Global Economics

Battle of the Mobile Brands


With the iPhone set to launch in Europe, Sony Ericsson, Nokia, and Apple are turning to local musicians to drive sales

It's being billed as the battle of the bands, but it's really the battle of the brands, namely Sony Ericsson's Walkman line of music phones vs. Apple's much-hyped iPhone.

Between October and December, when Apple (AAPL) is expected to launch the iPhone in Europe, Sony Ericsson and wireless network Orange plan to make a splash of their own, with a high-profile contest for the best unsigned band in Britain. The contest will run as streaming video simultaneously over TVs, computers, and mobile phones.

The "mobileAct Unsigned" local music marketing campaign, announced July 24 in London, is designed to mute iPhone's buzz even as it tries to generate excitement for Walkmans and wireless downloads on the Orange (FTE) network. Here's how it will work: Britain's Channel 4 will televise 12 one-hour-plus shows around a contest for the best unsigned band with original music. The public will vote for their favorite bands, selecting their top 25. Well-known musicians will be asked to choose an additional 25. Those with the most votes will tour major British cities. The band that ultimately wins will be guaranteed an album deal with a major record label, says Hervé Fontaine, a Sony Ericsson vice-president.

Driving Downloads

Sony Ericsson and Orange first tested the contest in Switzerland, where a young band named Container 6 won a recording contract from BMG Sony last year. The teenage band, named after the huge industrial container—stamped with the number 6—it practiced in, is set to record its second album for the label. A new contest will be launched in Switzerland before yearend, with other European countries to follow.

Music fans will be able to watch and participate in the contest using all types of mobile phones, MP3 players, computers, and television sets. Orange and Sony Ericsson hope the contest will juice sales of Walkman music phones and promote downloading or streaming of music over Orange's network. Orange has sold some 2 million Walkmans in Europe since the partnership began in March, 2006, and hopes to sell an additional million by yearend, says Yves Maitre, Orange's senior vice-president of devices. Existing sales have translated into a 300% increase in downloads in some markets such as France.

Apple Trails in Europe

For now, at least, the race between iPhones and Walkmans in Europe is no contest. Mobile phones with music-playing capabilities far outstrip the iPhone's projected sales: Sony Ericsson sells almost as many Walkmans in one quarter than the 10 million that Apple expects to sell worldwide over 18 months. Even so, mobile music as a mass market product is a tough sell for European wireless companies. Only 6% of Europeans listen to full music tracks on their phones. After investing billions in third-generation networks, mobile operators are keen to increase their margins with over-the-air downloads of music, but a vast majority of European consumers "sideload" music content onto their phones from the Internet rather than use streaming or download services offered by mobile operators, says technology consultant JupiterResearch.

MP3 devices don't fare all that much better. The iPod has a market penetration of about 10% in Europe, and when you throw in all other types of MP3 players only a total of 26% of consumers listen to music using this type of device, says Mark Mulligan, a digital media analyst at JupiterResearch.

Still, hardware manufacturers continue to have high hopes. Nokia (NOK), the world's No. 1 maker of handsets, has been flogging its music phones in connection with the X Factor, a British TV music talent show that features aspiring pop singers drawn from public auditions. And it is expected to launch its own branded music and multimedia services within a year, the better to compete with the iPhone/iTunes duo.

The Local Angle

Sony Ericsson and Orange kicked off their partnership by launching a nine-month European sponsorship deal with Sony BMG artist Christina Aguilera. The deal gave Orange customers in nine European countries access to exclusive mobile music content, such as track downloads, via Orange's portal. Although Aguilera tracks were popular, the feedback from each country was that a local angle was crucial, giving rise to the new mobileAct Unsigned campaign, says Maitre.

Apple, too, has figured out the importance of the local market. As part of what it calls an "iTunes Festival" every night in July, it is hosting a different well-known British artist or band, include Amy Winehouse and Crowded House. The artists play to audiences of no more than 350 people. Each concert is professionally recorded and made available for purchase on iTunes. Tickets for these events can be gotten only through iTunes, fan Web sites, and two lotteries run by Britain's Institute of Contemporary Arts.

It is not yet known which mobile operators Apple will partner with in Europe or what pricing models it will use, but it is expected to benefit from marketing iTunes, the iPod, and the iPhone together, says Jupiter's Mulligan. Still, Nitesh Patel, a wireless applications analyst at tech consultancy Strategy Analytics, says he believes that mobile music is likely to remain a niche market in Europe, regardless of whether it is served up on an Apple, Sony Ericsson, or Nokia device.

Schenker is a BusinessWeek correspondent in Paris.

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