I just came from the Mobile Entertainment Show, which Moco.news covered here. One of the most interesting panels was the Music one where label executives continued to insist that we would see broad adoption of full song downloads at $2-3 per track, even though it would often not be fully transferable to other devices and even though the prevailing Internet price is $.99 per track. The general argument is that the convenience of quick, mobile downloads to a phone with great audio capabilities would over time carve out a large market versus those who wish to download through a PC for a lower price. The other part of the argument is that mobile users now pay $2 for a 30 second poly ring tune, and $2.50-$3 for an MP3 ring tone, so they will have few problems paying $3 or more for a full song, especially when you see what's happened in Japan with the success of KDDI's full track service (in a market where iTunes Store does not exist). It's simply wishful thinking.
The fact remains that many of us will have MP3-capable phones by 2006/2007, and the distinction between ringtones and full tracks will go away - it will be very easy to take existing MP3's (the vast majority of all music catalogs), move them to phones, and clip them to 30 second lengths, no matter how much carriers attempt to disable various transfer methods. Yes, there will be DRM issues, Apple Fairplay issues, etc., but this process will get much easier due to broad availability of 3rd party software which will simplify this process - consumers will quickly figure out the value proposition and the vast majority, especially savvy younger users, will transfer music from PCs and friends rather than pay much higher rates for the mobile delivery - you already see early signs of this in the European markets. Mobile music pricing is going to move down towards the $.99 level, not up to the $3 level as the technologies evolve - it's too late to put the genie back in the bottle.
I believe that mobile music will be a huge volume business and a large profit center for labels, just not at the margins/prices that they are currently signalling since consumers and service providers won't allow that arbitrage to take place.