7 good reasons why Apple will launch an MVNO

MVNO is hot in the US. Russell points out quite a few examples while Forbes.com claims that the Cupertino giant is planning to roll out its own soon.

While I don't think that an MVNO strategy is appropriate to many of the big brands, it makes perfect sense why Apple should do it.

Here are 7 good reasons:

1. Apple is an existing strong customer brand, familiar to the masses. Not only that, but people are already used to purchasing Apple hardware (iPod, PowerBook), as well as services (iTunes tracks, etc.). Many people I know admitted that their main motivation for purchasing an iPod was the design of the hardware. Guess what? What's the main selling point of mobile phones today? Think about the RAZR!
   
2. The iPod's main challenger is the mobile phone. They all failed. The iPod is to the portable digital music player market what the Nutella is to the chocolate-hazelnut spread market (in Europe at least): many people are trying to compete, imitate, but the dominance is set for a while. Once the hard drive player business was conquered, Apple launched the Shuffle to go after the remaining Flash memory player market. But these standalone Flash based players are starting to face what standalone digital cameras have been facing: the market is getting largely shared with mobile phones. As a next step, Apple HAS to get involved in this business.
   
3. The iTunes phone experience. This year is supposed to be the year of mobile music, and here we are, July 10 and still no sign of the Motorola iTunes phone announced a while ago. Om mentioned that it should now be on the way to hit Cingular stores, but the revenue share over song tracks is probably the sensitive part. iTunes makes almost no margin on tracks, but instead get the extra bucks out of the iPod. So how does this translate into mobile? Apple will share their 2 or 3 cents with the carrier? Does not make any sense. Songs may have to be more expensive, but then what is the incentive for users to download songs over-the-air, rather than waiting until they come back home? Launching an iPhone will allow Apple to make the extra cash out of the hardware, and therefore apply their usual strategy. Its partnership with Motorola should in theory allow them to sell to operators, but if they launch an MVNO, they become their own customers, and will be able to avoid similar ready-but-can-not-be-launched scenarios.
   
4. Allow different usages. I think there would be different products for different needs. Apple certainly doesn't want to let its iPod on the side, so synching will be king. At least two types of devices make sense here: the iPod capable of downloading tracks by itself (or why not receiving phone calls, who needs a keypad these days beside text messaging?), as well as the iPhone capable of playing songs in a way that they can be synched with your iPod. In this last scenario, you can download your song track using your phone, which automatically gets stored on your iPod, and your favorite track list on your iPod gets automatically duplicated on your phone.
   
5. Podcasting and tracks downloading. What is the difference between podcasting and song tracks downloading? One tends to have a more limited life time while it requires a more frequent connection. Think about it. I am sure plenty of people don't bother synching their iPod with their Mac/PC more than once a week, while Podcasting by nature has a more frequent need. And Podcasting is now fully part of Apple strategy if you look at the latest version of iTunes. I recently heard about KDDI's latest way to optimize its network bandwidth. Instead of having most of its users download news, videos, and other content during peak times (let's say 8am to 10am), they deliver the content over the night before, depending on which channel users subscribe to. There is also an advantage doing so: there is a good chance your device will be plugged in, so no battery issue here. Even if there is a high chance you may have a PC or Mac always next to you at home, I am sure it still has a lot of value (I sometimes check my emails with my phone while at home, so I don't bother turning on my laptop).
   
6. Apple is already working on mobile. Job postings, and also their recent launch of Apple Store Mobile in Japan are some examples.
   
7. The future: MediaFlo, DVB-H and WiMax. Broacast solutions such as MediaFlo and DVB-H, would be ideal to get podcasting on iPods, iPhones, or whatever you want to call their product line. Also, if WiMax gets launched sooner than later, it could allow this over-the-air download. If I believe these solutions are more long term, Apple should select a MVNO partner who is planning to offer one of them.

So will it be the "There is one more thing" that Jobs will talk about during MacWorld 2006? We'll see!

The Long Tail for mobile content

Last October, I read - with great interest - the article about The Long Tail written by Chris Anderson, the day where Russell Beattie told me about it, and I thought it was the one of the most interesting thing I had read for a while. Russell and I discussed about how The Long Tail could be applied to the mobile industry, and surprisingly I haven't read too much about it so I felt I should post something.

No, the Long Tail isn't only a buzz word you may use to catch the attention of a VC in order to get some funding, along with "vertical search", "tags" and "RSS". It is about opening your eyes to what the new economy has really to offer, and exploring the unknown boundaries of the digitalization of media and entertainement and the way they can be distributed. It is about being finally allowed to consider the customer as unique with his own taste and pushing away the idea of putting them in some kind of marketing categories. Market segmentation will always be there (TV commercials haven't got an unlimited duration as opposed to the Long Tail catalogue), but the marketing rules are no more driven by the physical world with its own rules.

Chris Anderson does a great job explaining how the Long Tail can be applied to digital media. But let's focus on mobile for a minute. We have two types of content for cell phones. Let's call them "basic content" - including ringtones, wallpapers, avatars, etc. - and applications which require programming skills, such as games.

Now what does make a difference between traditional digital media and mobile content? A huge part of this mobile content is actually not portable across devices. And it is especially true for applications since you have to deal with the platform, versioning, screen size, supported APIs, etc. So what does that mean for our Long Tail here? It simply means that it is more complex to build up unlimited catalogues for mobile content than for more traditional media. Your mp3 song will be played anywhere, whereas your mobile game will only work with this specific phone... See where I am coming from?

Now let's think about the opportunities. As a service provider, the way you implement the Long Tail for recommending mobile content may have an even bigger impact than on the Web. Think about search. You may look into the top 10 to 20 results when you type a request on Google using your desktop, whereas you may not scroll down to more than 3 to 5 results when you use your mobile. Mobile search is more demanding than Web search, since you don't want to browse tons of results. For the same reasons, companies applying The Long Tail for mobile should better do a great job when recommending the relevent content to each user.

My 3 favorite mobile services right now

There are a few mobile applications available out there that I am really into right now, and I wanted to share them with you. I have been showing them to some people at Mobile Monday last night and I felt some of you might be interested.

I am currently using an Orange SPV C500 (smartphone known as the Audiovox SMT5600 in the US) but the following apps and services not exclusive to the Windows Mobile platform.

Instant Messaging
Agile Messenger is simply the best IM client I have ever used... You can connect to your MSN, Yahoo, ICQ, AOL, etc. and the last version is awesome since you can do Push2Talk either your friends are on their cell phone or PC. You can also upload pictures and share them during your session. Brilliant. Since Agile Messenger is using http, there is no service fee specific to mobile (MSN and Yahoo usually charge for their mobile access).

Mobile Radio
Virgin Radio just launched their mobile service, and I tried streaming the radio using Windows Media Player, and it is terrific! According to Russ, the client is very good, but you don't even have to install anything and it works great. So cool to listen to the latest Stereophonics' this morning while driving my car, since the tune is not played by any US radio station as far as I know.

Mobile TV
This is something I have been super impressed by lately: TV on your mobile, but without any limitation when it comes to number of frames per second, without the need of installing a client - once again Windows Media Player does a great job here - and it is totally enjoyable by the average customer I think. On this demo, you can access only to a few channels including CNBC and the Weather Channel. Smart Video is the company behind this product and what is impressive is the quality you get while using a simple GPRS network, not 3G, not even EDGE!

The best part is the fact that all these services are free! It doesn't cost me a single dime using them, and since I have an unlimited data plan for $5 per month, this is such a great deal! Think about that, $5 a month and you get unlimited IM, unlimited radio, and unlimited TV!

I have to say that I am a little bit skepticle about mobile TV over a cellular wireless network, since there are some scalability issues for a wireless operator, and that's why Korean and Japanese carriers have been pushing for TV brodcast access such as satellite. After initial services such as MobiTV, the US industry will be using digital boradcasting solutions such as Qualcomm's Media Flo and DVB-H. Now we are talking about high resolution TV on the cell phones, so you can even read the headlines scrolling at the bottom of CNN!

And during that time SMS still counts for 76% of mobile data revenues for wireless operators in Western Europe, and overall few people are using data services... I guess I must fit in the "early adopter" category then ;-)

Mobertainment

Last month, Fox announced a unique series of one-minute dramas based on its hit show 24 for Vodafone Live! and its brand new 3G service. The "mobisodes", as they're being called, will be introduced in January 2005 in the UK and more than a commercial service, I think it really represents a milestone in the entertainment industry.

Let's take a step back here. Well, I am far from being a Hollywood Guru, but when the TV came out, I think we can say that there were two categories of content being broadcasted. First, the type of content that already existed on other mediums - such as movies coming from theatres - that could just fit well on a TV. Second, the made-for-TV type of content as we know it today. TV is still using these two categories, because it is by nature very well adapted to its format, its distribution, but a different business model has been introduced: TV commercials.

Now let's look at the Web. It is an ocean of everything where anybody can put their own content available for others, a many-to-many type of model while the TV has followed a one-to-many approach. I think the mobile space is somewhere in between, since you still have operators who have some degree of control of services - the deck - while you also have the many-to-many paradigm possible. But what does this really imply for our mobisodes here?

Well think about it. 24 on cell phones is like cinema for television, fitting into the first category of entertainment (in our case, 24 will be 1 minute episodes instead of 60 minutes, so there is still some adaptation here). But what is expected to come next is content-made-for-mobile type of entertainment, this is what we could call mobile entertainment or mobertainment. The type of content designed from scratch for the mobile platform, considering its nature: limits (screen size, etc.) and unique advantages (interactivity, anywhere, etc.).

I have been told our 24 case here had its limits, due to what the whole entertainment industry is based on: rights, rights and rights. I have been told that a different cast will be put in the wireless version of the series due to rights issues, because the show has not been designed for wireless on a legal statepoint.

Last week end, I was down in LA, spending some time with the crowed behind The Spot. This show may be the very first one that belongs to the second category, which is made-for-mobile from scratch. And this is because of the format of content they started to use, but also and mainly because of the way rights are handled. The company behind The Spot owns the rights and could launch the episodes on the Web as well as on wireless. Since May this year, Sprint subscribers can access to the daily audio episodes for a monthly fee and the production is talk with television channels as well. I actually did start my Hollywood career there, since I played a mysterious French guy called Alexandre Badeaux (you should check out the free videos online starting this Wednesday!).

What is cool about the Spot is the community built around it and its influence power. Fans can email, send text or video messages to the Spot Mates (people living in the house being called the Spot) and somehow influence how the storyline is evolving. And all of that can be done from a cell phone! I am not a big fan of reality types of shows, but how many people out there would like to some degrees of influence over the people they watch on these shows? I can imagine this becoming big, really big.

I believe 24 and especially the Spot being good examples of how the entertainment industry can efficiently embrace the wireless space, not just pushing what's already available on TV or other mediums.

A lot of $$$ and a little bit of development

It is only a few years old thing in both Americas and Europe and a little more in Japan and Korea, but dynamics around mobile application development are changing already. By the way I put "Americas" instead of US on purpose, because we should not forget about the Canadian and the very fast growing Latin American markets.

But let's go back to our topic here... As a mobile developer, you can chose which platform you want to support, and will be selling your applications through operators or other distributors including Handango. Until recently open mobile platforms such as J2ME and Symbian had the advantage of guaranteeing low barriers of entry with an upfront investment of $0 or close to close to $0. Wireless carriers could also opt for BREW and its end2end solution providing an appealing business model for developers. But the barriers of entry here have always been pretty high since a $10,000 investment is required for your application to be certified - a must to be considered by carriers.

But despite of this cost factor, BREW happened to become a big money-making solution for both carriers and developers. It is like supporting iTunes rather than Kazaa when you are in the music industry: the artist, record company, and distributor/platform provider are all getting paid.

Now the other mobile platform providers are somehow adjusting their propositions in order to answer to the industry's demand. Wireless carriers do want security and bugs free applications, in order to guaranty good quality in their data offerings along with their voice services. And typically carriers can not and do not want to handle the certification process. So certification programs managed by platform providers started to come into the picture...

J2ME is now providing Java Verified, Symbian launched Symbian Signed and Microsoft Mobile2Market. They all enable applications to be certified (application testing + signature) and may also provide some marketing support as well. Now Nokia is taking both J2ME and Symbian into the next level. With Preminet, Nokia intends to do for these platforms what Qualcomm has done for BREW: provide wireless carriers with a content distribution system, supporting only certified applications. But what does that mean for developers?

On one side it is becoming harder and harder for developers to get their applications on carrier's catalogues. Wireless carriers usually limit the number of apps they are selling. So let's face it as a new, record free developer, your chances to see Sprint or Verizon Wireless propose your game to their customers are becoming very, extremely low. And on the other side, with the industry trend and this Nokia initiative, it would cost you a few thousands dollars upfront even if you decide to support J2ME and Symbian, without any garanty to make a single dime out of your application.

So for independant application developers, it simply means more risks, and you-better-go-with-a-partner such as a publisher and ultimately, the pourcentage of revenues you will get may shrink, but hopefully volumes would balance... But it looks like this community will have no choice and become more and more professional. I don't know many independant developers who are playing around with BREW as much as with J2ME, developing applications "for fun" and submitting them to carriers. The BREW community seems to be more about companies and less about individuals and I believe the same may be applied to the other platforms in a near future.

A new Gold Rush!

When I arrived in San Francisco early 2001, the dot-com bubble was about to burst. Just a couple of weeks later, I met this CEO of a small company at a party and he told me he didn't believe the good times were over. He said that after spending 20 years in the Silicon Valley or so, not only it always comes back, but it even gets more crazy each time. I told the guy that I believed the next one was going to be about wireless and that I wanted to be here when it happens. Well, it is happening now, right now!

It is true that the Highway 101 is getting more crowded these days (which is probably a credible symptom by the way!) but I have some more concrete arguments to raise. One thing: we are not talking about the entire economy here, but definitely about the mobile entertainment industry.

I have done a little bit of homework, and here is how CRAZY has been the past summer when it comes to investment and acquisitions:

• Sorrent raised $20M, third round, July 2004
• Airborne Entertainment raised $22M, August 2004
• In-Fusio raised $27M, August 2004
• Idetic raised $15M, second round, August 2004
• Agilix Labs raised $4.35M, August 2004
• Digital Chocolate:
• Acquired Sumea, June 2004
• Raised $13M, 2nd round, August 2004
• Mforma
• Raised $44M, 1st round, June 2004
• Raised $19M, 2nd round, August 2004
• Acquired FingerTwitch, August 2004
• Acquired Blue Beck, August 2004

To conclude this crazy summer, Digital Bridges signed a development deal with EA and Jamdat went IPO, a few days ago, raising about $61M, and their stock rose over 40% 1st day of trade!

So now open up your eyes... About a quarter of a billion dollars has been invested into these companies, in the last 3 months! We may not (and should probably not) talk about a bubble yet, since these guys are making money, probably even more than projected a few years ago. But it looks like VCs have been considering investing all at once, just like if they were scared to be out of the game.

This is a very exciting time right now, and I believe the industry has just entered into something big, a new gold rush full of opportunities, and I hope this will get better, crazier and even more fun than the previous one! Later this month, I do not want to miss the Mobile Entertainement Summit.

Romain

Orange Code Camp

Orange hosted a Code Camp about two weeks ago in France, and it was a great opportunity to meet with application developers, and keep updated on their experience and issues they are facing.

I was moderating a Birds of a Feather session on 3D in Java, and had a great panel of experts from Apoje, In-Fusio, as well as Nokia. 3D is happening right now, with a bunch of devices reaching the market before the end of this year. These devices will support the standard 3D API: JSR 184. Here is a short list just to name a few: Siemens CX66, Sony Ericsson K700, Siemens CX70, Motorola e680, Nokia 6630, Siemens SK65, Sony Ericsson S700i, Sony Ericsson Z500.

For application developers, 3D will mean acquiring new skills or partnering with graphic designers, so this market is expected to follow somehow the traditional game industry, and I don't think individual developers will be willing to take the additional risks...
But anyway, if you are interested about these opportunities, check this article Sun has just published: Getting Started With the Mobile 3D Graphics API for J2ME.

In addition to that, what I think to be very exciting are the upcoming hardware solutions. Heard about ATI, nVIDIA and NeoMagic? Well, they have all announced upcoming products for cell phones, so yes, you will be able to play Tomb Raider truly, fully anywhere! Such devices are expected to reach the market next year. Now the question is: would you spend $10 or so to get Tomb Raider on your phone?

But going back to the Code Camp, if you are a developer and you are based in the US, stay tuned because you may hear about something cool soon.

Presentations at the last Code Camp are available online on the Orange Partner web site (you do need to register though).

Romain