Business Matters: Music Discovery Abounds, Conversion Needs Improvement: Study
Business Matters: Music Discovery Abounds, Conversion Needs Improvement: Study

The smartphone craze is having a notable, and positive, affect on mobile music usage, according to a new report from the NPD Group. According to the company's research, the number of active mobile music listeners increased by 9 million in the U.S. alone last year.

Specifically, mobile music listening activity increased from 12% of U.S.-based Web users in 2009 to 17% in 2010, NPD says. What's more, the ability to stream, download or otherwise listen to music on a smartphone is the second-most used feature of these devices, after downloading apps but ahead of taking and sending pictures.

However, the majority of this activity is focused on free services. Among active mobile music listeners, 56% prefer to listen to music saved on their phone while 32% prefer streaming free Internet radio. Only 16% prefer on-demand streaming from paid services.

"More than half of mobile music listeners currently prefer to listen to their own music, and most prefer free music to paying for it," Crupnick said. "That's a challenge for paid services to create and offer the most incremental value, which will be critical for companies looking to supplement the ad-supported model," said Russ Crupnick, entertainment industry analyst for NPD, in a statement releasing the data.

He goes on to say that eight of 10 users say what they can get for free is "good enough" and therefore see no need to pay extra for other services. That could have an impact on the ongoing move to the cloud. If music fans are happy simply storing a few tracks on their phone and playing them as they like, cloud music providers like Google, Amazon and, soon, Apple may have a tough time convincing them to pay extra to stream their entire library on demand.

The challenge is even greater for paid subscription services, like Rhapsody and, perhaps, Spotify. While integrating monthly billing fees into a carrier bill is certainly a nice step of convenience, more features and value must be added to the service to encourage more users to pay in the first place.

Overall, however, this is encouraging news for the mobile music business. In 2007, analyst groups reported that only 5% of U.S. mobile phone users bothered to use their devices for music services.