- In the past month I have had the opportunity to discuss with many leading players and witness the emergence of the off-portal distribution market for mobile content in the U.S. Although there is still significant resistance in the operator community towards opening the floodgates to free competition a lot of players are betting on the eventuality of the market deregulation.
The everyday reality is still pretty grim out there: a premium SMS guideline document of a leading SMS aggregator is thick like a bible and it lays out the absolute lack of any coherence in terms of how those services can be deployed to the customers of the various carriers. Make no mistake, some of those concerns are very rational and necessary to protect the consumer. Just the implementation of them is still today a content provider’s nightmare and a consultant’s paradise.
Discussions with upstart ring tone portals reveal a common trend: claimed round A financings are in the order of $5 million and first year revenue goals in the order of $20 million. To what extent the public will take out their wallets and make these predictions a reality remains unknown but at least the guns are out and the fight has started. What is the total ring tone market in 2005 going to be worth? Says a co-founder of a leading upstart ring tone portal: “Come on, that’s a macro question, you will have to talk to someone else - we will do $70 million in 2006, that’s all I can say.” Did this happen before a few years ago? And yet the funny thing is that it is dangerous to undermine the consumer devotion to spend money in something they feel passionate about. Who would have thought the “Crazy Frog” ring tone would become a chart-topping 20 million dollar winner?
At the end of the day the operators will probably note that the deregulation of the market was for the good of everyone in the industry.
Warmest regards,
- Tapio Anttila
- www.anttila.net
THE PROOF OF THE PUDDING IS IN THE DNA
I have been following with interest the largest mobile content aggregators and publishers try to “grow big” in the space where their role going forward might be marginalized by either the carriers or the large media companies.
It is interesting to see Jamdat execute fairly well against their competition mForma. Looking at the Verizon top ten game chart one can see many more Jamdat titles than mForma titles. Why is Jamdat riding the wave with the stock trading at P/E 95 while mForma is going through a major reorg while trying to pull in enough revenue to justify their own IPO listing? The simple answer is probably two-fold: 1) Jamdat was originally founded to be part of the BREW ecosystem and it is receiving the uncompromised support of the companies involved in that ecosystem and 2) the company simply was founded by game company executives and mForma was founded by brilliant financiers. In the fierce competition the real DNA of the company will eventually surface.
Infospace is another example: a search/directory company at its core has expelled its wireless DNA (Moviso acquisition) and needs to rebuild it to suit a new strategy. This is the classical problem with post-acquisition integration: how can you build sustainable value into the merged entity?
In the ring tone business in the USA we are now in a “deceptive growth phase”: new distribution and marketing channels will create a feeding frenzy with consumers (hopefully) responding to $100+ million TV advertising spending. At the end of that frenzy we will see a mass-exodus of customers if the content offerings are not enhanced with quality and creativity.
Sustainable change comes most often “from underneath”: the Crazy Frog ring tone taking over the charts, Myspace.com becoming a catalyst of a major change in the music industry, blogs and podcasting emerging as potential business opportunities. Companies with the right DNA can harness these opportunities but it takes some understanding on what lies at the core of the value provided to the end user.
Some of these newcomers will give the establishment some tough competition: Bonus Mobile (www.bonusmobile.com) with heavy game industry DNA, BlueFrog (www.bluefrogmobile.com) with good sensitivity to music programming. These are just examples and I am in no way affiliated with these companies. mForma and Infospace are certainly good companies, too, but they will need to rediscover their DNA.
STUDIOS THROWING IN THE TOWEL?
I have been following the large movie studios here in Hollywood trying to make it in the wireless market. We seem to be coming to a full circle here: it all started by studios not yet understanding wireless and licensing the rights out for unreasonably high asking prices, thus causing the innovation to happen slower. In the second phase they took the publishing in their own hands and tried to bring to market sellable product with varied success. In some cases the quality of those products was not up to what has normally been expected from a movie studio - a case in point often mentioned in the industry is the Charlie’s Angels mobile game by Sony Pictures. The studio bureaucracies are often notoriously slow, thus making it difficult for the company to execute and to bring product to the market. Sony Pictures has reportedly not launched any ring tones for their movie catalog properties, largely due to complicated internal rights clearance issues. Last week the company suddenly lost three senior mobile producers. Do we have here a company with the right DNA or wrong focus on NDAs? (yes, this was a late-nite joke)
And then came the Crazy Frog ring tone that makes 14 million pounds sterling - go figure. What will this result in? How much is the Simpsons suddenly worth now in the eyes of Fox if the Crazy Frog sets a crazy precedent like that? Would the studios be better off defaulting back to the licensing of their libraries now when the market is flooded with VC money? As we have perhaps read in the press, Sony Pictures recently licensed a number of movie-based mobile game rights to Verisign’s mobile games publishing unit Ojom. The deal was rumored to be worth $1.5 million. The circle is closing: now when will Sony Pictures license out a large part of their entire library to maximize the imminent value in the “inflated” market situation? Why continue to own a part of the value chain where you’re not good at if someone is ready to pay an unreasonable amount of money? On the acquiring side, would this be a better way for Infospace to spend their money than acquiring companies they have a hard time integrating (Elkware, Iomo, etc.)? And how would you then launch mobile properties for old movies? How to re-launch an old property and make the related mobile content timely and sellable? One of the obvious answers would be to go talk to the home video division of the studio and integrate the mobile content launch into their product and marketing strategy. This is often a viable option, particularly as the studio’s mobile arm and the home video unit might not work well together for political reasons…
And who said middlemen are not needed?
CAN MOBILE CURE TIME-SHIFTING?
Using mobile phones to interact with TV programs is gaining ground even in the US. We have all heard about the significant success of the American Idol SMS voting in what is called ‘participation TV’, integrating a mobile feedback channel into existing TV programming.
(The new emerging trend (already well-established in Europe) is mobile-centric TV programming: buying cable TV airtime to program entertainment which is mostly based on end-user generated content and premium SMS and MMS billing mechanisms to charge the end user.)
But back to participation TV, I have often wondered whether integrating the mobile feedback channel into TV advertising would actually offer the industry a way to battle the “Tivo-phenomenon”: viewers recording programs with the ability to skip ads. If you simply start to create TV advertising that has interactive components in them with a possibility to win something, people would certainly be less likely to 1) skip the ads and 2) watch the program time-shifted.
Is there a problem doing this or is this an undiscovered opportunity?
ANOTHER BREW EVENT
Just a quick note on the BREW 2005 event which I visited two weeks ago in San Diego. Hats off to Qualcomm for staying on the bleeding edge and responding swiftly to market needs. The handset customization solution uiOne (http://brew.qualcomm.com/brew/in/about/uione.html) is yet another example of an innovation other leading players can kick themselves for not having brought to the market first. Sometimes I wonder whether Qualcomm should spin off these innovations as new companies so they could better benefit the whole industry and not just the 15%-of-the-market CDMA ecosystem?
Because at the end of the day, no matter how well the BREW and other Qualcomm ecosystem programs are executed they will only serve a small part of the market. The trade show may grow 100 percent per year and there may well have been a wealth of Indian and Chinese BREW developers attending the show but it all seemed to lack steam and real momentum. And to their misfortune, the U.S. BREW ecosystem is reliant on the continued success of Verizon Wireless, the fierce defender of the Soviet-style closed walled garden ecosystem. As a result of their inability to open up and share value with others Verizon has had to go on the defensive and rumors on the severed relations between Qualcomm and Verizon over the BREW service agreement abound. When the cake is too small for the grown-up eaters it is understandable that sharing it becomes an issue.
SOME COOL COMPANIES
Great Media. In the U.S. they talk about ladies in swim suits as adult entertainment. Let’s take a look at Sweden, the home of folksy erotica. GM Entertainment Inc. has created an entire ecosystem for the democratic selection of commercial imagery. www.greatmedia.se is a service portal offering both Swedish men and women to the world as mobile entertainment. www.girls.se and www.man.se are related online “casting agencies” where hotties are separated from the not-so-hotties.
When will this come to the U.S.? Why has www.vanitydate.com never really taken off? Well, ThumbPlay is reportedly offering GME content here already. www.thumbplay.com
mPowerPlayer. The company has created a Java-based solution to offer trials of mobile apps on any website. The app can then be ordered and provisioned, currently in partnership with Handango. http://www.mpowerplayer.com/ http://content.mpowerplayer.com/
MySpace. The LA-based social software site MySpace is making headlines with their incredible traction on the market place. This is another example of grass-roots innovation: the site does not offer any sophisticated tools nor high-end experience and the server performance is very slow. Moreover, the company is managed by InterMix Media which has been so far better known for innovative viral marketing techniques, also known as spyware… See the Buzztone summary on the company success: http://www.buzztone.com/murmurz/setup.asp?id=27&sec=01&tmplt=2&w=800. I wonder whether MySpace already has a mobile strategy in the works?
GREAT GUYS & GALS OF THE INDUSTRY
mForma had an eventful month: the company lost one of the most decorated industry executives, Rob Tercek who served as their CMO. Along with him left Matt Edelman, SVP Publishing. Both gentlemen were responsible for bringing expansive (and expensive) product innovation to the company which was apparently no longer needed when the IPO process needed more executives who can bring in the revenue. It will be interesting to hear where Rob will end up - rumors tell he is in talks with Xingtone.
mForma also hired some new executives, including Gina Centoni as SVP Product Management. Gina moves in from Macromedia who has by now lost most of its mobile leadership team.
The old management team of Moviso at Infospace is all but gone: the recent month’s casualties include Dean Newton (VP Entertainment), Shane Dewing (CTO) and Mark Levy (VP Licensing). Mark has reportedly a cool new gig at Corbis.
Need a new job, too? Please drop me a note, I might know of some options.
EVENTS, BLOGS & SOURCES
My favorite news sources: I have only time for two these days: www.moconews.net and www.digitalmediawire.com. That will get you covered.
Of other news sources you should notice Wireless Watch Japan (http://www.wirelesswatch.jp/).
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Disclaimer: Opinions presented herein are those of the undersigned and do not represent the position or message of any company I might be affiliated with.
