ONE IN TEN MOBILE SUBSCRIBERS HAVE MUSIC-CAPABLE PHONES, BUT OVER THE AIR MUSIC PURCHASING STILL SLOW TO CATCH HOLD, ACCORDING TO TELEPHIA

Will Apple Kick-Start The Market For Selling Over The Air Music Downloads?

SAN FRANCISCO--January 8, 2007--According to recently published research from Telephia, the world's largest provider of syndicated consumer research to the telecom and mobile media markets, there are now 23.5 million mobile subscribers in the U.S. who have phones with integrated music players. The number of consumers with music-enabled phones is up five times from the same period in 2005 and nearly 20 percent of the new phones purchased in Q3 2006 were music capable. Many of these subscribers report loading music on to their phones via their PC, but only a small number have actually downloaded music over the air (OTA) from a wireless carrier music store. In Q3 2006, a little over two million subscribers, about 8.5 percent of those with capable phones, reported any purchases of music via OTA downloads (see Table 1).

"It is still early days in the market for OTA music purchasing and carriers are experimenting with pricing models and working to improve the user experience," said Kevin Burden , Senior Manage--Mobile Devices, Telephia. "Clearly, the ability to facilitate impulse music purchasing will allow the wireless music stores to capture some portion of the larger digital music market – the only question is how big a piece they will get."

Table 1: Uptake of Music Phones and Over the Air Download Services ( U.S. )

Source: Telephia U.S. Device Census Report, (Q3, 2005-Q3, 2006)

Mobile phones with integrated music players have been in the U.S. market for more than two years and have gone through substantial improvements in memory capacity, file format capability and sound quality. Nearly all of the major device manufacturers are featuring music-capable phones as an important part of their current product portfolios. The LG Chocolate (VX8500) has been one the most heavily promoted music phones, but the five most popular models among recent purchasers are the Motorola RAZR (V3m and V3i), Motorola E815, LG VX8100, and Sony Ericsson Z525.

Mobile operators have launched their music stores much more recently and OTA purchasing is still not available on all the major carriers. Sprint was the first major U.S. operator to launch its music store in October 2005, followed quickly by Verizon Wireless in January 2006. Subscribers on these carrier networks represent the majority of the two million OTA downloaders. Music phones and OTA music stores were the focus of much of the advertising spend from carriers during the holiday season. Of the more than $3.5 billion of carrier advertising dollars that was spent in 2006, $234.3 million or 6.7 percent, promoted music phones and music download services.

"If we see the widely anticipated product launch announcement from Apple this week it could greatly accelerate adoption of music phones and OTA purchasing," added Burden. "By building on its loyal iPod user base and ability to deliver a seamless music purchasing experience, Apple could make a huge impact on the market for music phones."

About Telephia

Telephia is the world's largest provider of syndicated consumer research to the telecom and mobile media markets. Telephia is your connection to the digital consumer. Since 1998, executives at service providers, device manufacturers, content providers, and retailers have relied on Telephia data to make confident competitive strategy, marketing and resource allocation decisions. Telephia uses its unique measurement tools and large-scale consumer panels to completely understand the digital consumer's behavior, attitudes and experience.

To learn how Telephia data can help you understand the digital consumer and track your competitive performance, please contact us at (415) 395-0500 or www.telephia.com.

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