« Little Brother: Building The Yellow Pages of Non-Yellow Pages Information (3 of 3) | Main | GOOGLMNO »
May 10, 2005
Rearranging Deck Chairs On The Titanic
I love that phrase. I cannot think of a better mental picture of someone putting forth a good effort to fix a problem that won’t exist soon because of a much larger problem that would obviate the solution they are attempting to implement.
“Bravo Jenkins - smashing job tidying up those deck chairs. Say, have you noticed the 39,000 tons of water pouring into the forward compartment pulling the ship down? Bloody unfortunate news – seems we only have an hour or so and that water looks chilly. Sorry to tear you away from this important work, but when you’re done here, let’s see if we can lend a hand, eh chap?”
It wasn’t Jenkins’ fault. He didn’t see it coming. Neither did anyone else. And that’s the way it goes. Steaming through icebergs at 20 knots requires some visibility into what lies ahead. If you read my previous posts on the Forces Shaping Mobile Media, (1, 2 and 3) you know where I am going on this. To recap, today’s mobile data business model relies upon closed networks and closed devices to sustainably monetize the content being sold. Like we noticed on the internet, the most open of networks connecting the most open of devices, when a consumer has a choice between paying for a song or getting it for free, they will choose free 99% of the time. And no matter how many 12-year-old girls the RIAA sues, consumers apparently are not afraid enough to stop doing it.
Do You See An Iceberg Out There?
WiFi handsets are here, enabling users to make (potentially) free VoIP calls from any hotspot.
Kyocera and Boingo recently announced a dual-mode handset that presumably will sense when you are near a hotspot and route your data over the free connection.
Which smells like a market opportunity to companies like Kineto Wireless which are filling in the spaces by bridging the gap between WAN and WiFi.
And that's just the tip of the iceberg. (Get it?) Devices themselves are evolving, changing from closed “black boxes” to open hardware platforms with operating systems and software applications. Bluetooth and removable media represent progress for the mobile space, but they also present some problems in that they could disrupt existing and potential future revenue streams.
I don’t even have to offer you a link to one of the many articles about falling voice ARPU. Just look in this Sunday’s paper for the latest offer from any carrier to convince yourself of the simple fact that voice has reached commodity status: “10 billion minutes for just $29.99/month, including 5 billion evening and weekend minutes.”
So although as an industry we need closed networks and closed devices to make money selling ringtones, graphics and games, on the horizon we have open networks, open devices and dwindling revenue from our core product. What should we do?
Full Steam Ahead
No problem there, though, because even if mobile voice calls go to an ISP model flat rate for unlimited use (like what T-Mobile appears to be preparing for) or at worst follow the internet trend and go to free, (and they likely will, though I would personally always pay for some level of QOS if the alternative were to be even more dropped calls) data is the thing that will sustain growth in our industry.
Investment capital is pouring into mobile TV companies, and judging from the new Forbes cover story, (“It’s Cellevision”) we are all going to get rich off of mobile data. Hollywood came to CTIA this year and threw some great parties. There is a palpable optimism in the air.
It feels like 1998, doesn’t it? That was the last time I felt this much optimism - when the Internets was going to be the new distribution channel for all manner of media.
And it was, just not in the way the media companies expected. The original, cool Napster showed us that.
Let’s Try DRM Again
Albert Einstein said that the definition of insanity is doing the same thing over and over again and expecting different results. DRM exists on the web today. The very small percentage of consumers who actually pay for music and movies on the internet are usually downloading content in some sort of DRM wrapper. The vast majority of the rest of the consumers who are downloading music and movies for free via P2P networks are not. And so I wonder if anyone at the GSMA or MPEG LA or OMA have asked this fundamental question: Does it really matter? Is it possible that they are rearranging DRM deckchairs on the mobile data Titanic? If all the signs point to opening devices and opening networks, what value does any security scheme really provide? I read with great interest the latest rejection by the GSMA of the MPEG LA’s revised proposed fees for the OMA members’ collection of DRM patents. Well of course it is too expensive. DRM will exist in the open mobile space only to satisfy a legal requirement to make some effort to protect intellectual property rights. Then some geek will crack the DRM code and the genie will be out of the bottle. The vast majority of content in the open mobile space will get napsterized. If you are trying to build future value beyond the next two years, now is a bad time to start dealing in mobile content downloads.
Jump Ship
I may have just tipped my hand that I am against DRM. True. I have written before that I am in favor of a closed network and closed devices as a better alternative to an open environment with DRM. The carriers have control of their networks and I think they should hold out as long as possible to monetize their very valuable infrastructure. As such, I am a true believer in paid mobile media. But the writing is on the wall. I ran the largest ringtone company in North America and I don’t even buy ringtones anymore. Now I record song clips on my phone and make them my ringtones. So if we are getting more and more indications that there is going to be an alternative mobile network that cannot be closed because it is inherently distributed, what’s a mobile media entrepreneur to do?
The answer is simple: Don’t deal in mobile content downloads. Today, you should. In two years, you should not. We will see dozens of compelling mobile data applications over the next few years. I predict that when devices and networks are open, none of them will be based on business models that rely on selling a discreet piece of content to a consumer. Services that enhance communication by giving users a multimedia publishing platform in their pocket are valuable future apps. Make my phone easily integrate with my shared distributed calendar to increase productivity – that will be valuable. Turn my mobile device into a location-based remote control to interface with the world around me – that will be valuable. Go beyond general search to verticalize applications by interest area so I can find a particular kind of person, place or thing with some reliability. Extend existing data services like mobile IM to include true multi-dimensional presence functionality – that’s a good idea. Network layers like lat/lon and time stamp, when attached to media, will be valuable certification services that carriers can monetize and will revolutionize the news industry. Then make every user part of a participative media network with the mobile phone as interface, blurring the lines between media, marketing and communication. Make the mobile device a commerce tool to replace or augment the current credit card industry – that’s a new value chain waiting to be built. Make my phone a personal assistant complete with seamless integration to my other modes of communication so that people who I want to talk to can find me, but those who don’t can view either my personal or work channel instead, complete with assignable rights to access certain information by individual.
This industry hasn’t come close to unlocking the massive value of data. There is literally nowhere to go but up. That’s good news. It is even bettter news that even if there is an alternative and free distribution channel for data, the carriers still have a seemingly limitless number of opportunities to monetize their subscriber relationships through applications and services that are future-proof because they cannot be napsterized. A little Hollywood is good, frankly, and mobile video is cool and it should have its place in our industry. I just hope to see more companies look past the current traditional media repackaging frenzy and capitalize on the massive opportunity in mobile data that lies just beyond the next iceberg.
Posted by Shawn Conahan at May 10, 2005 03:09 PM