AT&T Wireless (NYSE:AWE) recently debuted its mMode Music Store. Developed together with Loudeye (NASDAQ:LOUD) and Microsoft (NASDAQ:MSFT), the store allows subscribers to browse, sample, and purchase digital music using their cell phones for $0.99 a song from a library of 750,000 songs.
This news should not be dismissed as yet another company jumping on the digital music bandwagon -- as the first mobile music store in the U.S., AT&T Wireless' rollout signals a shift in the digital music business.
This change was already foreshadowed by Apple's (NASDAQ:AAPL) deal withMotorola (NYSE:MOT) and a similar deal between Nokia (NYSE:NOK) and Loudeye to develop a music platform for wireless providers. Mobile music has not gathered full steam yet. Currently few phones can play MP3s, and direct-to-device downloads are not yet viable. However, the launch brings to the fore various strategic implications.
In the short term, makers of flash-based MP3 players should be worried. While the first generation of MP3-phones may suffer from low built-in capacity and battery life issues, subsequent improvements might render flash-based MP3 players redundant.
Further down the road, there is more at stake. Wireless subscribers are already a proven market for music, with the ring tone market racking up $2.3 billion in worldwide sales in 2003, according to the Yankee Group. Companies are betting that if cheesy MIDI ring tones based on popular music can command that much cash, selling the actual songs would net even more.
The large pot available will galvanize the rush to develop platforms for delivering content. Look for more alliances between handset manufacturers and digital music providers. One possibility that makes sense is Samsung teaming up with Roxio's (NASDAQ:ROXI) Napster -- they have already cooperated on Samsung's Yepp MP3 player.
The competition between formats will continue. The mMode Music Store uses Windows Media Digital Rights Management (DRM) and the Apple/Motorola collaboration will naturally use the iTunes DRM. No established standard for secure content has emerged, so for now, Apple and Microsoft will continue fighting for your right to party.
With so many companies venturing into the digital music space -- many having other commitments -- it is difficult to identify which one to back. Micro-cap Loudeye has proven experience in building digital music platforms. It may be worth a look as a pure play for those seeking to profit from digital media.
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Fool contributor Tim Goh is an AT&T Wireless subscriber and does not own any stake in the companies mentioned.
