Microsoft to acquire MUSIWAVE

Thomas Husson | November 13, 2007, 06:42 AM

2 years ago, I posted a comment on Musiwave's acquisition by Openwave.

Since then the company managed to gain a significant footprint in Europe (see more info here; Musiwave also signed a deal with T-Mobile which went largely unnoticed in the press last summer) and to a lesser extent in America and Asia. Their discovery engine is now available in java for more than 50 differents handset models.

Microsoft announced yesterday its intention to buy its 3rd French company (after MotionBridge and ScreenTonic). It is good news for the company since it will now benefit from a stronger investment (stand by was the rule in the last few months following Openwave's own difficulties in its core business). As the PR states it, "The acquisition would bring Musiwave's relationships with music labels, device makers and mobile operators that deliver digital entertainment to consumers, together with Microsoft's Connected Entertainment technologies and services, including Windows Mobile, Zune, MSN and Windows Live".

However, the competitive landscape has changed significantly in the last 2 years: Napster/ERICSSON announced their agreement, Sony Net Services and Widerthan were acquired by REAL Networks, NOKIA launched its own music store in the UK, AMAZON now sells digital tracks and ISPs tend to promote converged offerings (Orange to launch in S1 2008 after 9's initiative with Universal catalogue). With OMNIFONE, which is trying to gain ground with its weekly music subscription (back-end is powered by Musiwave by the way but via a non-exclusive deal), GROOVE (the company behind Sprint and 3UK music store) are now the only small independent players in the consolidating mobile music space). Competition is thus increasing and most of these players are obviously trying to challenge Apple's leading share of the digital market with the iTunes success story.

However, depsite the hype, reality still is that few consumers are effectively paying for mobile music. Churn is still quite high and the challenge is consequently to develop discovery and loyalty. It is also to take into account PC sideloading as an inevitable trend, but to give end-users tools to manage their playlists and increase their impulse spending.