Vodafone Stakes Leadership with DRM-free, Dual-downloadable Music

| Mar 13, 2009 | Wireless Services - Europe | Competitive Update

| Analyst: Emma Mohr-McClune

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

March 12, 2009 -- Vodafone announced the arrival of DRM-free MP3 format full tracks and albums from Universal Music, Sony Music and EMI, across both mobile phones and PCs. Vodafone customers who have already bought tracks or albums from Universal Music, Sony Music or EMI in WMA format (with DRM) will be able to upgrade them to MP3 at no extra charge within the existing download allowance. DRM-free music will be available through a number of Vodafone countries by the summer and will complement Vodafone’s current music offerings.

Analytical Summary

• Current Perspective: Positive on Vodafone’s DRM-free music service, as the provision of DRM-free music across three major music labels in multiple markets by the summer allows the operator to stake leadership in the music services area. The revocation of digital rights management across three major labels will allow Vodafone a unique selling point among the mobile operator community providing a dual-downloadable digital music service.

• Vendor Importance: High to Vodafone, as this announcement flags up a far higher commitment to DRM-free music provision as was recently indicated at CeBIT earlier this month (see CeBIT 2009: Vodafone Focuses on Music, With a Subscription Service and DRM-free Tracks, March 3, 2009). This announcement confirms Vodafone’s plans to roll out DRM-free music with three labels (not one) across many Vodafone markets (i.e., not just Germany) in the near-term.

• Market Impact: High on the mobile market, as the launch of DRM-free music within the flagship Vodafone Music Store, across three key music labels and available in multiple Vodafone markets, will likely trigger a wave of ‘me-too’ competitive responses. In years to come, this event will be remembered as a key turning point for mobile carrier-branded DRM-free music.

Recommended Competitor Actions

• Competitors can bet that Vodafone operating companies are about to make plenty of PR mileage with this announcement. Any ongoing DRM-free negotiations competitors are now holding with music labels should be accelerated, with a view to hitting the Christmas market with a like-for-like proposition.

• Orange should roll out its Musique Max service beyond France, as the UK unit needs a strong response to Vodafone’s growing digital music portfolio. Orange UK should also consider the same bolt-on pricing option as Orange France.

• Competitors should understand that the delivery of DRM-free music is only one digital music portfolio enhancement that Vodafone is working on right now. New releases announced at CeBIT this year tell a broader story, including a subscription option in Germany that could well be deployed in other markets (see CeBIT 2009: Vodafone Focuses on Music, With a Subscription Service and DRM-free Tracks, March 3, 2009).

• Telefonica O2 Europe needs to give its digital music portfolio more development attention, as the operator is falling behind both Orange and Vodafone in this area. Ease of user interface is a strong differentiation for both Musique Max in France (Orange) and the new Vodafone Music Manager client.

• All mobile operators should acknowledge they are no longer competing among themselves for mobile music subscriptions. The digital music competitor landscape has broadened significantly, and it will expand further as online players get more aggressive in the mobile music space. The ability to provision DRM-free tracks is now a key differentiation in the online digital music market, and service providers have to match this.

• Nokia must announce a major, pan-European service provider channel partner for Nokia Comes With Music soon or face diminishing market confidence in this product. Every month that goes by without such an announcement represents a nail in the coffin of what was once considered the most challenging pipeline product in Europe, DRM-free or otherwise.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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