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When the region's first major, legal music website launches later this year, the site's owners plan on pricing the music to compete with the pirated music. In other words, downloading will be free.
Sean Emery, CEO of Arvato Middle East, a division of German-media group Bertelsmann, said the reason for the company's decision is simple.
"You're not going to sell a song here for a dollar," he says.
"If we [sell] directly to consumers, we have to keep international price points. The international price is too high for this market."
While music and other digital content, such as mobile phone games and ring tones, will be free to users at Getmo.com when it launches in October during Gitex, that doesn't mean no one is paying for it. Emery says that Arvato's business model is similar to that of television, where advertisers help carry the cost of providing content.
Emery believes free downloads are the only way anyone is going to be able to "sell" music in the region. The problem, he says, is piracy, which is rampant and has kept the big music labels from selling music online in this part of the world. That in turn has "forced" people looking for online music to go to sites that offer illegal downloads.
"Because no one has come up with a model that works here, it's forced the industry into piracy," he says. "You have people wanting to be legitimate, wanting to be legalised, but physically there is no way for them to do it. So the piracy industry has gone berserk."
However, the downloading of illegal music has also had a secondary side effect, he says. People in the region have come to expect free music.
"Consumers in this market are not necessary at the stage were they want to spend money on content when they think they can get it for free," he says.
Instead of trying to convince people to pay, Arvato is partnering up with groups such as Unilevel, Nestle and Proctor and Gamble. "If we're going to fundamentally change the market, we can't do it on our own," Emery says. "We have to fundamentally change it with some partners."
The companies won't pay for the downloaded music directly. Instead, consumer products, which could include items such as razor blades or cans of cola, will have codes that allow users to log in the website and download a set number of products. He compares the codes to frequent flyer miles.
Advertising
Users who download the music will also be shown a very short "flash ad". Advertisers in the region spent an estimated $6 billion in 2006, he says. That amount is expected to increase to $10 billion by 2010.
Anyone who doesn't want to use the codes will also be able to pay cash, but Emery expects paying users to be in the minority. The site will also offer a subscription-based service, where users can download music which will "expire" after a certain amount of time.
Unlike sites such as iTunes, Apple's tremendously popular music site, Arvato is expecting the majority of its content will not be downloaded to computers but to mobile phones.
"The mobile phone is much more important for us than the PC," he says, and estimates there are 10 million potential customers who will use computers. With mobile phones, that number could rise to 50 million. However, since users would have to have pay telecom charges in addition to the cost of music, an ad-supported business model is more feasible, he says.
The company is currently looking to launch an ad campaign during Ramadan, and Emery says the company will be launching with an as-yet-undisclosed telecom.
"If we [combine] local and international media and technology together, we can create very interesting digital products and business models which can fundamentally change the way people received digital entertainment until now."
Profile: 12 years in mideast
Arvato Middle East and its parent company Bertelsmann may not be household brands in the region, but anyone who has spent money on DVDs or CDs will probably recognise the company's popular music label, BMG, which stands for Bertelsmann Music Group.
The company also has a joint venture with Sony, the well-known Sony-BMG music label, which has a music catalogue of more than a million songs.
Arvato is launching their online music site, Getmo.com, in partnership with the Abu Dhabi Media Group in October, and will offer a large portion of the Sony-BMG catalogue. Avrato has been in the Middle East for 12 years, and was originally the sole face of Bertelsmann in the Middle East.
Last week Sony announced that it was seeking $1.2-1.5 billion to buy Bertelsmann out of the Sony-BMG deal, but Arvato CEO Sean Emery says that deal will have no effect on Getmo.com.
Sony's interest seems to be aimed more at using mobile devices as a way to distribute its music. The company, which has the rights to artists such as Celine Deon, signed a deal in April with Nokia to distribute music on the company's handsets.
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