Last year, Verizon Wireless shook up the mobile industry by revealing plans to open its network to developers with the intention of launching an application storefront similar to iPhone’s App Store. That effort will soon come to fruition with the launch of Vcast Apps, expected by the end of the month.
When it launches, few will be happier than Ed Ruth, the company’s director of strategic business development and partner management. Ruth will be a featured speaker at the upcoming Music & Money Symposium on March 4, on the App Observations: A Mobile Drilldown panel.
In this Q&A preview, Ruth discusses why music licensing costs are holding up mobile music subscription services, the opportunities for artists to go mobile, and what Verizon learned from the Droid smartphone.
Where’s the money in mobile music these days?
Unlike days of the past, when you could focus on the production and distribution of a single revenue stream, the reality is that the revenues are coming from many areas and growing every day. Digital music is a new entrant, and that space has evolved over time, moving to hybrids of streaming, a la cart and Internet radio. Now it’s the applications space, like games and community-oriented artist apps. Sky’s the limit on the possibilities.
Other than ringtones, where are you seeing real return on music ROI?
Tones are still generating a substantial amount of revenue for us. Music has been healthy for us from a full track perspective. Growth is consistent with the rest of the industry, but not growing as much as the rest of the industry would like. Some of that is because there are so many options for the consumer, and ultimately we’re all competing against free. Some models where we’ve seen traction but are still looking for the real ROI would be those around subscription and all-you-can-eat on-demand. Those are interesting spaces, but the challenge thus far is to bring the access to the consumer they expect and the monthly cost. Although we’ve been at this for a while, we have yet to meet on those terms with our licensing partners.
I can stream from Rhapsody on my Verizon Droid phone, but I can’t stream though a service directly from Verizon. Why?
That’s a very fair question, but it’s not a simple answer. The device where we can ensure the biz model is profitable is where we’ll do it. Right now that comes to market as the Droid device. As we have the ability to use unlimited bits of data over our network, we’ll open that up to many category of devices. We have to be able to recover the cost of how much usage we get over the network. We have a certain amount we invest in the network each year, and those are very real costs for us. The amount that goes into making the next investment the next year comes out of all the things that use the network the year before. So to the degree that we are able to continue to invest in our network, we have to make sure the business models that run on top of it are profitable. In the particular case of the Droid, there’s a data plan associated with it and we allow always on access.
Can you give me an update on the developer program you launched last year and when we might expect to see resulting apps available on Verizon?
We announced last year that we were opening up to all types of innovation and development, and give everybody in the dev community the opportunity to participate in an ecosystem on the Verizon device. Since then we’ve been working closely with the development community. In the music space we’ve talked with all the labels, and all the developers building interesting and innovative apps. Those include the usual suspects of Slacker, Pandora and those guys, as well as our partnership with Rhapsody and what we can develop together. To date, we have well over 1,000 developers registered and we’re planning to launch that store with a full catalog in the coming weeks.
What kind of outreach have you done with artists directly?
We’re not discriminating with who we talk to. Anyone interested in innovating on the platform we expect to be a partner of ours. We’ve spent a lot of time with the traditional players in the space, the labels and developers, but also looking at how artists can take more of a drivers seat with their own brand. How can they start to evolve their marketing engine beyond the Web and move it to mobile. Creating communities, give access, and potentially capitalize on the revenues they do own like merch and ticketing. These are spaces that are very nascent opportunities for both the artist and the label.
What have you learned from the Droid experience, having that kind of smartphone and app environment on your network?
One of the things we take away from that is there’s pent-up consumer demand for a high-end device that provides a high-end experience. We’ve sent that niche on other carriers and the Droid fills that need for us. I think it’s only just begun to satisfy the need. What you’ll see from us is a lot of devices at that same level of capability and functionality. It brings the consumer more than just the ease of access to things like the Internet or driving directions, but all the innovations that can ride on top of a device that has very quick processing speeds, strong internal memory, crisp resolution. The gameplay on devices like these can be very good, and not just for the games like Need for Speed. Consider the gameplay for various innovative ideas around artist-based games and how music becomes integrated into the games, or letting consumers select music while playing them. They’re really the tip of the spear for new and innovative ideas going forward.
Ruth is speaking on the App Observations panel at Billboard’s Music & Money Symposium, taking place March 4 in New York. Other panelists include Liz Schimel, global head of music for Nokia; Jeff Smith, CEO of I Am T-Pain developer Smule; Syd Schwartz, senior VP of global digital marketing at EMI; and Tapulous CEO Bart Decrem.