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ALIVE WITH SOUND OF MUSIC SELLING

If cell phone-makers like Motorola Inc. have their way, you soon may be listening to "London Calling" -- and hundreds of other tunes -- in between making calls to London.

Cell phone-makers are beginning to unveil a new generation of music-playing phones and Schaumburg, Ill.-based Motorola's much anticipated iTunes model will be among the bunch. The Motorola phone, expected soon, will allow users to download music from Apple Computer's popular iTunes Internet music store.

Playing music marks another step in the convergence of consumer electronics with cell phones. And the new gadgets offer another way for phonemakers to juice sales. The popularity of camera phones, for instance, helped spur a 30 percent surge in global mobile phone sales last year -- one of the biggest annual increases in years.

While nobody is predicting that sort of immediate boom from music, many industry experts see music phones traveling a similar path as camera phones. They look at the booming market for MP3 portable music players, led by Apple's iPod, and see big potential.

Still, music phones face hurdles. Perhaps the biggest, analysts say, is thatphonemakers must convince wireless carriers -- the prime retailers of cell phones -- that they, too, will make money on music.

After all, getting music from iTunes and putting it on a cell phone is great for Motorola and Apple -- but not necessarily for carriers such as Cingular or Verizon.

A phone full of tunes doesn't necessarily prod a customer to call more people, or transmit more data or pictures to friends -- all revenue sources for the carriers. There is a smattering of phones on the market with MP3 capability, more so in Europe and Asia than in North America. Motorola, the world's second-largest cell phone-maker, launched a handful of MP3-equipped phones last year, all higher-end models.

By the end of this year, about 50 percent of all phones shipped by Motorola will have some music-playing capability, said Alberto Moriondo, director of Motorola's entertainment group.

Music playing phones will have enough memory -- either internally or externally through memory cards -- to hold about 120 songs.

That's about the same as Apple's new "Shuffle" music player and about one-eighth that of Apple's Mini iPod, which has its own hard drive.

Over time, hard drives -- which have more storage capacity -- will be incorporated into music phones, too, Moriondo said.

A "subset" of Motorola's MP3-enabled phones will be "music optimized," as Moriondo put it. "They will look and feel like a music device," he said.

Motorola expects to unveil some new music models this spring. It won't disclose if the iTunes phone -- announced in concept last July -- will be among them.

But Motorola spokeswoman Monica Rohleder said news about that phone "will be coming out very soon."

Other cell phone-makers have already made significant announcements. Finland-based Nokia, the leading global cell phone manufacturer, announced a deal in February with longtime phone software rival Microsoft Corp. Nokia will use Microsoft's music formats on its phones.

Also, Sony Ericsson, the world's sixth-biggest cell phone-maker, plans to launch a music phone in Europe and Asia this summer with Sony's famous "Walkman" brand.

It's not clear yet what the new crop of music phones will cost. Mike Walkley, a stock analyst at Piper Jaffray in Minneapolis, estimated prices of $250 to $350 initially. But as production volume increases, prices should fall over time--a common occurrence in consumer electronics.

That's what happened with camera phones. And as camera phone prices fell below $100 last year, sales surged, said Hugues de la Vergne, an analyst with market research firm Gartner Inc.

Another market research company, IDC, estimates that 40 percent of all cell phones sold globally last year had cameras -- up from 15 percent a year earlier.

If MP3 phones are to be the next big phone thing, companies such as Motorola and Nokia are counting on people like Alex Gerdow, a 20-year-old from the Chicago area. He's a big music fan and carries an MP3 player stocked with tunes.

He'd like to buy a cell phone and is keen on the idea of the combining the two gadgets. The reason is simple: Carrying one device is less of a hassle than carrying two. "It takes away clutter in your pocket," he said recently.

That's the beauty of convergence: Fewer devices stocked with more functions. Cell phone-makers figure they have a leg up in convergence because the cell phone is so ubiquitous -- more so than the camera, the portable music player or the personal digital assistant.

Cell phone-makers also covet people like Gerdow because he's part of the age bracket -- 16 to 24 -- that Moriondo refers to as "the sweet spot" for music sales. But like many in that group, he's not too keen on paying for downloaded music. His MP3 player is primarily stocked with tunes ripped from his CDs.

Gerdow said he's not interested in buying songs from iTunes for 99 cents a pop. And he said that if he had a cell phone, he wouldn't be interested in downloading music directly from a wireless carrier, either.

That's the sort of attitude that industry analysts say raises questions about music phones.

"One of the main barriers now is, what's in it for the carriers?" said David Linsalata, an analyst at IDC.

Carriers have a lot of clout in determining the features of phones made by the likes of Motorola. In fact, they subsidize the price of phones by tying them to contracts for wireless phone service.

On average, carriers cover $100 to $150 of the cost of a phone linked to a one-year service plan, said Albert Lin, an analyst at American Technology Research in San Francisco. Motorola's planned iTunes phone is perhaps the least appealing to wireless carriers although it will probably be most appealing to consumers, Lin said.

Meanwhile, the Nokia/Microsoft tandem will probably be the least appealing to consumers, but the most appealing to carriers. His reasoning: ITunes phone users -- if they download music at all -- would be more likely to pluck it from the Web, not from wireless carriers' networks. The Nokia phone would be vice versa, Lin wrote.

Motorola's Moriondo says carriers have plenty to gain from an iTunes phone and have shown "a significant amount of interest" in it. "It's an opportunity for carriers to get on board with the coolest, hottest brand in music."

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