future of Music Distribution

J@pan Inc Magazine Presents:
Commentary on Japan's music technology news

Issue No. 93
Wednesday, February 8, 2006
Cannes, France


++ FEATURE: NTT DoCoMo and the Future of Music Distribution
** AMG and Rainbow Partners Introduce Music Recommendation Engine
** KDDI Chaku-uta Downloads Top 300 Million
** Yamaha, KDDI Develop Speaker System with Bluetooth Unit for Chaku-uta Full
** Nihon Plantronics Announces Bluetooth Headphones
** New Offerings Announced For NTT DoCoMo's Melody Call Service
** First 'LISMO' Handset Released

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++ FEATURE: NTT DoCoMo and the Future of Music Distribution

'Japanese telecoms giant NTT DoCoMo has identified the future of music
distribution: the retail store.'
- from January 23 edition of 'The News' (official MIDEM newsletter)

As one of the keynote speakers at last month's MidemNet conference
held in Cannes, Takeshi Natsuno - senior vice president and
managing director of multimedia services at NTT DoCoMo - provided
some insight into the carrier's strategy for mobile music. In particular,
Natsuno talked about his company's recent investment in Tower
Records Japan (now 40% owned by DoCoMo), saying that CDs
purchased at stores will remain the first choice of most music
consumers for the foreseeable future.

Natsuno laid out plans for a comprehensive music service in which
CDs, PC downloads and mobile each have a role to play, with mobile
content largely relegated to promotional material. Rather than making
phones the medium for music content, he suggested that mobiles can
be better used as 'wallet phones,' pointing to the increasing use of
these phones in Japan for purchasing train passes and the like. As
part of its deal with Tower Records, DoCoMo will likely extend this
service soon to allow wallet phone purchases at Tower stores.
The data acquired from these transactions can then be used to
produce tailored marketing campaigns according to individual
musical taste.

Over the past year, KDDI (DoCoMo's main rival for the Japanese
3G space) has loudly publicized the success of Chaku-uta Full,
its full-song mobile download service, while NTT DoCoMo remains
the only wireless carrier in Japan without such a service. It therefore
came as no surprise that Natsuno emphatically downplayed the
popularity of full-track mobile downloads, saying 'they take too long
to download - people don't want to wait that long.' In response to KDDI's
recent announcement that it had sold 30 million full-song tracks in
the first 13 months of service, Natsuno said that regardless of the total
figure, it still works out to 'only one song per user each month.'

In a conference that featured a lot of talk about new and unproven
services, Natsuno brought a healthy dose of 'down-to-earth'
pragmatism to the discussion on mobile music in general and
full-track downloads in particular. His comments were sharp,
witty and entertaining, and struck a chord with those in the audience
who (quite rightly) feel that mobile music has been overly hyped in
recent months. By pointing out that physical CDs and music retail
stores are still the mainstay of the music industry, he provided
a refreshing reality check on the notion that mobile phones will soon
dominate the distribution of music.

Still, there are some clear trends in Japan that point to a much greater
future role for the mobile phone. On KDDI's service alone, 20 million
full-song tracks have been purchased in the last six months at an
average price of nearly US$2.90 per track. Considering (1) the
'long wait time' (about 45 seconds on average by our tests), (2) songs
can't be transfered from the phone, and (3) all the normal hiccups of
a relatively new service, selling one download per user per month
is not bad at all. In fact, if DoCoMo were able to sell a $2.90 download
to each of its 50 million subscribers every month, it would add up to
well over US$1.7 billion per year in additional revenue. And the
services will only get better with time - just days before Natsuno's
MidemNet keynote, KDDI announced their new 'Listen Mobile'
(LISMO) service, which will allow songs to be played and stored
on the PC as well as the phone.

Of course, much of Natsuno's dismissal of full-track mobile downloads
can be attributed to the fact that they are currently only available
on competing carriers - KDDI and Vodafone. In actuality, it is likely
that DoCoMo will launch its own full-song service in Japan sometime
this year. Should this indeed happen, it will be interesting to see how
such a service is then integrated into the carrier's overall strategy for
music content distribution.

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** AMG and Rainbow Partners Introduce Music Recommendation Engine
In brief: All Media Guide (AMG) and Rainbow partners announced on
January 23 a playlist and recommendation engine for music discovery.
The new software is called Tapestry and uses AMG's new Global
Song Level Database, which stores information based on more than
6,200 musical descriptors including genres, styles, themes, moods and
instruments. An online demonstration of Tapestry is available at Rainbow Partners will be adding information
for a wide range of Japanese songs over the course of this year.

** Dwango Establishes Music Publishing Company
In brief: Dwango Inc., which operates the popular 'Iromero Mix' service
for ringtones and realtones, announced last month that it has established
a subsidiary company that will focus on rights acquisition and management
for mobile music content. The new company, called Dwango Music
Publishing, was officially established on December 26, and is 100%
owned by Dwango Inc.Source:

** KDDI Chaku-uta Downloads Top 300 Million
In brief: On January 23, KDDI and Okinawa Cellular announced that
the total number of chaku-uta downloads (30-45 second mastertones)
reached 300 million. The service began in December 2002, and KDDI
reached the 100 million mark in July 2004 and 200 million in April 2005.
KDDI currently has 341 different sites offering chaku-uta with a total
catalog of more than 280,000 tracks.

** Yamaha, KDDI Develop Speaker System with Bluetooth Unit for Chaku-uta Full
In brief: Yamaha Corp. and KDDI have jointly developed a speaker
system and Bluetooth unit made specifically for use with music data
from KDDI's 'chaku-uta full' full-song mobile download service. The
NX-A01 is a general purpose speaker unit shaped in a 9cm cube.
The TRX-R01BT is a Bluetooth unit for KDDI's new W41T au handset
that can be used together with the NX-A01 for playback of full-track
mobile downloads. Both units are expected to retail around JPY14,000

** Nihon Plantronics Announces Bluetooth Headphones
In brief: In mid-February, Nihon Plantronics will begin selling a new
Bluetooth-enabled stereo headset called the Pulsar 590A. The new
headphones can be used with mobile phones that have Bluetooth
support and are expected to retail at around JPY20,000 (US$170)

** First 'LISMO' Handset Released
In brief: On January 27, KDDI began selling the W41S handset (made
by Sony Ericsson). The W41S is the first model to support KDDI's new
LISMO (Listen Mobile) service, which will combine music downloads
to the mobile phone with PC downloads, storage and management.

Subscribers: 4,773 as of February 8, 2006

Written by: Steve Myers