“handset subsidies were removed in finland and italy. in finland, there is still no stopping the growth of handset purchases. in italy, the sales of handsets dipped when the subsidies were removed, but then started to climb and return to normal once folks were accustomed to full priced phones.

the problems with subsidies (and i am not whining as a manufacturer) is that it removes any value from the handset, such that folks couldn’t give a damn what phone they have, so long as it’s free or cheap. in this way a 6680 ends up on par with a basic 33nn phone.

also, in the us, you have all these buckets of minutes you need to use up every month, extremely long contracts, high termination fees, and user paying for incoming and outgoing calls. all this removes any incentive for the operator to improve service or retain customers – the contract and all guarantees that the oprator makes money whether the service is krappy or not.

real competition would be to have no fixed contract, calling party pays, and number portability without hefty termination fees – then the operators would have to compete for customers and would have to provide great services.

it is no coincidence that finland is mobile phone heaven – the competition here has been fierce: at least 4 operators duke it out for a few million users.

wake up usa – let’s have some real competition for customers.”

I’d agree that it’s certainly a very interesting time for the mobile developer. That said the finance that comes will still typically be deferent to well publicised and hyped products/services. I cite the Bango floatation.

I’m constantly amazed at how people are surprised at the fact Three’s ARPU is disproportionately higher than the other carriers. Three made a transition from a content house, to a network operator and used pricing as the incentive to buy a customer base. What they didn’t do though is give this connectivity away with no strings attached. A barrier to entry still existed; Yes, you’d get cheap calls, but you would still have to take out a contract (pass credit checks etc), or take on their PAYG offering, which was never a fully fledged PAYG model since it required a minimum spend requirement anyway. Three’s percentage of post pay customers (vs. prepay) is also still markedly higher than any other carrier.

What Three now have to do is continue to innovate in terms of content/services, and continue to grow 3rd party service provision. The latter of which, despite an almost continual barrage of ‘closed-wall’ comments on the web, they are doing very encouragingly at. The walled garden approach has not recently been a ‘let’s preserve our exclusivity’ issue, and certainly Three is now opening up to a much wider array of 3rd party content, and even apps.

> The real problem with 3G is that the operators haven’t worked out why we should buy a 3G phone – what exactly are the benefits and how will my user experience be improved over GPRS? This is partly because no one has developed the applications that need 3G speeds to justify themselves.

I can almost see the words ‘killer app’ about to creep into this sentence somewhere. Three’s ARPU is higher than the other carriers in the UK. I’ve noted some logical thoughts as to why this is above, but additionally one has to take into account how much better Three’s portal is to a non 3G carriers offering; The 400K unique users per day they receive to their portal is testament to this. The point is that as 3G handsets become smaller/faster/better and the consumer starts to expect a more converged, engaged, and media rich capable device in their pocket, the trend will be a migration towards 3G handsets. This is going to happen anyway – in spite of any particularly groovy 3rd party apps.

Take for example MMS capable handsets; We all know that the MMS peer to peer volumes have not materialised, however if you try and buy a handset now that is not camera enabled, you will definitely have your work cut out. 3G video capable handsets WILL become the de facto highstreet purchase handset; in
spite of whatever funky or otherwise apps and services ‘we’ all come up with, the crux is that the carriers need to claw back license expenditure, and they will roll out 3G handsets on mass.

For me, the real interest comes from the fact that for just about the first time carriers actually need decent 3rd party apps, and developed solutions/services, far more than they have ever done before. The background thoughts to his comment are; If there was never another SMS 3rd party service sold, would it be that hard hitting to the majority of carriers – no it would not be, since their peer to peer traffic blasts any third party activity out of the water. True MMS applications are somewhat redundant as a 3rd party offering (I’ll write you an epic on this, but not now). LBS, well don’t get me started! This brings us to shiny 3G handsets, and 3G capabilities. Much like SMS, lots of 3rd party service potential exists, but unlike SMS, there is literally NO carrier peer to peer service application currently in use. Take video calling, has anyone ever actually seen anyone making a video call to someone else? Now think why Three are so keen to promote video services as much as possible (See the Three UK portal, and ‘The Lab’). As I’ve inferred above, 3rd party applications alone will not be sufficient for a carrier to push 3G off the back of, but it does present an opportunity to drive churn, and also presents an opportunity for an app/service developer to be in the right place at the right time to capitalise on this churn and get their products adopted.

Thanks Njar for your consistent contributions!

It’s interesting that the success or failure of adult entertainment on mobiles is often perceived from the writer’s personal views on the subject. A press release from Reuters in April this year stated pretty much the same thing. Adult on mobiles was more hype than fact and it wasn’t going to be one of the main revenue drivers. Then in the next sentence, it said that simple ‘pornographic’ (see the generalisation here!?) images and videos earned over 400,000 million dollars in 2004. Based on the mass-market popular handsets, the technical restrictions and the poor level of content itself that was available last year, I think that’s a pretty impressive indication of the demand for a single product type!

The objective now is delivering not only to that demand, but the consumer expectation of what it SHOULD be! The point that many are missing is that adult entertainment on mobiles should be DIFFERENT than in other media such as the Internet, DVD’s etc. Users interact with their mobiles in a totally different way than they do online and erotic consumers on mobiles have different requirements than gamers for example. (I could go on at length about the psychology of mobile erotica – It’s a lot more involved than topless wallpapers.)

I am also in agreement that statistical analysis is just that – analysis. It can ONLY be speculation, because we haven’t done it before. One thing I DO know is that since the beginning of 2005 demand for erotic products and content has gone crazy here at Cherry Media. Our distribution channels (i.e. where we license our mobile erotic products such as wallpapers, screensavers, video clips etc. to aggregators and operators) has increased over 85% in the last 6 months. This is via at least 20 global territories and includes many operator portals. Believe me it’s really starting to heat up! So whatever your personal opinion is about adult entertainment, it WILL be ‘one of’ the major revenue drivers on mobile. We are living it every day. We do no cold selling, very little marketing (and none, direct to consumer) and we have several enquiries every day wanting to distribute our content.

The adult mobile industry has been a little slow to take off, because of platform and network issues in ensuring that only adults could access it. This is now happening with the UK really leading the market.

Also, please keep in mind the following: Roughly 80% of the content we are distributing via distribution partners (based on their requests) is bikini or topless – in line with the lad’s mags available today. In our own direct to consumer channel (i.e. not reliant on operator on-portal requirements), where we have both glamour and adult, it’s almost the reverse – around 80% of our actual sales come from +18 content. What does that tell you? I would say it shows a discrepancy in what adult consumers actually want and what networks are willing to offer. This is why the operators will tell you it’s not the big seller on their portal. Probably not, why pay to download a image of a girl in a bikini when you can view it for free all over the TV, online and in the consumer media? If Adult mobile is NOT a killer app, it will be because users can’t find what they really want, specifically for mobile – and this is a HUGE range of soft, hard, funny, interactive, sexy, and seductive content and services. Not just hardcore porn galleries!

Thanks Chris for the comment of the week:

Because ad execs make most of their revenue from TV advertising – the sums
involved are thousands of times the magnitude of the typical mobile marketing
campaign – it’s a sad fact that they are recommending media that supports their
bottom line and not the clients objectives.

For all the talk of the death of TV
advertising – there is still no better way to communicate your brand to a mass
audience and influence consumer buying behaviour in a short period of time to a
national population – this will change with fragmentation of TV but the process
isn’t going to happen as fast as everyone believes.

The mobile industry may want
ad dollars that are destined for TV to be rerouted to to SMS/WAP campaigns but
consumers needs to catch up too. I think mobile will be very important part of
the mix and we’ll see it commanding more and more share of digital budget every
year from here on in, but TV won’t go away – its just too damn effective for
brand Goliaths who want to hit 10 million people in a 30 second spot.

We love it when you leave a comment on our posts. No really, we do – it takes this blogging thing into a different dimension when we have some interaction with the people who read our thoughts.

We get some brilliant comments here, so we thought it would be cool to have a Comment of the Week, as an occasional feature. We’ll run this when we think it’s justified – not necessarily automatically every week – but then we think there’s something worthy of your attention in case you missed it.

The rules (as Butch Cassidy said) is that there are no rules. We’ll just post stuff which catches our eye. You don’t have to agree with us or write a 500 word essay.

No prizes, just a little whuffie.

First winner is Mike Rhee, who posted this about Carlo’s widely quoted post Why DRM will Kill Mobile Music:

Carlo-
I think some of your points invalidating DRM are true. Currently,
it’s mostly used as a tool for exclusivity in both software and hardware,
limiting the user’s ability to use music freely. But the problem is no different
than the evolution of the phonograph to the cassette or the cassette to the CD.

As we all move towards a physically intangible digital medium of music, each of
our personal collections are going to be slowly decimated. We have to deal with
that. I know some people who are still "getting around" to converting their LP
collections. Sometimes it’s hard to let go, I know. As far as DRM goes, it’s
still a technology in it’s early phases. Eventually the choices will narrow
down, by nature of the market. We’ll have to see if the best technology
prevails.

I think your overall argument that DRM is choking the future of digital music
is flawed, primarily because it’s grounded in the now fading era of the LP. A
record used to be something you owned, could physically touch, and look at,
unfold. The idea of the album as a physical entity is dying. But with that, we
enter a realm of access to music that’s unlimited, instant, and unbounded by
physical or temporal limitations.

Take the digital rental music service paradigms
that are out there now; Rhaphsody, Yahoo, Napster. These services take the
ownership element out of music, an element that didn’t belong in the art form
anyway. I think people shirk from the idea of renting music because we lose the
tangible element. Even psychologically, it’s kind of weird. At least with an
iTunes purchase we can rest assured the songs will be there for as long as we
maintain the file on some storage medium.

Using digital music is going to
require a shift in mindset for all of us who grew up buying CD’s and leafing
through the booklets while it spun in our players. But the idea of sharing music
as a digital community, constantly circulating new songs that link to other new
songs, passing over one album to the next, finding new artists, all without the
constrictions of availability or individually purchasing each record, is a
fascinating idea. This Utopian music fantasy is a ways off, I know. But if this
is where music is heading, it’s going to be an exciting place.