Music streaming 'good news' for mobile operators

Posted by Emma Woollacott

Mobile operators could make more money by scrapping their download stores and partnering with music streaming providers instead.

The suggestion comes from joint research project from Informa Telecoms & Media and Spotify - which will presumably be sending copies to all the mobile firms it can think of.

There's three ways of improving profits through such a deal, says Informa. First, obviously, revenue earned from signing up new users to a service via the deal.

There's also money to be made from up-selling data plans and smartphones to both new and renewing subscribers, it says, and in addition money will be saved from users that do not churn to another operator because of Spotify.

The study is based on real data from Telia and Spotify, as well as other Informa research. It concludes that an operator in Western Europe with 20 million customers could generate revenues of E77.7 million in 2011 alone from partnering with a streaming service.

If the leading player in each Western European market did so, they would collectively generate EUR1.1 billion in 2011, the study found.

"Our research shows a large Western European operator could generate millions of euros of revenue a year by partnering with a third-party music service - significantly more than they would gain from offering their own service," says Giles Cottle, senior analyst at Informa Telecoms & Media.

"Add in other benefits, such as network efficiency, brand awareness and increased lifetime customer value, and the potential for such a partnership becomes very clear."

Based on the numbers, Spotify claims that operators' own download stores have had little effect on the bottom line.

"Streaming services, by contrast, have proved an effective way to differentiate from the competition and win new customers," says Adrian Blair, the company's director of European business development. "They have also been used to upsell high-ARPU devices and reduce churn."