MaxxoMedia Digital Media and Entertainment Trends

Posted on February 14, 2007 – 10:30 pm | in » Mobile, Music

Ever since the first ringtone sites began appearing on NTT DoCoMo’s i-mode menu back in 1999, most mobile music content providers in Japan have pushed to have their services appear on the ‘main menu’ of the wireless carriers. This approach has become known as the ‘official service’ model, and works something like this:

1. Content providers (CPs) first submit an ‘official service’ proposal to a wireless carrier.
2. If accepted, the CP’s service is listed on the carrier’s ‘official’ portal menu.
3. The CP charges customers a monthly subscription fee (typically around US$2.50) to use the service - for example $2.50/month to download 3 mastertones.
4. The carrier takes 9% of the total sales, with the rest going to the CP.

This ‘closed garden’ model has been widely criticized for putting too much power in the hands of the wireless carrier.

However, it has still been attractive to CPs because of the enormous traffic that comes from the carrier’s menu, as well as the convenience of having customer billing handled by the carrier.

For the past seven years, CPs have flooded Japan’s three major wireless carriers with thick, 150-page proposals, in the hopes of getting their ringtone, mastertone, or other content listed on the menu. Despite the high barrier of entry and heavy restrictions, this method has until recently been the preferred way to operate a mobile music service in Japan.

Recently, however, there has been a sharp increase in the number of music content providers choosing to forego the ‘official portal service’ option, instead opting for a ‘non-official’ site off the carrier’s main menu. Most of these sites rely on revenue from banner ads, and an entire industry has sprung up to match advertisers with the most appropriate non-official mobile sites. Because these non- official, ad-supported sites have no access to the carrier’s billing system, most of the content is essentially free to users, provided they subscribe to the service (also free).

Alternatively, some services are point-based, allowing users to obtain points clicking on ads or introducing friends to the service. Yamaha was one of the first ringtone companies to experiment with the non-official model, launching its ‘Gorgonzola’ service in late 2004. Interestingly, the company chose not to use its name or corporate brand anywhere on the site.

Rather, the idea was to make the site look as though it was created and run by a young, highly-motivated musician named ‘Gonzo’ who just wants to make the highest quality ringtones he possibly can, and is asking other people to help support his efforts by getting their friends to subscribe and click on the ads. In order to download ringtones and other content, users must first get points by spreading the word to their friends.

Although it took a while to build a subscriber base, Gorgonzola now boasts over 1.3 million registered users, and its success has prompted several other mobile music content providers to follow suit with their own non-official offerings.

Oricon operates its ‘Oricon Style’ site off-portal, offering chaku-uta (mastertones) and general music information.

Oricon drives traffic to its non-official site through ads and promotions in its popular music magazines. Vibe, another company that runs several official ringtone, mastertone and full-song services, started a new mobile SNS last year called GAMOW, which also entices users to earn points for downloading content. Adding more fuel to the off-portal movement, On-Q has recently started selling an ‘instant chaku-uta site’ starter kit that supplies the would-be off-portal content provider with templates, admin tools and a full catalog of well-known J-Pop songs for making a quick and dirty ad-supported chaku-uta download site.

The success of off-portal sites in Japan was made possible largely by the convergence in the past year of:

1. Powerful mobile search engines (including Google and Yahoo) that include off-portal content in their results

2. QR-codes (which allow quick access to mobile sites from paper media)

3. Mobile blogs and SNS sites, which help drive traffic to off-portal services

Together, these factors have created an environment that allows a well-made off-portal site to quickly establish a user base with a focused demographic. CPs also like this model, because it frees them from annoying restrictions imposed by the wireless carriers. It is not yet clear how many more CPs can succeed with this type of model, but with revenues shrinking from their official services, it’s a safe bet that many are going to take a shot at setting up off-portal services this year.

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