Abstract

The first mobile music services in China were launched in 2003. Initially, CRBT was the most important mobile music service, but over time other value-added services have been added, including ringtone downloading, downloading of whole songs or parts of songs, background music for voice calls, and MOD.

The wide range of different mobile music services that are now available and the ability to meet the needs of individual mobile phone subscribers have stimulated take-up of mobile music services. Mobile music is now the Chinese telecoms' most important value-added service after SMS.

CRBT was the first mobile music service to become popular in China. As mobile users using the CRBT services have to go through the operator's server to acquire a personalized ringtone, eliminating the possibility of users using unlicensed music as the ringtone, CRBT has been able to account for the largest share of the telecoms' total mobile music services revenue. It can be anticipated that CRBT services will continue to account for a sizeable share in the future.

Background music for voice calls and MOD are services that have only recently been introduced. So far, consumers have shown little enthusiasm for these services. To access these services, consumers need to use the telecom's GPRS or CDMA 1x network, the charge rates for which tend to very high. Furthermore, not all mobile phone models support these services. Given that consumers can download music from the Internet free of charge, there is little incentive for them to make use of services of this type.

The companies involved in the mobile music business in China fall into three main categories: telecoms, service providers, and content providers. The control that they exercise over a large subscriber base has given the telecoms a dominant position in the mobile music market. Impressed by the potential that mobile music offers, all of the leading Chinese telecoms have been expanding their presence in the mobile music market.

Neither China Mobile nor China Unicom is content to limit their involvement in mobile music service to providing the platform and billing mechanism. While continuing to introduce new services, both operators have been implementing vertical integration. By working directly with record companies, China Mobile and China Unicom have been able to access music resources directly without needing to go through service providers. This strategy has boosted their revenue from mobile music services, while at the same time increasing the level of control that they are able to exercise over the mobile music supply chain.

Both China Mobile and China Unicom have established their own mobile music platforms. Fixed-line operators China Telecom and China Netcom also provide mobile music services for their PHS subscribers; however, due to their limited network resources and the restrictions imposed by the PHS mobile phones, these services are largely confined to CRBT.

Service providers do not possess their own content resources. As more and more telecom start to directly collaborate with content providers, service providers are forced to establish strategic ties with other providers or expand into other market sectors. In the future, only those service providers that can secure substantial customer and content resources will be able to survive in what is becoming an increasingly competitive market.

In the traditional music market, content providers have suffered serious losses due to rampant piracy. Mobile music offers them a way out of this situation. Rather than just collaborating with service providers, content providers have begun to work directly with telecoms. Consumers benefit from the introduction of new types of mobile music service, while the content providers are able to disintermediate the service providers and achieve faster sales growth in what is potentially a much larger market.

In the future, the distribution of music over mobile networks will become more and more widespread; it will in fact become one of the main music distribution channels. Given the ability to minimize the impact of piracy, content providers can also expect to secure a larger return on their investment.

Appendix

List of Companies