Mobile universe may not be consumer paradise

Wired on Friday: Switch on the TV today and you will barely blink as you flick through TV channels, text services, weather maps…

Wired on Friday: Switch on the TV today and you will barely blink as you flick through TV channels, text services, weather maps and even radio stations. For many, the world long ago went digital. All that remains is for everything to go mobile.

But just as television has also produced news and weather text services, so the lines between the mobile phone and the internet are starting to blur. The marriage looks set to give birth to a supercharged offspring that will not only inform and entertain, but potentially produce vast profits for the companies involved.

In particular, it is the coming together of music, mobile phones and the internet which lies at the core of this structural shift. And the signs are that this is already happening.

Just this week the UK radio group Chrysalis said it planned to allow listeners to download songs heard on Chrysalis-owned stations to their mobile phones.

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Its move followed that of rival Classic FM owner GWR which recently launched its "hear it, buy it, burn it" services, which allow listeners to download tracks to desktop PCs or MP3 players like the Apple iPod.

Radio stations are well placed to take advantage of mobile. Research shows that 95 per cent of music purchases are heard on the radio first, so marrying the ability to purchase music with the mobility of mobile phones makes a lot of sense.

Not only do many modern mobiles have FM radios built into the handset, but eventually third generation mobile networks will offer the ability to both stream internet radio broadcasts and conduct complex e-commerce.

As Chrysalis chief executive Richard Huntingford put it, radio stations could become "virtual record retail outlets".

The mobile link is no coincidence. This week OD2 (On Demand Distribution), Europe's leading digital distributor of music, said it was planning to allow customers to pay for music downloads via SMS - perfect for younger buyers who are typically avid sharers of digital music as well as being hard-core mobile users. The service will work with the Vodafone, Orange, O2 and T-Mobile networks.

Chrysalis and OD2 are just the latest firms to announce new digital music services. The infamous Napster, which was born as an illegal online service and is now a legitimate operation, is busily trying to secure deals with record labels to launch in Europe. Apple too plans a European launch of its spectacularly successful iTunes online music store.

From the highest to the lowest, firms everywhere are scrambling for the digital music future. At the beginning of March, Universal Music said it had digitised its entire back catalogue. Even plucky British start-up Wippit managed to sign a deal to distribute BMG's catalogue recently.

Meanwhile, consumers are getting used to the idea of paying for digital music, in part because of the threat of court action. According to the Recording Industry Association of America, illegal downloading is down, with only 14 per cent of US Web-surfers opting for illegal tracks, compared with 29 per cent last year.

But the war for digital music supremacy is increasingly complex and fought in many different fronts. It's all very well having the blessing of the five major record labels to sell digital music to the punters, as both Apple and Napster have. But will consumers be content to be locked out - as they are in iTunes - from the Windows Media Audia format, touted by the biggest technology gorilla on the planet? Or will consumers care at all, if all digital music stores sell the same songs anyway?

Right now the battle is about distribution. In January, Hewlett Packard signed a deal with Apple to pre-install the iTunes software on its machines, and resell the iPod. Deals like this make Apple well placed to win the distribution round, even as other, bigger leviathans are on their way.

Richard Branson's Virgin group last week launched Virgin Digital to develop an online music store in conjunction with MusicNet, the digital music distributor formed in 2001 by Sony, BMG and Warner Music. The online store will be complemented by a jukebox with the ability to burn songs onto CDs located at Virgin Megastores, through which - handily - over a 100 million people pass annually. In terms of pricing, the company says it plans to be "hyper competitive".

The secret weapon, however, is that Virgin Digital's software will ultimately work on mobile phones and uses Microsoft's Windows Media Audio format.

The Virgin Group, which posted revenues of $7 billion in 2003, spans high-street stores, trains and airlines but its mobile arm could give it the killer punch it needs against internet-only digital music firms. It's even planning a competitor to Apple's famous iPod.

Behind the front line of the battle for the music market, the desire to make our mobiles the centre of our digital world has led nine top mobile companies to apply for a mobile-specific internet domain. These included Nokia and Vodafone.

The domain, which may end up as ".mob", could, in theory, make it easier for users to locate mobilised versions of websites.

More likely it is an online land-grab designed to lock mobile users into a version of the Web which mobile companies can control.

So while most consumers will be understandably wooed by cheaper music, as the spoils of this gargantuan digital war which is increasingly accessible via mobile, they may also be locked into one firm's view of the digital world.

• Mike Butcher edits mbites.com