Music Phone Wins but Mobile Music Loses in China

Tiborlee

Following three years of continuous strong growth, China’s mobile music market slowed down in 2006 as a result of Service Provider (SP) regulation initiated by China’s Ministry of Information Industry (MII). China’s mobile operators also introduced severe measures to counteract the SPs’ illegal activities and to protect mobile users’ interests. The greatest impact on the mobile music market has been the double-confirmation mechanism, which removed from SP subscriber lists the 20%–30% of consumers who were recruited involuntarily, thus leading to sharp revenue decline in the short-term. As a result of the regulation, China’s mobile music market revenue declined slightly to $703.2 million in 2006, an 8.1% decrease over 2005.
HIGHLIGHTS
􀂃 In 2006, China’s mobile music market slowed down after three years of continuous strong growth, mainly because of severe SP regulation.
􀂃 Internet music piracy is the biggest threat to mobile music, but it also drives the proliferation of MP3-enabled music phones.
􀂃 China’s mobile music market will sustain moderate growth between 2007 and 2009, then experience low-level growth in 2010 and 2011.
􀂃 The penetration rate of music phones in China’s handset market will almost double from 45% to 85% between 2006 and 2010.
However, even though the SP regulation has affected the mobile music market in the short-term, we believe it is positive for the continuous healthy development of the wireless value-added service market. First, a lot of small SPs were washed out and big SPs survived during the regulation, which will help avoid destructive competition among SPs. Second, consumer trust in SPs is recovering as a result of the regulation, which is a key to the future growth of wireless value-added services.

Tiborlee

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