Mobile Music: Marketing vs. Retail

"I heard it through the grapevine…" or maybe on my mobile phone.

The music industry is learning a hard lesson: The mobile platform works better as a marketing and customer relationship tool than it does as a retail sales channel.

"Bands and artists are increasingly using mobile to form direct relationships with their fans that are then monetized through other means, such as tickets to live shows, merchandise and fan clubs," says John du Pre Gauntt, senior analyst at eMarketer and author of the new report, Mobile Music: Ads to the Rescue. "In addition, given consumers' reluctance to pay for music on their phones, marketers are finding new opportunities to partner directly with carriers, labels and even music artists themselves."

It's not that there won't be mobile music sales, they just won't be as large as many in the industry hoped for.

eMarketer forecasts worldwide mobile music retail revenues will grow from $2.4 billion in 2007 to over $13 billion by 2012.

To replace the drop in CD sales, alternate revenue streams must be developed.

"Marketers will account for a greater proportion of that overall spending as the ad-supported model for mobile music gathers steam," says Mr. Gauntt.

eMarketer expects marketers will spend over $1.5 billion in 2012 to subsidize or sponsor mobile music to targeted customer demographics, up from $42 million in 2007.