Portfolios Journalism
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Mobile Talk: Interview with Tim Nilson, VP of Global Mobile Technology, Sony/BMG
Business article, MBJ Vol. 1 Issue 4, August 2005 (~3,120 words)
Recently, I had the great pleasure of interviewing one of the most distinguished graduates of the Music Business/Management department, Tim Nilson. Currently, he is the Vice President of Global Mobile Technology, Sony BMG Music Entertainment.
Tim Nilson is from Germany, and came to Berklee for the 5-week summer program as a young musician, a pianist. When Don Gorder announced at the end of that summer (of 1992) a brand new Music Business/Management department, Nilson knew this was right for him, as he loved music and was also very interested in the business aspects of it. So that fall, he was one of the first to join the major.
While at Berklee, Nilson knew he wanted to work for GRP records, a jazz record label, and he worked there after graduating from Berklee in 1995. He worked on technology related things, such as putting together CD-ROMs with information on their full catalogue on it.
Then he joined a company called N2K, an Internet focused music company. They had a lot of content sites, like Jazz Central Station, Rocktropolis, sites where fans could learn about artists in specific genres. They also built up the online music store Music Boulevard, and between them and CD Now, they had a majority of the market. In 1999, N2K merged with CD Now.
After the CD Now merger, Nilson left, together with J.J. Rosen, and they have had much success with multiple music technology based companies, be it online music store type services or ringtones. Originally their company was called ‘Run Media’ (Run was derived from ‘Rosen und Nilson,’ with ‘und’ being the German word for ‘and’), and they were a consulting company for online music services. They changed their company to ‘Run Tones’ when they noticed the ringtones craze in Europe, and that it hadn’t happened yet in the U.S., so they felt that there was an opportunity there. As Run Tones became successful, Sony Music became interested and acquired Run Tones, making it a department at Sony Music.
Below is an excerpt of the interview.
When you started your foray into mobile technology, did you think that ringtones were going to become one of the few aspects of record labels to stay positive despite record sales suffering in the current era of the industry?
You know, when we first started, there were monophonic and polyphonic ringtones, and the entities that benefited were the publishers and the companies selling them. You sold it at a retail price and then you had to split that with the publisher, but the record labels didn’t really make any money out of that because it wasn’t their master that was being exploited. So that was kind of the starting point of the business and it slowly moved from monophonics into ployphonics, which all of a sudden opened it up to much more, being much closer to what the actual music sounds like, but still, a long way from it. I think at the beginning it was more like a novelty kind of a thing, and I was always skeptical as to how this was really going to become a real business. But now, only a couple of years later, we saw another transition from polyphonics to what we call master tones, true tones, or real tones, there are so many different names for it now in the industry, but they all refer to ringtones that are based on the actual recording and that’s where obviously the record label becomes involved, because they own the master recording.
When Sony Music acquired our company, Run Tones, in November of 2002, we were really still looking at polyphonic and monophonic ringtones as the focus, because there weren’t any handsets that could support digital audio recordings. But now, when you look at handsets that are coming out now, most of them support digital audio based ringtones. The migration from monophonic to polyphonic to digital audio ringtones or master tones all happened in a very short time, like three years. And now I think they are really the focus for everybody in this ringtone space, because the handsets are available now, the networks can distribute them fast enough, and consumers love them. It’s a great place for the record labels to be. And the market is still growing, you know, as there’s a replacement cycle from monophonic or polyphonic devices to devices that are capable of playing master tones. I think in the next 24 months, we’ll see that probably upwards of 70 percent of all handsets in the market will be master tone capable.
What’s the most popular genre for ringtones?
Hip-hop and R&B.
Do you see your department trying to target other markets/genres?
We’re making available everything from our catalogue. Sony BMG has such a vast catalogue of music. Every week, we go and comb through the catalogue and pick out the best songs and make them available as ringtones. Now, in the ringtone business, and also in the digital music distribution business, you sell content with a long tail, which means that you have the top ten songs sell an incredible volume, but as you get deeper into the catalogue, the tail of how many they sell gets much smaller. They sell maybe ten, twenty items a day or even less. We call them onezies and twozies. But that tail of how many songs in the catalogue that sell is very, very long, much longer than what you would find in typical retail, because they can’t stock that many SKUs. So, for ringtones, we want to make as much content available to as many places as possible, as widely distributed as possible. And there are challenges around that. For example, how do you browse through a catalogue of many thousands of tones on a screen that’s very small still? So we’re trying to work on that, like how do you make the browsing and cataloguing of music effective for users who are interested in certain genres of music. And we have a product that’s called Sony Music Box, that’s available on many carriers, including Verizon. There, you can browse through music and available ringtone content by genre, and we include all the genres. It just happens to be that hip-hop is the one genre that sticks out. But we are making all of our content available as widely as possible.
How much interaction is there between your department at Sony BMG and the other departments?
There’s a lot. And we actually have a group that’s headed by my business partner, J.J. Rosen, who is really the one in charge of bringing the labels into this process. At Sony BMG now, we have a lot of different labels that, from the Sony side and from the BMG side, they kind of have their own online departments that are focused on building artist websites, building email lists, and marketing the music of the artists. We work with them, and also the regular marketing departments, to come up with ringtone and mobile promotions, not just for ringtones, but other things, like contests, giveaways, and those kinds of opportunities. And in the beginning, when they didn’t yet know what this was all about, and there wasn’t any revenue data to get them excited, it was more difficult than it is today. Today, when they are crafting their marketing plans for artists and releases, it’s always, ‘what are we going to do in mobile and ringtones?’ That’s where J.J., my partner, works with them on crafting a real strategy for what to do with singles and CD releases, to make sure that the ringtone is always in sync, or even made available earlier than when the record ships, or when the single is even hot on the radio.
How much collaboration is there between your department and cell phone companies?
You know, it’s an interesting space, where you have content owners, the cell phone companies making the devices, and the carriers selling the devices to the consumers. Now, I think we’re much more aligned with the cell phone carriers that want to sell our content to the end consumers, and I think in general, what’s happening in the cell phone or the mobile industry is that the cell phone carriers are really starting to become a powerful entity in that industry, because they’re the ones touching the consumers, and they’re the ones buying the handsets, the OEMs, from the cell phone makers. And we see more and more companies, like Vodafone, dictating to the cell phone makers how the cell phone should work, what it should look like, and how the UI should work on the cell phone, so that all the devices are consistent; you look at a Vodafone handset in Europe, and it doesn’t matter what brand of phone you have, the UI [user interface] on the phones will all be very, very similar. You also see that they’re sticking their brand now on the outside of the cell phone, to brand the handset Vodafone or Verizon, and not Motorola or Nokia or whatever. I think that trend will only continue. The cell phone companies that are making the handsets, they have to adapt. It’s a tough space to be in, because they have to get big orders from the cell phone carriers, and because of that, they will be accommodating the cell phone carriers, but we do work with cell phone companies as well. We have, obviously, Sony Ericsson, one of the major cell phone OEMs, that’s very close to us, and we do a lot of work with them to come up with special things, like embedded content, so that when you buy your handset, right out of the box there’s music on your phone.
So when the carriers, like Vodafone, come up with how the UI works, do you talk to them in the process?
We do talk to them, specifically around content usage rules. Right now, the cell phone, or the ringtone business, is very much protected from piracy because of how the handsets work. For most handsets, the only way to get a ringtone in there is by going through the proper channel being offered by the cell phone carrier, so there’s very little way to sidestep that process. As a result, piracy is very low. So we are, as a content company, obviously in favor of that, and we are always talking about those aspects of how to protect content, how to make content enter the device in a very easy but secure way, and we’re very much participating in all of the standard bodies that are trying to come up with DRM [Digital Rights Management] standards, such as OMA [Open Mobile Alliance] that’s working on DRM standards that can be implemented and adopted by all the cell phone makers so that content can be prepared and protected in the same way on all the handsets, where right now, it’s very fragmented still. We have to prepare our content in many different formats, protect the content in many different ways, because there are no real standards yet. And those standards bodies, I think, are very important, and we’re embracing them, working with them and the cell phone makers, and the carriers, to make sure that it becomes easier for the customers to get our content, and that the content stays protected.
I’ve been finding out about handsets that can play straight mp3s, and I recently heard about a software that can now make ringtones out of mp3s.
You can’t stop that. There’s always going to be those types of companies that are trying to make these services available, and that may, from a consumer point of view, work for you as an MP&E major, being able to create your own ringtone, and then move that onto your device. However, I think in general, the broad consumer base doesn’t want to sit there and have to figure out how to run a PC application to turn a snippet of a digital file into a ringtone and then move that to the handset, when it may not even be possible on their device. In contrast, there’s one button on the phone that gets you online, and right there, into the catalogue of music, and all of the hot tracks and the entire catalogue is right there. All the major record labels are aggressively licensing their content, making sure that it’s available everywhere, so there is no reason, I mean, it’s not like you have to resort to piracy if you want to get your favorite song on the cell phone to use as a ringtone. It’s definitely available, so I’m not too worried about it. I think there’s always going to be those things, or “leakage” if you will, but I think overall, we haven’t seen that slow the growth of the ringtone industry. Also, the cell phone carriers are the biggest allies of the content companies, to make sure it continues to be that way. When the cell phone companies come out with all kinds of functionality that they think their customers will want, but destroys a whole business model for the carriers, it doesn’t work, because, don’t forget, carriers are the ones making a lot of money selling ringtones, and they’re ready, or getting ready, to sell full music downloads. The cell phone carriers are all investing billions of dollars upgrading their networks, to make the data speeds much faster. So that’s the first battle. Then the second thing is, what kinds of applications are they then going to offer on those fast pipes, and music is a perfect application. So it’s in their interest to recoup their investment that they just made and committed to for the expansion of their network to have services like full length music downloads over the air, video services where you can stream video content, including music videos, so they’re the ones who will protect that business.
How is it that it came to be that master ringtones cost $2-3, when a full song on iTunes is $0.99?
I think it shows that users and customers are willing to pay for music. The $0.99 price point was an idea that was put in place without much rhyme or reason, and it works, but would a $1.99 work? Probably. Also, the ringtone business is obviously different than full length downloads. Full length downloads are obviously there to build a collection and listen to those songs as entertainment. People who are buying ringtones are buying them to personalize. We have entertainment versus personalization. And I think the personalization aspect is the reason people become a lot less price sensitive. So when you just walk into a store and you buy the newest phone that you are going to carry around with you every day and you can’t wait to put a new ringtone on it, you don’t really care that its $2.50 or $2.99 even $3.50 because you want it, you want that true tone on your phone and then show off to your friends. Because of that, I think people are willing to pay for it, they don’t seem to have a problem with the $2.50 versus the $0.99 for a full length song. It’s a different use, you know. We spend an incredible amount of time at Sony BMG taking our content and picking exactly what regions of the song makes for the best digital audio based ringtone because we only have about 25 seconds. We don’t start just at the beginning of the song. I remember when we did Miles Davis’ Kind of Blue album and we did the ringtones for that recording, which, when I went to Berklee, we studied that recording every day. It is such a famous recording you know, and I have a colleague that works for me at Sony BMG, Sergio Salvatore, a very gifted piano player who’s recorded four CDs already and he’s only 22 years old. He’s a jazz player, and I am a jazz player, and we were sitting there really diligently trying to find what is the best 22 seconds to use as the ringtone. So it’s that work, you know that A&R work of picking and choosing the right sections that people appreciate and that makes for good ringtones.
I’m wondering about the future. Are there things you know that are about to be released to the public that you are excited about?
Definitely. I just came back from CTIA [Cellular Telecommunications & Internet Association] in New Orleans, the biggest wireless show in the USA, and I was looking at handsets that have hard drives in them, phones that look like digital cameras because they have 7 mega-pixels cameras. So those things are really more like a cameras with a phone, but its really marrying things that used to be two separate devices. Most of the flip phones now have cameras in them, but they are very, very low quality right now. But that will change; you will have a cell phone soon that has five mega-pixels or more, which makes it really useable as a digital camera for any purpose. I think on the music side it’s the same way, with the introduction of much larger flash based memory and hard drives. The storage is not an issue anymore. The network speeds are really increasing dramatically. Verizon launched their EVDO [Evolution Data Optimized] service in the US that is incredibly fast. It allows you to download at speeds that are very comparable to what you would get at home through DSL connection on your home PC. So all of the components that you would need or would want for a full music service are clearly coming very quickly within, again, the next 24 months. We will have a lot of devices that have incredible storage and incredible bandwidth and incredible services, legal music services that people can use to download music anywhere they are, whether it’s on the go, over the air, all without the need for a PC, and I think it will really replace the digital music player as we know them today. In 2004 we had about 12 million digital music players and about 168 million cell phones. Right now, cell phones can’t really do digital music very well, but in 24 months or so I think that will change, and then all of a sudden you have 168 million digital audio players in the market that can all download music over the air from a legal service very easily. I think that’s what excites me. That’s why I think the next 24 months or so are really going to be incredibly important for the music industry as a whole, because of mobile technology.
To view this article in the MBJ itself, please visit the Music Business Journal web site, where a PDF of the issues are available for download.
Journalism Outline
The Music Business Journal of Berklee College of Music
· "Editor's Note"
Editorial, MBJ Vol. 2 Issue 1, March 2006
· "NAMM: Kyung Min"
Business article, MBJ Vol. 2 Issue 1, March 2006
· "Paul Goldman: A True Creative, even in Business"
Cover article, MBJ Vol. 1 Issue 7, December 2005
· "The Next Generation Recording Studio: Tainted Blue Productions"
Business article, MBJ Vol. 1 Issue 6, November 2005
· "SSL Rejuvenated: Staying on Top of the Game"
Business article, MBJ Vol. 1 Issue 6, November 2005
· "Marketing Design Group: A New Student Club of the MB/M Dept."
Business article, MBJ Vol. 1 Issue 6, November 2005
· "Mobile Talk: Interview with Tim Nilson,
VP of Global Mobile Technology, Sony/BMG"
Business article, MBJ Vol. 1 Issue 4, August 2005
· "Editor's Note"
Editorial, MBJ Vol. 1 Issue 3, May 2005
· "Editor's Note"
Editorial, MBJ Vol. 1 Issue 1, March 2005
· "The Future of Music"
Model Work, MBJ Vol. 1 Issue 1, March 2005
· "Press Kit: FLUTTR Effect"
Review, MBJ Vol. 1 Issue 1, March 2005
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