Robert Tercek has written a thought-provoking piece for Forbes on the speed bump that mobile content has hit.  He writes that "After an initial burst of growth, mobile content–which can include
everything from ring tones to video clips–is struggling to break out
of the early adopter segment and achieve mass consumption."  Ring tone purchasing has stalled, at about 10% of mobile subs each month, while the pricing of games is also going down.  Tercek places most of the blame for this squarely with the operators for their lack of marketing in terms of customer segmentation and merchandising.  Consumer fatigue is also an issue.

I would add pricing to the list.  But, I don’t think it’s all their fault.  Mobile music stores and handsets are still 1 or 2 generations away.  I’ve been playing around the Spring PCS Music Store for the past few months.  While it is a subject for a future post but navigating the music store and player on the phone has been much too clunky.  I’ve used it now and then during down time when I’m traveling, but it’s not like I leave home without my iPod.  The novelty of being able to find and download songs has pretty much worn off for me.  The better solution would be for me to be able to access an on-demand subscription service like Rhapsody from the mobile phone, where I could easily access my playlists or listen to radio.  My carrier would not like this because they’d only be getting my data revenue and no additional revenue unless Rhapsody gave them a piece of the pie.  Better yet, why don’t the carriers market a subscription service through their own stores but at a steep discount, say $5 or $7 / month for mobile and pc listening.  Now that would be something worth paying for.

Much has been made about the recent launch of an ad-supported version of Napster.  They are not the first digital music service provider to offer this.  RealNetworks did something similar with Rhapsody, except with Rhapsody, the first 25 songs each month are free and then you have to pay; whereas with Napster, you can listen to as many songs in their library but not any one particular song more than 5 times before having to pay.  I like Napster’s approach better.  It’s much more conducive to browsing and discovering new music without worrying if my ‘quota’ would run out.

Napster also intro’d Napster Links, a way of syndicating music, which is a great move (and not unlike what Brightcove is enabling content owners to do for video, but that’s a topic for another post).  For instance I can ‘post a song’, like My Morning Jacket’s Off The Record and you can listen to it.

I wish Napster Links were integrated with the Napster player.  Today you have to visit the main site to access Napster Links.  Also the Player only plays 1 song at a time and doesn’t support playlists.  When you search within the player, it spawns a web page with the results rather than rendering them in the Player.  So the UE needs some work but I’m guessing they had to walk the fine line between encouraging usage but not cannibalizing the much more profitable subscription revenue stream. So playing 1 song at a time forces the user to look at ads in the Player when it pops up with the new track in question. 

Speaking of revenue streams, ne analyst estimated that the new ad supported Napster, with its 1.9 Million monthly uniques, could bring in $50 M in revenue. Now I don’t know the context of where he got this number but, on the face of it, it sounds absurd. 

All in all, a nice first effort by Napster but you can tell their heart is in the subscriptions business by the way they’ve hobbled the functionality in the ad-supported player.  I could be mistaken but I see this as more of a customer acquisition play with ads subsidizing their costs, rather than a play to actually create an ad-supported business that can stand on its own (I’m assuming they have to pay about $0.01 per play, which I’ve heard is the going per-performance rate for on-demand listens subject to a rev share).  That means that each track has a licensing cost of $10 CPM, not to mention bandwidth and everything else.  Still, if their existing subscriber acquisition numbers are indeed $100, that’s a lot of free tracks to let people listen to, to entice them to subscribe. 

I don’t think I’ll regularly use the service but I do look forward to using Napster links to showcase music, and I applaud their (and the labels’)efforts to offer consumers more choice.

Over the past few months, I’ve heard similar things from folks that have video sharing sites:  They would like to monetize their traffic more, namely by running video pre-roll ads, but have not done so fearing that they’ll lose their users to competing sites with the same or similar user-generated content that choose not to run ads.  This is a classic multi-player prisoner’s’ dilemma with one equilibrium point being the current situation where no one runs ads, and I bet it will continue to be so.  Since bandwidth is getting cheaper and VC dollars are flowing, even if many of the video sharing sites decided to start running ads, the temptation to cheat and not run ads in order to siphon away traffic would be too great. 

Congrats to Nimrod Lev and the kSolo team — they just announced that they’ve been acquired by Fox Interactive Media.  I still remember that day last May — I was about to move out of NYC the next day and Nimrod had pinged me to meet him with this new concept around online karaoke.  I was intrigued so I took the meeting.  I was blown away.  It was like nothing I had seen in the past 6 years around digital music, and executed really well, especially considering the resources that had been put into it.  To me it was one of the few digital music services that I thought was attractive and feasible. 

I don’t know what FIM paid for it but, assuming it’s a reasonable price, I think it’s a great pickup for them.  It’s easy to see the fit this would be with their MySpace and American Idol properties.

[Disclosure: I did some work for kSolo last fall]