The new pretender to the mobile music throne

From his office (the former Island Record studios) in West London, Omnifone CEO Rob Lewis is quietly building a mobile music service making big noises in the industry. Launched nine months ago by Lewis and two other successful entrepreneurs, the MusicStation service allows users unlimited access to songs on almost any handset for a flat fee of just €2.60 (£1.99) a week in the UK. During a meeting with CXO Lewis waxes lyrical about the product’s development thus far: “The first eight months since our commercial launch have been about proving the model works, making it as scalable as we possibly can and demonstrating that consumers love the product,” he explains. “It has also been about proving to the music industry that this really is a way to resolve a lot of the problems associated with the global music industry today such as the decline of physical CD sales and alike.”

Much to the delight of MusicStation’s backers, the service has proved a hit in the countries where it was first available after launch, including the UK, Hong Kong, Sweden and South Africa. Plans are the pipeline to venture into new territories soon, with Omnifone bosses in talks with a host of network operators and music labels. Currently, there are over 1.5 million tracks available to download but this will soon swell. MusicStation’s creators say they are keen to aid the development of a music industry that is going through a digital metamorphosis. Lewis expands: “Our view is that downloading music is going to go from a traditional à la carte model [paying for each track] to more of a service-based model where customers can download, play and share music whenever and wherever, irrespective of what device they are using.”

Top of the charts
Not ones to rest on their laurels, Omnifone’s trio have recently unveiled a groundbreaking deal with Korean electronics giant LG to launch MusicStation Max – a phone with unlimited free music downloads bundled into the handset.
The device, which is being kept under wraps for the time being, is due to hit the market in June. All we do know is that it will be similar to the iPhone in design with a touch-screen display and slide-out keypad.

Lewis is confident the new phone can muscle its way to the top in this fiercely competitive space. “Our view is that by delivering a competitively-priced touch-screen music phone that gives consumers free and unlimited downloads straight to the device over 3G and HSDPA (High-speed downlink
packet access), we can deliver a better consumer proposition than we currently see from Apple where customers have to download tracks over Wi-Fi.” While the Apple marketing machine has done a stellar job in persuading us that the iPhone is the best thing since sliced bread there is still the small matter of cost. In the UK users have to stump up around €350 for the smaller 8GB model and are tied to a €45-a-month contact for 18 months. Tracks from Apple’s iTunes store cost around €1 each. “MusicStation Max is a darn sight cheaper than Apple’s device,” Lewis ripostes. That may be so but the US giant forecasts iPhone sales of 10 million in 2008.

Omnifone and LG say MusicStation Max will be available for ‘free’ on a pay monthly contract. “We feel it [the cost] is a compelling proposition,” Lewis enthuses. He says users will be able to download as much free music as they wish straight out of the box, without the need to connect to a PC. There is no limit on downloads as the physical capacity of the handset itself is managed automatically; should you run out of memory, your least listened to tracks are swapped out for newly downloaded tracks.  There is a catch to the service however – you won’ be able burn the tracks to CD. On the upside through, when you decide to terminate your contract you get to keep your favourite music on your phone and computer. And just in case the phone is stolen, lost or broken your music library is fully backed-up on a data network. It just gets transferred to your replacement handset. Another useful function is the community feature that allows users to add friends and share playlists and tracks legally with other MusicStation subscribers.

“We have proven that consumers will relish the opportunity to have unlimited access to music straight to their phone wherever they want, as well as having automatic synchronisation of friends, playlists and community features between the PC and the mobile phone without wires.” While comparisons are being made between MusicStation Max and Apple’s iPhone, Lewis is all too aware that the battle for supremacy is far from a two-horse race. Nokia, the world’s largest mobile phone manufacturer, has thrown its hat in the ring with its ‘Comes With Music’ initiative which will incorporate a similar system to MusicStation in that you don’t pay for each song. “Undoubtably, Nokia is going to do a fantastic job because they are a company of immense scale,” Lewis admits. “It is also a reality that they ship and get more than one million mobile phones into the hands of consumers every 24 hours. So they are not to be under-estimated in terms of the impact they are going to have on the market.”

Highest new entry
From talking to Lewis it’s clear that Omnifone has come a long way since the idea of the business was first hatched. Casting his mind back to Omnifone’s beings in 2003, prior to MusicStation’s incarnation, Lewis says he and his fellow business leaders didn’t specifically set out to create a mobile music service. At the time Lewis had recently sold his successful technology news site Silicon.com to CNET Networks. Before that he sold internet software company Cromwell Media for £850 million just prior to the dotcom bubble going pop.

With a knack of possessing more than a hint of the Midas touch, Lewis and his partners (two ex-Cromwell directors) trained their sights on the telecoms industry. Having access to hundreds, or even thousands, of songs on your phone looked like having enormous potential. MusicStation was born. “We looked at music because it was clear that more and more users, particularly in the 15-30 age group, had become acclimatised, through peer-to-peer file sharing and to a different way of consuming music.” Lewis reveals. “They like to dart in, try out a track – if they like it they keep it. If they don’t, they dispose of it. So we set about creating an all-you-can-eat, unlimited music model that would give users access to music whenever or wherever they are.” He also notes how people today have almost “come to expect music to be free” due to the proliferation of piracy and file-sharing websites; something that the record labels have had to concede is here to stay.

And with 2.6 billion phones serviced by more than 400 operators globally, Omnifone’s bosses have no doubt been licking their lips over the growth potential. “The mobile phone is the ultimate device because it is something that is with us 24/7 and almost always connected. Also, there are twice as many devices on the mobile internet than there are connected to the broadband internet today.” However, Lewis concedes that it is “very difficult” building services and applications that work across all makes and models of handsets. Indeed, much of the four years prior to launch last year was spent on getting the technical stuff sorted to enable Omnifone to bring MusicStation to virtually any music enabled mobile. Omnifone has a R&D facility at its London HQ, while consumers’ opinions are constantly being sought for prototypes and existing services.

The firm’s efforts are paying off too. In February, MusicStation scooped the most prestigious award in mobile music; ‘Best Mobile Music Service Award’ at the Global Mobile Awards, part of Mobile World Congress in Barcelona. It was there that details of MusicStation Max were first revealed.  Buoyed by the critical acclaim and recognition received in Spain, Lewis has high ambitions for MusicStation. “Clearly we would like to be the global market leader in the mobile music space but there is no guarantee one can ever be there,” he shrugs.  “However, we do feel that by working with manufacturers and all the major carriers that we can be a very significant player in this market.”

Clearly, it’s not going to be a walk in the park beating the likes of Apple and Nokia, not the mention the other manufacturers such as Sony Ericsson and Motorola. Indeed, the mobile music market is fast becoming a fiercely competitive market as manufacturers offer handsets with greater storage and in-built music playback capabilities – all of which could signal the death knell for the stand alone MP3 player.  “At the end of the day, the consumer is the party who will ultimately decide whether or not it succeeds,” says Lewis. “It is clearly going to be a very interesting year.”