MEOW - Issue 7, 2005

I took a month off in publishing the newsletter - I should have told you in advance as so many are requesting it which is a humbling experience.

You all must have seen what happened to the Infospace stock a week ago - down 30 percent. I wrote about the Infospace lack of wireless strategy in the past few newsletters and got surprised reactions from many people, including other industry publications like MocoNews (although it is my favorite news source;-). Well, look what happened. Infospace has apparently ignored to innovate and secure their position in the value chain. Industry experts estimate that 75 percent of their premium content revenue relies on their relationship with Cingular - the one they are slowly losing out to Motricity.

I spent three weeks in Finland which is often seen as the Mecca of mobile content. Finns themselves are being very realistic about their status and admit that mobile content market there lags some two years behind leading European markets where phone subsidies are in use. The main trend in Finland seem to be a total commoditization of both phones and basic services - voice minutes are reportedly the cheapest in Western Europe.

Also the size of the Finnish market makes it difficult to introduce advanced offerings based on lifestyle segmentation: the market is simply too small to allow for early differentiation like that.

Due to the presence of Nokia, the Finland continues to be a strong technology innovator with an amazingly poor track record of taking those innovations to the world market. Why is it that the only two ring tone companies in the US who have not yet gained a decent valuation are of a Finnish origin? (For the record: ringtones were invented in Finland in 1997.) And why is it that on the contrary one of the greatest success stories in the US ringtone market (Q-Mobile) has its roots in Greece? I think the most important answer is that the Finns have not yet read Donald Trump's book to learn to 'think big'...

What is even more important is the ability to 'think big' when it is time to do so. To the credit of for example Q-Mobile they got the timing right. Latecomers will find the market exhausted of high-growth vehicles and the investment risks multiplied due to market saturation. Ask your favorite investment bank and they will not tell you this, though;-).

Nokia published their quarterly results and took some beating on the stock market for reduced earnings. The analysts were criticizing their focus on low-margin low end phones and on their losing market share to Motorola in the high end. I am not trying to defend the Finns (as you can see from the above;-)) but I think the market is seeing things through colored glasses.

I believe Nokia is for a change doing exactly the right thing: securing the low end when they still can. If they let the opportunity go they would feed emerging competition in low-cost labor markets, lose scale advantage and most importantly lose young customers who represent the greatest over-lifetime revenue potential. Focus on design is important and in that respect Nokia has stumbled in the past two years in ways that should lead the chief designer Frank Nuovo to reconsider whether he actually after all is God.

My point is that the market for mobile multimedia is still very early and fighting for the high end market share at this point is not as crucial as securing the low end. Even Series 60 as the leading platform is just taking its first steps and putting all the ammunition on artificially building a market for that before the true consumer demand is there would not be the smartest thing to do.

The moment of truth for Nokia will come only roughly a year from now when multimedia phones and smart phones reach a price point where they will be able to build rapidly market share. And at that point we all should have figured out what kind of revenue-generating content we can offer on those phones. We should also always remember that not all technologies become successful when you just wait and let them mature - video conferencing is a case in point, the whole industry nearly died until video voyerism on the Internet finally brought it back... And mobile videoconferencing will fall on its face, sorry.

It is fascinating to observe a revolution in the making: the US carriers are indeed opening up the premium content market for the distribution of binary files (e.g. ringtones). In the past month or so both Sprint PCS and Verizon have launched commercial services for off-deck binary content distribution with a few partners.

The latest numbers from i-bank/research company Rutberg & Co reveal that in the segment of the market covered by QPass's billing settlement services (primarily Cingular and Nextel) the off-deck share of revenues grew from 2 percent to 23 percent during the first quarter of 2005 alone. This is a very encouraging development. When all the major carriers will have launched full-scale deployments of PSMS content billing by the end of 2005 we can certainly expect the overall mobile content market to grow significantly in 2006. Off-deck players like Jamster are pouring in tens of millions of advertising dollars per quarter on the US market alone, thus raising market awareness and speeding large-scale adoption.

My top ten list of emerging off-deck players on the US market is the following, based on revenues, financial backing, strength of mother company and stage of launch. I will certainly be making some mistakes here so I apologize in advance:

This list does not include companies focusing mainly on Latin America such as Telemedia Development, Wilaen or ClearSky. I have also excluded companies who still mainly rely on carrier distribution such as Infospace, mForma, Airborne or Moderati. In the future we will certainly see studios, record labels and brands go direct to the consumer using premium SMS billing - an example under development is Universal Music Mobile or 123 Multimedia who are launching the BET Black Entertainment Television offering soon.

CellCast Interactive. Cellcast lauched their Flirt TV offering on Saturday on Echostar satellite TV as well as on the web. It starts from a simple SMS TV chat and will evolve in the future to include MMS photos and video take by end users. CellCast touts the new venture as the 'interactive version of Match.com'. However, looking at the launch email from Cellcast and the people that email was sent to it is clear that the offering might gear somewhat towards 'adultish' services. Included in the email are for example a new IP TV play Ripe TV (http://ripe.tv/) as well as Andrew Conru, the CEO of FriendFinder.com, home of the online dating industry's most amazing cash cow AdultFriendFinder.com. http://www.flirtliveusa.com/

SK-Earthlink. The Korean-American MVNO on Sprint has set up their headquarters in LA and they are building the platform as we speak. All signs indicate that the joint venture will be a showcase of best Korean mobile media innovations applied to the US market and it will be a conduit for several Korean platform providers to get a US foothold.

FotoChatter. These guys in Santa Monica have developed a cool OTA p2p 'mobile image network'. It's a very cool idea, kind of 'photo group conferencing'. It works through both WAP and J2ME. www.fotochatter.com

GearOn by Protohaus. Another Santa Monica -based company Protohaus is bringing to the market a mobile UI design innovation which centers around community interaction. The various functionalities enable media sharing and various aspects of organizing 'tribal activity'. The company founder Eduardo Sciammarella was a senior award-winning UI designer at Sony for ten years. If you are interested in knowing more about partnering with GearOn please contact Eduardo or myself. http://www.protohaus.com/gearON/index.html

Chris Dorr started at Sony Connect as VP of Digital Video (including mobile). Chris was previously VP Programming with Intertainer, an online VOD play which burned through $160m VC money. Sony Connect is rumoured to the brain child of Sony's new CEO Howard Stringer. It is said to have 40+ open positions available... Looks like Sony Connect might be the future bright spot in the Sony Empire... cdorr@earthlink.net.

Ivan Lopez started a while ago at Disney Internet Group (DIG) as Director of Business Development under Larry Shapiro. DIG has been given the mandate from the top management to be the focal point for mobile activity within the Disney Group. ivan.lopez@dig.com

Anina is a Paris-based supermodel who has become the ambassador of mobile within the fashion industry through her Nokia-sponsored mobile blogging initiative 360° Fashion which is using the Nokia LifeBlog platform. This is a great example of a grass-roots development helping to bring a whole new industry into the mobile ecosystem. You can contact Anina directly at www.anina.net or email me and I can evaluate and relay your partnership idea/proposal. See also: http://www.cellphones.ca/1411

RECRUITING

Major Hollywood Studio with strong commitment to the mobile entertainment space is actively recruiting for the following positions:

Manager of Business Development – Focused on distribution and evolving platforms in the mobile space for North America
Manager of Content Licensing – Focused on securing 3rd party content from AAA brands
Senior Manager of Account Management – Manage all distribution accounts and team of account managers
Senior Account Manager – Manage major carrier relationship on day to day basis

Jan Michael Hess is producing a solid set of study tours which could give you an opportunity to understand better the leading Asian mobile markets: Japan, Korea and China. The next events are scheduled for October - check them out at http://www.mobileeconomy.de/met.