Wednesday, August 31, 2005

Camera Phones: Digital Camera Boon or Buster?

After IDC issued a report that claimed cameraphones were actually driving the sales of standalone digital camera, TechNewsWorld covered the story and sought additional insight from Jupiter analyst Michael Gartenberg.

Gartenberg agreed with with IDC's assessment and said, "Camera phones will not become digital cameras, nor will music-enabled phones displace iPods or MP3 players. These devices will be an addition to, not instead of."

Gartenberg believed context was a key factor to consider when choosing a device to carry. For example, a camera phone should suffice for simple snapshots of friends when out for a night on the town.

Usage model is another factor. As Gartenberg notes, "The cell phone user, for the most part, isn't going to pay money for the camera feature. They are getting the camera as part of the phone and aren't paying extra for it,. A digital camera is something that you go out and buy because you want to take photographs," he said

On the topic of IDC's finding that most consumers don't print camera phone photos due to low image quaility, Gartenberg added, "Often consumers don't have an easy way to get the pictures off the camera. So they use them as wallpaper and screensavers instead of printing them. It shows how consumers are changing the way they are interacting with digital technology. Consumers are realizing that there's many ways they can interact with their pictures other than just printing them out and pasting them into an album."

Switched On: A Case of “He Said, HP Said”

In memoriam of HP's exit from the MP3 resale market last month, Ross Rubin of NPD writes a humorous and fictitious account of the initial coversations between Apple and HP in his Switched On column at Engadget. Although hypothetical, Apple's hardline stance probably rings true in many ways.

Rubin concludes with the following observation:

When HP dropped the iPod, Apple noted that HP had sold about 7 percent of iPods worldwide. That sounds like a trivial amount until one realizes that most of Apple’s other competitors have suffered similar market shares. HP has proven it can come from behind; it entered the PC market late and rose to dominate retail sales. Yet, while partnering with Apple may have been the second-worst way to enter the portable digital player, re-entering at this point competing with Apple would be the worst one.
HP still has the iPaq, which Tim Bajarin at Creative Strategies mentioned last month as a possible platform for a portable media device. It calls, web browses, messages, plays music and video, and probably slices and dices too. The pieces are there, but can they market it properly?

Jupiter: Orange's Mobile TV Efforts in France

Thomas Husson posts at the Jupiter Analyst Weblogs about Orange's mobile TV efforts in France. Husson reports Orange is offering 7 new channels for a total of 50 altogether that are "commercially available to 85% of the French population (thanks to a combination of EDGE and 3G coverage)." He compares this with the recently-launched digital terrestrial TV in France, TNT, that only has "14 channels available to 35% of the population!"

Husson digs into Orange's claim on the success of the service:

Orange claims to have the widest offer worldwide and that its customers watched live TV for 19.000 hours in June 2005. Impressive numbers but a rapid calculation gives me an interesting ratio : roughly 7 minutes per 3G subscriber, which amounts probably around 25 minutes for active TV subscribers. Not bad but let's remember the promotion : free and unlimited 24 hours a day, 7 days a week during the first two months...
Husson notes Orange is pushing mobile TV, while competitor SFR (Vodafone) is riding mobile music to differentiate their services and entice consumers to migrate to 3G. It'll be interesting to see which one is the bigger draw or whether a completely different service holds the key for greater customer adoption...

Wireless Broadband: The Next, Cheap Wave?

Business Week covers Verizon's recent price cut for its high-speed mobile internet service and takes a look at the potential market in the U.S.

With the entries of Sprint and Cingular to the 3G playing field, Albert Lin at American Technology Research said, "To remain competitive, Verizon needs to build a greater gap between themselves and competitors."

Lin estimated that "only about 1 million, or some 2% of the company's 47.4 million subscribers, use EV-DO to connect their laptops to the Web" and predicted "the service's growth rate should double in the next year as more users take advantage of the lower price."

He added that "with a further decline in prices, to around $40 a month, even the mainstream consumer will jump onto the wireless broadband bandwagon." Lin also noted that "at $80 a month, its EV-DO service was too pricey even for some business users. Also, Cingular is likely to prove a tough competitor once its broadband service is more widely available."

Jeff Kagan an independent telecommunications analyst said, "The prices are now low enough that this service is starting to get interesting." Kagan even suggested that "if prices continue to drop, most wireless users will opt for faster broadband access instead of alternatives such as digital subscriber line (DSL) connections."

That might be pushing it. With DSL at only $14.95 a month, it will be a while before the wireless carriers drop prices for their broadband networks to this level. And as I've said many times in the past, pricing will need to drop a lot further ($30 range?) before mainstream adoption kicks in...

Ring Back Tones with a Continental Twist

European analyst Thomas Husson at JupiterResearch posts his thoughts on Ring Back Tones (RBT). He notes that for people experiencing them for the first time there might be confusion especially when combined with voicemail greetings. On the current market, Husson states:

In order to lower promotional costs, mobile operators relied too heavily on RBT to gain organic adoption through its self generating viral marketing effect. This is double-edged sword: "word of mouth" could also damage the reputation of this nascent market and kill the service before its first breath.

However, if marketed correctly, mobile operators and record labels could benefit from increasing revenues. Best practices and disruptive techniques have been used successfully by some carriers and could be implemented easily.

Tuesday, August 30, 2005

Jupiter: Curious Lack of PSP Buzz in Europe

Nate Elliott at JupiterResearch ponders why there is such little buzz in Europe regarding the upcoming launch of the Sony PSP on Thursday, September 1. As Elliott notes:

After making Europeans wait so long, you'd think Sony would be able to build the market to a fevered pitch this week -- but I just haven't seen it happening.
Kind of odd he has only seen two ads altogether, since as a "29-year-old white-collar tech-savvy guy" he is the target audience for the device. This also seems to run counter to a post last week that claimed Sony was going to embark on a massive £10m cross-media marketing campaign to promote the PSP this holiday season. Maybe Sony's waiting for all the Apple buzz to die down. That would put it after the holidays...

More Analysts on Apple's Upcoming Launch: Part II

In order to give everyone equal play, here are some more analyst quotes in the news regarding Apple's September 7 launch. The RED HERRING takes the viewpoint that the impending iPhone will not be as succesful as the iPod.

Pacific Crest Securities analyst Steve Lidberg said, "From an Apple perspective, [the phone] is an incremental positive, but I think Apple is more tied into developing technology for the iPod. I do think there will be an iTunes video download service introduced before the end of the year. But a video iPod likely wouldn’t debut until at least early next year, since in talking to components suppliers, I don’t think the technology is ready for a video iPod."

Noting most handsets have limited memory on board and potential battery issues, Forrester's Charles Golvin said, "The right model for this would be, you can use it to grab some music before heading out the door or going on a two-day trip."

On the topic of iTunes and DRM, Albert Lin at American Technology Research said current phone technology “isn’t powerful enough do what Apple requires for digital rights management. Apple would have to make iTunes more open," he commented.

Lin thought the current 99 cent cost for a songs on iTunes wasn't sustainable for everyone to make a profit. He thought it would havee to be in the $1.50 range, “which would be too high a premium to pay for the convenience of downloading a song onto a phone," he remarked.

Golvin countered that a bundle model might work such as allowing "consumers to download a favorite song and get a ring tone version, all for the price of a carrier download."

Over at InternetNews the analyst who scooped the Apple, Motorola and Cingular deal, Ovum analyst Roger Entner, held forth on the launch. He believed OTA music downloads was critical. "That's how Cingular really makes money. Just having an iTunes phone and not the capability of selling songs over the air is pointless. Music will be such a significant revenue opportunity," he said.

Jupiter Research analyst Joe Laszlo pointed out that in the short-term, "A consumer looking for one particular track from one particular artist will be in for a lot of tapping and scrolling. Down the road, I expect cell phones and digital content to work well for impulse buys, such as getting an SMS that says, 'We know you like Shakira; would you like to download a single from her upcoming album?' There's definitely some money to be made from that."

Laszlo suggested the "right price point would probably be that of the iPod Mini, or around $175." Even though cell phone are subsidized in the U.S. market, "With the Apple and iTunes brands involved, it increases the odds you can shift the consumer mindset away from the cheapest price possible to, I want something cool. If the price crosses the $200 threshold, it becomes something many people want, few people buy," Laszlo added.

Entner believed the launch would have the greatest impact on the portable music device industry. "It was foreseeable that the music player market would go same way as the camera phone. The only thing that will be left in three or four years will be the $5 MP3 players from China. Everything else will be the cell phone," he opined.

Lastly, on the Technology Pundits blog, Rob Enderle takes a different tact. He thinks the device will be brilliant and wonders:

The question will be whether this is an MVNO (Mobile Virtual Network Operator) or a cell phone pure play. An MVNO, like the one Disney just created, would give Apple much more customer control and they really favor that, while the cell phone pure play would be vastly easier to do but put them in a subservient position to the carriers and Apple doesn’t do subservient well. Still it would be less risky and that was the path they were on until they discovered the carries wanted a piece of the music business and realized that customers probably wouldn’t pay that extra tax for long.

More Analysts on Apple's Upcoming Launch: Part I

Obviously a lot of analysts are sharing their thoughts on the upcoming Apple launch on September 7. Before one of their brethren at Ovum helped The New York Times to the scoop that Apple and Motorola would launch their music phone for the Cingular network, several analysts were guessing what would be announced in a San Francisco Chronicle article.

Ross Rubin at NPD Group remarked that component prices to build a video iPod have dropped so stated, "Right now, a lot of the challenges are around content acquisition. If Apple does launch a video iPod, it shows that they have been able to move forward with (Hollywood)."

Other analysts weren't so sure it would be a video product. Michael Gartenberg at Jupiter Research said, "I don't think we're going to see a video iPod from Apple. They're still adamant about the notion of portable video: lack of content, poor viewing experience and long download times."

Gartenberg thought a music phone was more likely and Wall Street analyst Gene Munster at Piper Jaffray concurred, who went on to predict that Apple would also "unveil, at Macworld in Paris on Sept. 20, new versions of the iPod Shuffle and perhaps a new iPod Mini that uses flash memory rather than a hard drive."

Munster wasn't sure Apple would go the video iPod route, but thought" selling movies online could make lots of business sense." Munster commented, "The amount of money they can make on it is potentially high."

After the music phone stories broke in the Times and Wall Street Journal, Investor's Business Daily reported on the possibility of an Apple/Moto music phone on Cingular. According to Roger Kay at Endpoint Technologies Associates, the move will be "a defensive play. The phone manufacturers are trying to do an end run on Apple, and this is a way for Apple to shore up its position," said.

Gene Munster at Piper Jaffray believed the phone and new iPods are "a lock," and mentioned an iPod redesign could be in the works. "It's a bit of a wild card, but they'll probably have a new look for the end-of-the-year shopping season," Munster said.

Why iPhones Get Buzz and Windows Smartphones Don't

Michael Gartenberg blogs some more on music phones (see chart above on installed base) and why Apple is ahead of Microsoft at the Jupiter Analyst Weblogs. As Gartenberg remarked in an earlier post, there are already phones on the market capable of playing MP3s. He states:

Look at the upcoming iTunes phone announcement and the coverage it's getting. Contrast that to the fact that Microsoft has had phones on the market that could play mp3s, use subscription services like Napster, REAL and Yahoo, play videos and even stream live TV and music using ORB. They even had one on the market from no less than Motorola!
Gartenberg blames it on Microsoft complex set of messaging and functions, essentialy trying to be everything to everyone, while Apple focuses on the music. He warns:
There are too many parts of the eco system from hardware players to the device software and from the music stores and services and the carriers and no one leading the charge. Once again it looks like Apple will seize the high ground and leave Microsoft and her partners in reactive (as opposed to) proactive mode.

Cell Phones for Junior

With the entry of kid-specific cell phones and services, the San Francisco Chronicle reports on what the mobile industry is hoping is an untapped and profitable market. According to the article, 80 percent of adults between 18 and 65 own a cell phone but only 10 percent of preteens have one.

The article looks at some of the companies getting into the act such as LeapFrog with EnFora, FireFly and Wherify. Most of the offerings will "incorporate parental controls, protected phone lists, prepaid calling minutes and a GPS monitoring device."

According to Julie Ask at JupiterResearch, even if the market is untapped, profits might not be as big as expected and kids could grow out of the phones faster and ask for more sophisticated cell phones. "There's certainly a market there for parents who want to find and track their kids and call when they're in trouble or they're late. It's one of the few open frontiers for carriers," Ask said.

With the ubiquitous family plans here in the U.S., it might be more cost-effective for parents to just give kids their older handsets and upgrade (I can never pass up an opportunity to get a new handset) or purchase an extra plain vanilla model from their carrier...

Jupiter: What About the Other Music Phones?

Michael Gartenberg at JupiterResearch about all the hubbub surrounding the ever-impending launch of the Apple/Motorola music phone. Lost in the din is the fact there are already a number of capable phones on the market that can play music. Gartenberg notes:

They're not new and some like the SMT-5600 from Audiovox or Nokia's N Series are pretty capable devices. But the rumor of an Apple related phone generates this incredible level of buzz and attention. Must be frustrating for all those other folks out there.
I have to agree. I transferred MP3s to my SMT-5600 and it's pretty simple as long as they are from my collection of CDs. What the new Apple/Moto phone will have going for it is seamless integration with iTunes. For me it's an extra couple of steps for songs purchased through Apple. I need to first burn them to a CD (which I'll play in my car) and then rip the files back to iTunes before transferring to the phone. I can also tranfer the songs to my son's PSP too so it's not that bad. In the end, it's more work but then again geeks love the journey :-)

Gartenberg's colleague, analyst David Card, also chips in his 2 cents on the upcoming Apple announcement. Card states:
"Sideloading" -- or docking a phone to your PC -- is much more interesting than over-the-air downloading, at least for now.

Verizon Cuts EV-DO Pricing..Sort Of

I first covered the rumors that Verizon would cut its EV-DO data network pricing plan by 25 percent on Saturday. The price cut was formally announced yesterday and the Contra Costa Times picks up the story, which coincided with Verizon finally offering EV-DO access in the Bay Area. Kind of boggles the mind that one of the most connected regions in the U.S. and home of Silicon Valley would receive Verizon's high-speed mobile data network many months after 30+ other cities, but that's another story.

The CC Times article notes the reduced pricing of $60 a month is for laptop users and requires a EV-DO adapter card although it fails to mention you have to be a Verizon Wireless customer as well.

Ken Dulaney at Gartner seemed skeptical consumers would embrace 3G data networks. "The big problem is 3G mobile operators have done a terrible job understanding what people need," he said. According to Dulaney, "Business travelers, for example, depend on their Blackberry handsets to keep tabs on their e-mail and phone messages, then use their laptops to connect to the Internet once they reach their destination."

Here's another reason consumers will be slow to flock to high-speed data networks on their mobile devices. Price. While Verizon did knock $20 off the monthly cost for laptops to access their EV-DO network, it only went from very expensive ($80) to expensive. More importantly, they left their unlimted data plan for handhelds, like the Treo 650 and the Samsung i730, untouched. It still costs $45 a month. With DSL pricing for the home now at $14.95, how many people will be willing to pay 3 times that for broadband on the go? Early adopters and corproate users. If they want more people to use and explore the network and also get a leg up on the competition, Verizon better drop the price and fast. Then again I can always wait til Sprint and Cingular roll out their networks and prices fall...

Cameraphones Drive Standalone Camera Sales

By way of Techdirt, a new report from IDC is refuting "what it calls the myth that cameraphones take away sales from standard digital cameras." Mobile Pipeline writes that IDC "contends that cameraphones are "gateway" devices that bring new users to digital photography and to standalone digital cameras."

According to IDC, more than 30 percent of cameraphone users expect to buy a standalone digital camera because they were introduced to digital photography by their phones.

One key finding is most users never print photos from their phone, which is likely due to the lower quality of the images. IDC analyst Chris Chute said,"The anemic number of prints supports IDC's theory that end users have more reliable expectations regarding mobile imaging than vendors themselves."

Monday, August 29, 2005

An IPod Cellphone Said to Be Imminent

The long wait might soon be over. The New York Times is reporting that Apple and Motorola plan to launch their music phone collaboration next week on September 7 in San Francisco.

Providing the leak is Roger Entner at Ovum,who said the new phone will be marketed by Cingular Wireless and include iTunes. "It's a deluxe music player now on your cellphone," he said of the device, which will allow users transfer to songs from a PC to the handset.

The article notes that it is "not clear whether the iTunes phone would allow users to download songs directly from the Internet onto the phone" though most doubted this would be available at launch. Mike McGuire at Gartner said that "so-called over-the-air downloads would first require ironing out technological and music-licensing issues."

McGuire commented the "deal between Apple, Cingular and Motorola could fit in with Apple's strategy of extending its iTunes brand, while also enabling the company to get licensing revenue for having the software appear on a generation of new phones."

One has to wonder if Entner didn't honor an embargo since the article claims he was already briefed on the launch. If yes then I guess he won't be getting many pre-briefings moving forward...

JAMDAT Expands Retail Space With Tetris

Seamus McAteer ruminates on the M:Metrics Blog about his network explorations after downloading Tetris Deluxe to his handset.

McAteer believes "major publishers such as JAMDAT are uniquely positioned to cross-sell gamers" and thinks "digital distribution and the ability to forge a closer, direct relationship with the gamer will mean that the rules of the wireless gaming market will be very different from those in the handheld console segment."

It might be harder for the smaller players in the market to achieve this since their main challenge is just getting recognized due to the major publishers owning the prime real estate on carrier portals. However with that said, the mobile gaming space is definitely shaping up to be an interesting new beast with cell phones on one side and Wi-Fi-enabled handhelds on the other...

Apple Hints at Big Announcement on September 7

CNET reports that Apple will be making a big announcement next week. The article states Apple sent journalists invitations to a "special event" on Sept. 7 in San Francisco that might be on par with the launch of the first iPod almost four years ago.

According to CNET, the invitation read, "1,000 songs in your pocket changed everything. Here we go again."

With speculation already running rampant on potential upcoming Apple products, many are wondering which rumored product will finally see the light of day on September 7. Will it be the iPhone? Video iPod? Flash-based iPod Mini? Or none of the above?

Jupiter Research analyst Michael Gartenberg cautioned, "When it comes to Apple announcements, expectations are often set unrealistically by Apple enthusiasts. But Apple has been known to pull rabbits out of the proverbial hat. It may be a new category of device altogether."

Gartenberg prognosticated that the new product probably wouldn't venture too far from Apple's current line so he thought "a video iPod is unlikely" with an iTunes-compatible phone the more likely candidate...

Back-to-School with Mobile Content

In their latest Benchmark Survey, M:Metrics reports that students are the largest consumers of mobile content. The firm found that mobile browsing by students "grew by 8.7 percent in July, a rate that is two-thirds higher compared with growth in consumption by non-students."

Seamus McAteer at M:Metrics, said "In terms of mobile content and services, it's the students that are taking their parents to school. Students are out-consuming all others in mobile content consumption - even in applications that are typically thought of as for the enterprise, like mobile e-mail."

Some key findings in the latest survey were:

  • full-time students with jobs are 42 percent more likely to use mobile e-mail than the average subscriber, and 23 percent more likely to do so than respondents who are full-time workers.
  • Students with part-time jobs are more than twice as likely to download a mobile game or personalization content, including ringtones and graphics
  • More than half - 57.5 percent - of all students are on family plans, most of whom are not paying the bill
"Based on our data, it is clear that strategies by carriers like Sprint, which recently announced products targeted at students to share user-created content, and MVNOs such as AMP'd Mobile and Virgin Mobile, which also target students, are right on the money," commented McAteer.

"This tremendous propensity to consume mobile content translates to real dollars - especially considering the majority of students are spending $41 to $60 on mobile services per month," he added.

This last observation is good news for the carriers and not so great for parents footing the bill. Students, who are usually a cheap lot, aren't price sensitive in this case because many aren't paying. This frees them up to explore the network and download content, until of course they are either cut off by mom and dad or asked to pay their share.

The carriers can learn from this. If they lower the barrier to entry to the data network, specifically high-speed access, then it just might encourage even more users to take the mobile data plunge, which will drive more ARPU for the carriers. Sounds like a win-win in my book. Of course, my kids don't have cell phones yet...

Apple Will Sell 7.1 Million iPods This Quarter

Macworld UK writes that American Technology Research analyst Shaw Wu is predicting "Apple will sell 7.1 million iPods in the current quarter." This figure represents a 15 percent increase from the last quarter but Wu warns Apple might experience competitve pricing pressures.

"We have noticed very aggressive pricing, particularly on 4GB iPod minis. We believe part of the reason is that iPod inventories remain relatively high on an absolute basis and this aggressive promotion is to ensure sales in an otherwise slower consumer period," Wu said.

With the rumored Flash-based 4GB iPod Mini to hit as well at some point, pricing could become more aggressive to clear out inventory of the drive-based models...

Mobile TV In Snack-sized Bytes

The Detroit News writes about mobile TV and the current efforts by the carriers to build out their high-speed networks and offer multimedia services. Currently Verizon is leading the pack with its $15 a month V Cast service. According to David Chamberlain at In-Stat, "It's just like looking at a small TV. I've seen a lot of early technology, but this really amazed me."

Chamberlain "estimates mobile TV subscribers in the U.S. will increase from 1.1 million by the end of this year to 30 million in 2010.
However, not all agree that cell phones are the best medium for watching TV.

Jeffrey Halpern at Sanford Bernstein recently wrote a research note that said, "Video on handheld devices has significant hurdles to overcome," including "billing challenges and the struggle to shrink TV broadcasts to fit on a tiny phone panel."

The article cites an In-Stat poll of 1,500 consumers in the beginning of the year that "revealed more interest in mobile TV than in other mobile data products, including gaming or even downloadable music. About 12 percent of those interviewed said they would buy mobile TV, though few were willing to pay above $12.50 per month."

Pricing will be critical as will the amount and type of content. TV viewing is a sedentary activity while cell phones are meant for on-the-go use - hence the term mobile handset. Programming will have to be tailored for this type of usage model. Several minute clips that are entertaining or informative would probably work well.

Chamberlain sums it up best. "I don't want a whole meal on my handset. I would rather have an information snack," he said.

Sunday, August 28, 2005

O2's Dual Portal Strategy

Courtesy of i-mode Business Strategy comes this commentary from OVUM that analyzes O2's plan to launch NTT DoCoMo's i-Mode service alongside its existing O2 Active portal service in the UK, Germany and Ireland by Christmas. According to Ovum, O2 "will differentiate the two portal brands by pitching i-Mode as a more sophisticated, Internet-like service for people that want more than generic infotainment."

Ovum is not convinced about the dual approach and offers O2 its 2 cents on what it believes will and will not work. On O2's positioning that i-Mode devices and services will be more tightly coupled to maximize the user experience, Ovum advised:

This is far more persuasive, but the impact of the message will depend on the line-up of devices that O2 can get in place in time for a Christmas launch. So far, there have been few firm indications on this front, and a good selection of devices will be a critical success factor. The lack of handset availability hurt KPN when it launched, and although this has since improved, Wind's i-Mode subscriber targets for last year were damaged by a shortage of i-Mode devices in the all-important Christmas season.

Gizmondo: Many Features, Any Talents?

There has been plenty of buzz surrounding the impending launch of the Gizmondo. Some good and some not so good. The New York Times reports the hand-held gaming device sounds "more like a digital Swiss Army knife. It can play video games, movies and music files; take photos; wirelessly send and receive text and e-mail messages; display Web pages; and function as a navigation and tracking unit. A built-in gyroscope can alter the viewing angle of a game as the player turns the device around."

The article takes a look at the company behind Gizmondo, Tiger Telematics, the product's features, the competitive landscape, and the well-documented delays that have slowed the product to market. Already selling in the U.K, Gizmondo is projected to hit store shelves in the U.S. at the end of October.

Having enough content at launch will be an issue as well as the company's advertising-driven approach to beaming ads to the device based on location.

So far, analysts have not been impressed. Anita Frazier at NPD Group said, "I'm pessimistic" citing the cometition and the lack of "breakthrough and proprietary titles from a well-known franchise."

Michael Pachter at Wedbush Morgan Securities added, "Somebody had a really good idea, but they haven't figured out how to implement it." Even with all the features, "if it is not a phone, I definitely have to carry two devices," he remarked.

Sounds like the Gizmondo is trying to be something for everyone. Whether it can do anything well will be the big question...

iPod Rival D&M Pulls Plug on Rio

The Financial Times covers the demise of the Rio and views it as a serious "blow to Microsoft, RealNetworks, Napster and other Apple rivals that operate internet music services based on Microsoft standards." According to the article, the music services need companies such as "D&M, Creative Technology and Samsung to provide music players that operate on Microsoft standards" and more obviously counter the ever growing iPod threat.

Michael McGuire at Gartner said, "It’s certainly a loss [for the Microsoft camp. When one of the early leaders in the space exits the market it definitely has to be a concern."

More Feel at Home with Cell Phone

The Enquirer of Cincinnati offers up another article on consumers dropping their home landline phone service for cell phones. According to the article, at least 10 percent of cell phone users have dropped their landline service. This might lead to telcos dropping costs to try and stem the bleeding.

Linda Barrabee at Yankee Group said, "You absolutely will see further price erosion. From the landline perspective, they will be looking to shore up their resources. The wireless companies will be looking to get into the home even more."

The article cites cell phone reliability and pricing as factors why landines are still holding on. Julie Ask at JupiterResearch remarked, "The thing people like is that the (landline) phone works all the time, even when the power is out While wireless prices have come down, they are still more expensive than home phone service, and the home phone is still seen as more reliable."

In the end, keeping the home phone seems to be the safest bet. As Roger Entner at Ovum noted, "When someone moves into a new place, the first call they normally make is on a cell phone to get a home phone. Increasingly, more people aren't making that call at all, even though there will always be a place for the family phone."

Wireless Service Costs End Free Fall

The News & Observer (registration required) writes that prices for U.S. wireless voice plans, "which had been dropping steadily for years, may have finally hit bottom."

Adam Zawel at Yankee Group said, "We're not going to see the 10 percent to 20 percent price drops anymore. The price declines will slow down to a crawl. That's already happening."

With voice plans amongst the major carriers becoming almost indistinguishable based on pricing, the carriers need to find new ways to drive revenue. "The value may very well come in a different form. The emphasis won't necessarily be on increasing the bucket of minutes," said Yankee Group analyst Marina Amoroso.

According to Yankee, the "average time callers spent on their cell phones tripled from about 250 minutes a month in 2000 to about 750 minutes a month this year. However usage seems to be slowing down. "People are talked out. The minutes of use have flattened out," Zawel said

Saturday, August 27, 2005

Verizon To Cut EV-DO Data Pricing?

Reuters is reporting that Verizon is expected to lower prices for its high-speed wireless data service in order to encourage customer adoption and stay ahead of Sprint as it begins to roll out its rival EV-DO service. According to American Technology Research analyst Albert Lin, Verizon will "cut its $80 a month rate plan to about $60."

"I think it'll be a significant cut. I think they're trying to maximize the time they have as a monopoly in order to build a customer base lead before there's competition," said Lin.

Verizon's rumored move is aimed at laptop-toting business customers, and Lin opined that "he does not expect the company to make dramatic changes to its high-speed consumer service, known as Vcast, which delivers content such as Web surfing and video downloads to phones for about $15 a month."

Currently, Verizon's high-speed EV-DO network costs $45 a month for handhelds so if the 25 percent cut does occur, it just might kick-start customer takeup beyond the small circle of power users, which is a good thing...

Music Biz to Jobs: You've Got A Friend In Me...Not

The New York Times writes about the contentious relationship the music business has with Steve Jobs and Apple. Apple helped lift the industry by demonstrating a legal digital music download service could work. However, many music executives are now itching to break free of Job's obstinance regarding opening up iTunes to other devices, and more importantly, its 99 cents pricing model since they want to charge customers more.

Gartner's Mike McGuire said,"As I recall, three years ago these guys were wandering around with their hands out looking for someone to save them. It'd be rather silly to try to destabilize him because iTunes is one of the few bright spots in the industry right now. He's got something that's working."

"I think if they're throwing down for a street fight. Tthey may have picked somebody who's as good or better at it than they are," McGuire added.

Om Malik posts his thoughts on the article and frankly I couldn't have said it any better:

The record industry just can’t help itself, and shoot itself in the foot. Thankfully, the record business is split into two camps - one that wants the price of downloads to stay at 99 cents, and the boneheads

Weekly Roundup

A roundup of mobile analysts in the news for the week ending August 27:

Strategy Analytics and cell phone ads via bluetooth via The Wall Street Journal (subscription required)

Rob Enderle via the RED HERRING on better batteries

AMI-Partners via Tekrati Research News on the booming market for portable computing and devices for India's SMBs

Portable Recorded Satellite Radio Gets Sirius

Tom's Hardware Guide reports that starting in October, Sirius subscribers will be able to time-shift satellite radio on the go. Sirius will offer the S50 portable music receiver at $359.99 with the home docking station an additional $99.99. Sirius' monthly subscription fee is $12.95.

The player can only receive satellite signals when connected to either a car or home docking station and records via the on-board flash memory.

Harry Wang at Parks Associates, said, "At $360, plus an extra $100 for the (home) docking station this is too expensive. I doubt this is a positive move for Sirius."

Wang added "there is some overlap of MP3 users and satellite radio users, but I suspect that the interest is not very high -- perhaps 20%." Wang thought the "S50's reliance upon its docking station to receive programs" was an inconvenience and counter to the portable music player usage model. "With music players, consumers like to be in the driver seat," said Wang.

I have to agree with Wang. $360 plus another $100 is not going to draw in the crowds, especially for consumers that already own an MP3 player. The monthly subscription fee of $12.95 won't help either since portable music player owners are price sensitive to rates over $10 a month Parks Associates found...

Friday, August 26, 2005

Market Forecasting: An Insider Explains

Have you ever wondered how analyst firms produce market forecasts? Or why the numbers from various firms differ?

Well ask no more because Analyst Insight has posted a thorough piece on the topic of market forecasting, which provides an insider's viewpoint into the processes and challenges. The author of the piece was a former analyst with InfoTrends/CAP Ventures and forecasting was her job.

From personal experience, getting "accurate" numbers from a company is a tough job so this post offers plenty of insights into how forecasts get done....

Absolutely the Last Post About the Flash iPod Mini...For This Week At Least

By now everyone and their mother knows Apple is purportedly buying 40 percent of Samsung's NAND Flash memory output for the rumored 4GB flash-based iPod Mini. Responsible for creating all the fuss is iSuppli analyst Nam Hyung Kim, who issued a report about the deal.

BusinessWeek picks up the story and another tidbit is that according to Nam, Apple is actually trying to secure even more Flash memory from Samsung competitor Hynix. However, while most people assume Apple's move is to make changes in the iPod line, Tim Bajarin of Creative Strategies thinks Apple might have a surprise up its sleeve.

"The Shuffle has been a pretty big hit. There's a perception that a 1-gigabyte player is a bit small, and so Apple has to be looking at a higher-density flash-based player. But it's really hard to anticipate Apple's actions. They may be using all this flash memory for something else," he said.

WebProNews adds to the BusinessWeek article and provides comments from Gartner analyst Joseph Unsworth that were made in a Red Herring article. According to Unsworth,"Samsung has 55% of the [NAND Flash] business and Apple's got 40% of that." He stated "That's an awful lot of Flash." Unsworth believed Apple would get a "big discount" allowing them to lower prices and deliver "improved versions of this iPod for $199."

D&M Blames It on Rio

Bloomberg reports on the demise of the Rio MP3 player after D&M Holdings decided to kill the product line and concentrate on "profitable, high-end home theater and professional audio products that sell under the Marantz and Denon brands."

The company claimed it was discontinuing the loss-making Rio line due to MP3 players becoming mass market and not matching the company's core business.

Stephen Baker at NPD Group said, "It's hard to make money in this market if you are not Apple. Now there is little barrier to anyone wanting to enter the market."

A Killer Deal? Iraq's Carrier Licenses Up for Grabs

InformationWeek reports that potentially lucrative yet hazardous licenses to operate cell phone businesses in Iraq are up for grabs. According to the article,the licenses for the country's "three cell phone companies are running out and potential new operators are assembling in the United Kingdom this week to sort out the risks and rewards involved."

Jonas Lindblad of Pyramid Research said, "You can actually make handsome returns in Iraq despite the risks. There's a lot of money chasing around a few deals in the [Middle East] region. In one way or another, they are linked to oil money."

"This is a very rare occurrence--three brand new, fresh licenses," he added.

Lindblad noted that equipment suppliers will especially be interested since "Iraq's cell phone infrastructure is scheduled for a massive build out." As for the risks involved, Linblad doesn't mince words. "Any new operators would have to bring in their own people. Some will get killed. The major issue is still security," he commented.

Opera Is Mobile Browsing Diva

The RED HERRING writes a lengthy profile on web browser company Opera, which finally seems to have found its niche in the mobile world.

The article chronicles the company's ten years of existence and discusses its efforts and mistakes trying to tackle the desktop market. The company's resurgence coincided with its entry into the market "for non-PC devices like mobile phones, PDAs, and set-top boxes."

In the last couple of years Opera has found success with its Opera Mobile accelerator and Opera Mini products and has been aggressively pursuing partnerships with handset manufacturers.

Michael Gartenberg at JupiterResearch said, “They are now looking at a market that potentially has millions of customers and it is also a segment where Microsoft cannot dominate like they did with desktops. I think Opera is here to stay and they have done a good job so far of delivering value to mobile users.”

I'd like to try Opera for my Audiovox SMT5600 Windows smartphone, but bookmark migration looks daunting and I'd rather not have to key in addresses all over again. I wish they had an easy one step process...

6 Days and Counting: PSP Poised to Take Off in Europe

MCV looks at the impending launch of the Sony PSP in Europe in six days time. Retailers are hoping the launch of the long-awaited device with its "massive £10m cross-media marketing campaign" will be a hit during the upcoming holiday selling season.

The article touches on the PSP's main competition, the Ninetendo DS, which a Sony exec dismisses as targeted at Pokemon-loving boys and girls. The exec goes on to talk smack about the DS' technical features, such as the touchscreen, which he deems a "gimmick" and potentially detrimental to the "long-lasting appeal of the platform."

However, Wedbush Morgan analyst Michael Pachter believes both devices will have their place in the market. “Longterm, I see DS expanding Nintendo's demographic upward to the high teens. I see Sony’s PSP expanding the ‘mobile’ demographic to the 30s. Both will expand the overall market by providing an outlet for gameplay beyond the home or office."

Right now, Nintendo is delivering innovative content for the DS that takes advantage of its "gimmick", while Sony is not levaging the full capabilities of the PSP. The PSP has a lot of potential and that is why I believe Pachter is right when he says it will expand the "mobile demographic" to the 30s. I'd go out on a limb and say 40s for us folks who got our first taste of video gaming with Pong and Atari. With that said, Sony needs to start delivering more engaging titles to market otherwise the PSP might gain dust on my son's shelf...

IDC: Cell Phones a Social Necessity for Teens

In a joint survey with of nearly 8,000 U.S. teens, ages 13 to 18 who use mobile phones, IDC found that cell phones for teens is a social necessity and "35.9% of teens acquired their phones mainly to use text messaging while an additional 13.3% acquired them to talk with friends."

Dana Thorat at IDC said, "Unlike any technology before it, cell phones have become important social catalysts for teenagers. While parents can be rest assured that they can reach their mobile teenagers virtually any place and any time, teens conversely perceive their phones as a means for gaining social acceptance and staying connected with friends."

The study noted usage drivers differed between teen boys and girls.

Girls were more likely than boys to have purchased cell phones in order to call their family or to use in emergency situations, while boys preferred to call their friends. Boys were also more inclined than girls to use text messaging on their cell phones – girls, more than boys, preferred talking directly to their friends over text messaging them.
I would have guessed the opposite on the first point. Obviously, the societal implications of teens with cell phones did not go unnoticed at IDC. The firm noted that "current school policies that require the silencing of cell phone ringers during the school day may already be obsolete – dexterous thumbing on a phone's keypad under a desk is all it takes for seasoned texters to conduct covert conversations with others during class."

While texting has made passing notes in class obsolete, when will the cell phone equivalent of the spitball come to market...

Thursday, August 25, 2005

Intel & RIM: Yes or No?

The rumor mill is buzzing about a possible technology agreement in the works between Intel and Reasearch in Motion (RIM). As eWeek reports, Intel will agree to use RIM's battery-saving technology while RIM supports Intel's promotion of WiMax wireless broadband technology.

According to Ken Dulaney at Gartner, ""Intel and ADI [Analog Devices Inc.] jointly worked on [power management] technology that is in today's BlackBerrys. While that technology is in the ADI chip used in today's Blackberrys, Intel was waiting for the Hermone chip to incorporate it. I suspect that this is what all the fuss is about. The technology was inspired by RIM, so I suspect that RIM may receive some type of compensation for it, but that would be difficult to find out."

However, TechNewsWorld is reporting that although the rumored deal makes sense in many ways, it just might be vapor. The article cites a report from Peter Misek and Dushan Batrovic at Canaccord Capital who wrote, "Our checks originally lead us to believe that Intel was encountering considerable difficulty in developing a battery, bandwidth and heat-efficient Centrino dual core chipset. We have heard that RIM's combined solution would improve battery life three-fold and significantly reduce the Centrino's bandwidth and heat generation."

"We believe this partnership would make sense for Intel, additionally because the company is expected to be looking beyond laptops and PCs towards the cell phone, which represents an 800 million-unit per year opportunity," they added.

According to Ellen Daley at Forrester, the deal makes sense for RIM too. "This agreement is built around RIM using Intel chips because of their really good battery-saving capabilities. Then Intel and RIM working together to help promote wireless and Intel borrowing some of RIM's really efficient spectrum signal coding."

However, Daley squashes any idea of a WiMax-enabled Blackberry. "If you're a mobile professional, the implications of an Intel-RIM deal would be a pretty long ways off. RIM's hardware is a mobile device; you use it on the move. Where WiMax is maturing as an industry is in fixed WiMax. That's where the deployments are being rolled out," she said.

"It's really mobile WiMax -- 802.16e -- which won't be available until 2007 that will truly have an impact on devices that are mobile," Daley maintained.

Parks Associates: Lower Prices for Music Subscription Services Needed

Parks Associates announced an upcoming report, "Digital Music and Portable MP3", that predicts "portable music subscription services will have to drop below $10 per month to attract a significant number of MP3 player owners."

According to a global study Parks Associates commisioned, MP3 owners were asked how much they would spend for a music subscription. At comparable costs to US$10 presented in local currencies, Parks found the following number of MP3 device owners were not willing to exceed this amount:

  • 41 percent in the U.S.
  • 62% in the U.K.
  • 49% in France
  • 52% in Germany
  • 56% in China
In additon, one-third believed music services should be free. Parks concluded that the "entry of low-cost services such as Yahoo! Music could reshape the marketplace" especially since services like Napster or Rhapsody currently cost $14.95 per month.

Harry Wang at Parks Associates said, "Companies like Yahoo! can afford to keep the price low because they have other revenue streams to subsidize their music services. Pure-plays like Napster may not be able to lower their prices, but to counter low-cost competition, they can ally with telecom service providers or other broadband carriers to make their music services part of a bundled package. Napster’s recent partnership with Bell South is a positive move in this direction."

A lower cost makes a lot of sense in my book and would fuel adoption, exploration and hopefully purchases. I wouldn't mind paying something like $4.99 a month which is also the same amount I pay for Tivo with my DirecTV service. After using Tivo, my whole family finds the service indispensible and maybe the same would hold true for a music subscription service. However, as I commented on an earlier post, it would require more policing of iTunes so my kid's don't listen to songs they are not supposed to...

Can You Say Flash-Based iPod Mini...Again?

NewsFactor Network writes another in what seems like a never-ending series of articles about the rumored 4GB flash-based iPod Mini. Yes, I'm helping to perpetuate the story, but as you know, Apple makes good copy.

In this article, analyst Nitin Gupta of Yankee Group and Michael Gartenberg of Jupiter chime in with their thoughts on the product.

Gupta believes Apple's shift to flash is a big deal. The article notes that even though "flash-memory drives often cost twice as much as traditional disk drives, their memory density allows for smaller devices, increased battery life and more durable storage." Since flash has no moving parts, it is also less susceptible to failure and skipping.

Gupta said, "The user experience is far superior," compared to disk drives, but thinks there is less chance of flash-based higher-capacity iPods due to cost. "Apple will market the features, not flash," added Gupta.

"I have no doubt other Apple products [using flash drives] will appear in the fourth quarter," Gartenberg countered.

With the mini possibly moving to flash, what does that mean for the rest of the product line? Video? The Apple rumor mill never ends and is a cottage industry on its own...

Cell Phones Still Ringing Off the Hook covers Gartner's Q2 handset manufactuers market share numbers and states carrier consolidation is contributing to the trend.

According to the article, "handset sales growth rate this year will be somewhere in a range between 13% to 15%, with about 750 million units shipped. That compares with the record 20% growth last year, with 630 million units sold."

Commenting on the increased global market shares of Nokia, Motorola and Samsung, Albert Lin at American Technology Research said, "As we've seen for a while now, the big get bigger."

Carrier consolidation is pushing this trend as Lin noted "large carriers increasingly choose to deal with the big proven phonemakers that offer the kind of support they need and a willingness to accept phones the telcos want to return."

He cited the Russian market, which had no established cell-phone industry as an example of how the big players always rise to the top. Within a year or two of starting, "Russia's handset market looked like the rest of the world -- and Nokia and Motorola were No. 1 and No. 2." added Lin

Lin pointed out one surprise in Gartner's second quarter numbers. "I think a lot less high-end phones were sold than people expected," said Lin

Will Cell Phones Be the Music Business Savior?

Business 2.0 writes that due to the success of ring tones, the cell phone just might save the music business, although it seems the industry is doing a pretty good job of shooting itself in the foot at this point.

The article notes that mobile phones are the "first real digital-music moneymaker for record labels, because they bring in much more from cell-phone downloads than from other digital outlets. Mastertones sell for nearly three times as much as iTunes tracks, and the labels often command royalties as high as 50 percent."

With new music phones set to hit the market and Verizon "rumored to be launching a nationwide 3G (third-generation) music service selling mastertones and songs this fall," the music labels are licking their lips in anticpation of what Strategy Analytics predicts to be a $9 billion business by 2010.

As noted many times in the past, the music industry might be a bit short-sighted if it believes consumers will pay ringtone prices for downloading full-length songs to their phone, especially since iTunes has helped establish the 99 cent price level in consumers' minds. As for the ringtone gravy train, phones that can play MP3s will help deflate that market pretty fast as tech-savvy teens and young adults learn how to convert their digital music library into ringtones...for free...

Gartner: Nokia's Global Share Rises to 31.9%

According to Gartner, Nokia's global market share grew to 31.9 percent in Q2 2005 from 29.6 percent last year due to strength in the Latin America and U.S. markets, reports.

Hugues de la Vergne at Gartner said, "Nokia regained its top position in Latin America and stepped up to the third position in North America, benefiting from its successful launch of its Virgin Mobile [handset] which helped its lagging CDMA sales."

Mobile phone sales rose to "an all-time high of 190.5 mln units, a 21.6 pct increase from the same period last year," with the other top two handset manufacturers increasing global market share as well - Motorola to 17.9 percent and Samsung to 12.8 percent.

Gartner credited the uptick in sales as "driven primarily by sales of phones as replacements for older models and, to a lesser extent, by first-time buyers," in the mature Western Europe and North American markets.

Carolina Milanesi at Gartner added, "In the emerging markets, growth was boosted by an uptake in new connections as consumers took advantage of falling average selling prices of mobile phones."

Europe Picks Up 3G, Investors Rejoice?

The "Heard on the Street" column at The Wall Sttret Journal writes that 3G has finally arrived in Europe, which might be good news for investors. The Journal reports that Vodafone "added one million 3G customers globally in the second quarter and Hutchison's "3 Group added 1.7 million 3G subscribers globally in the first quarter."

According to Ovum, "European operators will have registered 63 million 3G subscribers -- one in six European cellphone users -- by the end of next year, as the sophisticated networks needed to carry the technology finish being rolled out and prices for 3G handsets come down."

Philippe Kiewiet de Jonge at ABN Amro Asset Management in Amsterdam said, "Slowly, what operators were saying one, two or three years ago is coming true."

In Europe, with the networks mostly in place and the infrastructure investments written down, "3G services could be a boon for European telecom companies desperate for fresh revenue." The article provides some good carrier data for the potential of 3G:

Subscribers of 3 Group in the U.K. spend £40 ($72) a month to get video downloads of the "Big Brother" TV show and soccer-game highlights in addition to regular voice service. By comparison, the average British cellphone subscriber spends just £25 a month. Vodafone says its German 3G subscribers spend more than three times as much as its regular subscribers, though that is partly because these so-called early adopters are usually technophiles who use their cellphones more.
Ralph Brook-Fox at Brittanic Asset Management in London remarked, "the bottom line is we should finally start to see higher service revenues from European telecom companies."

The article concludes by citing the Japanese market as a source of potential as well as caution. NTT DoCoMo claims "its 13.7 million 3G subscribers use their phones twice as much as regular customers and spend about 50% more each month. The company expects to nearly double its 3G subscribers to 24 million by next spring." The downside is due to competitive pressures, ARPU is expected to drop 6 percent this year as "enticing flat-rate plans to grab market share" push down spending...

Games to Go

The Washington Post (registration required) writes about the growing market for mobile gaming, from handheld gaming systems to cell phones.

The article states that according to IDC, "cell phone games took in $345 million worldwide in 2004 and are set to make $590 million in sales this year." IDC analyst Schelley Olhava segments the market for mobile gaming into the following buckets: "Younger players tend to gravitate toward the Game Boy, 18-to-34-year-old guys reach for Sony's PlayStation Portable, and the cell phone market has more adult women fans."

Frankly, this segmentation is a little too simplistic for me. As I posted earlier, kids are more sophisticated and are growing up on video games. They are migrating off consoles like the Nintendo GameCube and moving to the PS2 or XBOX
at younger ages to play "cooler" games. So I'd say the demographic for the PSP skews younger as well as older to encompass us aging gadget geeks too. My guess would be 10-to-40 year-old guys when Sony gets more content out there. As for women, the upcoming intro of the Game Boy Micro might offer a new market opportunity for Nintendo. Small cute design and a vast library of games just might do the trick...

Wednesday, August 24, 2005

Get on Track with Mobile Music

Analyst firm Pyramid Research has issued a report entitled, “Get on Track with Mobile Music: Exploring Mobile Music Best Practices” that finds the market for mobile music is promising, but "success hinges on operators and content providers applying the right business models to increase mobile data usage and prevent illegal P2P sharing."

The report looks at the business models used by SK Telecom in South Korea and KDDI in Japan and claims during the first quarter of offering music service, "SK Telecom saw more than half a million mobile music subscriptions and KDDI’s 3G ARPUs increased by nearly 40%."

Both carriers use different models with SK Telecom offering monthly music subscriptions while KDDI sells individual tracks. According to analyst Nick Holland "the subscription model may hold the key to drive revenue and lessen piracy through continuous, predictable revenue streams and the promotion of additional purchases."

"Pay music services have set the bar at 99 cents per track. Operators will be able to charge a slight premium for mobile access to music, but European and North American markets will not support the $3 price tag found in Japan," Holland added.

The report notes "mobile music will drive demand for sophisticated (and expensive) handsets, as well as increase data ARPUs if carriers can replicate models that encourage over-the-air downloads, as seen with KDDI’s ‘Chaku-Uta Full’ service."

There is nothing earth-shattering in the press release, although the carriers' results are impressive. Of course, things might change quickly, especially in Japan. With the recent introduction of Apple's iTunes, the impact on KDDI's song pricing and APRU will need to be closely watched...

PSP Users Just Want to Play?

Next Generation reports that recent reseach shows that PSP users only want to use the device for gaming. I believe the market research firm cited in the article is actually a Japanese firm called Info Plant.

Key data points of the study of 1,000 Japanese PSP users were:

  • only 10 percent had watched a movie on the machine
  • most had no plans to buy any UMD movies
  • less than 50 percent said they would use the PSP to watch video or view pictures using a memory stick, although this drops to less than 30 percent among female users
  • 25 percent of male users and 10 percent of females updated their PSP for Internet use
  • the average attach rate is 3.1 titles
None of this actually surprises me. My son doesn't have any UMD films for his PSP, but I have downloaded some movies from our DVD collection to his MemoryStick for viewing. The average attach rate should continue to rise as more game titles hit the market. Right now there is a shortage of quality games for the platform so most folks probably own the same three titles. Sony really needs to deliver a killer app for the PSP that takes advantage of the device's many features. Only then will it really take off...

Mobile Sleaze Not Getting a Big Rise

The Guardian reports that the market for mobile porn is not matching the hype surrounding it. The article cites figures from a report last month from UK firm Informa that "the market for erotic content for mobile devices will be worth $2.3bn (£1.3bn) by 2010 compared with just under $1bn this year. Within five years there will be more than 114 million regular users of adult services compared with 65 million now."

As the article notes, these numbers seem promising at first, but when compared to the overall mobile market look a lot tinier. According to Informa, "the entire mobile phone content market, including music and gaming, is $43bn by 2010. Adult services will account for just 5% of the market."

Daniel Winterbottom at Informa commented, "If you take it out of the context of the wider market, $2.3bn is not a small amount of money. It's just when you put it next to things like music and games, which we believe will take off, it's not quite as impressive a part as made out in previous years."

Of course, this won't stop folks from trying to titillate mobile users moving forward. They'll just be less of it if the predictions are right...

More on the 4GB Flash iPod

Reuters via Yahoo! News claims Apple is planning "to buy as much as 40 percent of Samsung Electronics Co. Ltd.'s flash memory output in the second half" for use in the rumored 4GB iPod Mini that will use flash memory in place of a hard drive.

iSuppli analyst Nam Hyung Kim predicted, "To support production of its flash memory-based iPods, Apple has booked as much as 40 percent of the NAND output of Samsung for the second half of 2005, according to our industry sources. We're not sure now many of the new iPods Apple can sell this holiday season, but 40 percent would be the maximum in terms of their demand."

Neither Apple nor Samsung would comment, but Apple already uses Samsung's chips in the Shuffle.

Deutsche Bank analyst D.J. Yook added, "If Apple can sell 4 million units of its flash-based iPod in the fourth quarter, that demand alone will account for 36 percent of Samsung's fourth-quarter NAND capacity of 11 million units."

According to the article, the "analysts said the December quarter traditionally accounted for about 50-55 percent of Apple's annual iPod shipments. This suggested Apple could ship at least 15 million iPods in the coming Christmas quarter if past trends continued, creating an acute shortage in the global NAND flash market."

Apples and Everyone Else

I guess the current axiom that if you want attention then write or talk about Apple holds true. The Kansas City Star writes about the competing digital music formats befuddling consumers. The music industry's efforts seem to be curtailing and not encouraging market adoption. As one CEO of a digital music service notes, “You used to buy a CD, and it would play in any CD player. But that’s not how this works.”

According to Gartner, music downloads will increase from an estimated $335 million to $1.4 billion in 2009, which is still only 10 percent of CD sales. The article notes that for market-leader Apple, there is "little incentive to make nice with the competition" since the 59 types of protable music players "are jockeying for less than 10 percent of the market, and one, the iPod, has 90-plus percent."

“It’s a whole bunch of others grappling for leftovers at this point,” Mike McGuire at Gartner said.

The various types of services - purchase vs rental - don't help either. McGuire pointed out the downside of the subscription model by stating, "The catch is you have to keep paying the fee forever to keep the music; as soon as you stop, a code makes the song vanish. It’s as if you canceled a magazine subscription and the magazine sent someone to your house to take away all the back issues."

“Most people want to own their stuff," opined McGuire, who according to the article is "not bullish on the rental model. (In addition, the songs won’t play on iPods, and you have to pay extra to burn them on a CD.)"

In the end, it all comes down to the usage model. If you want access to a lot of music, but don't care about owning then the subscription model works fine (as long as you don't own an iPod). For me, I'd rather own the music. I admit my CD collection is filled with albums I only purchased for one song or haven't listend to in years, but right now iTunes suits my family's purposes just fine. My kids listen to singles and not albums so 99 cents is a lot easier on the wallet than $12.99...

The Convergence of Toys and Mobile Devices

BusinessWeek has two articles on the toy industry that provides good insights for the mobile crowd as well. The first article covers electronic toy company LeapFrog, which is pinning its hopes on two new tech products to help turn its fortunes around. The first is the Leapster L-Max, the company's next generation educational handheld that now lets kids interact with the TV too.

The other is the anxiously awaited Fly pentop computer, which debuts in October. Targeted at "tweens" (ages 9-14), the Fly is expected to retail at $99 and "will allow kids to keep a schedule, jot down notes, and play games with it. It can "see" what children write through a special camera and responds to written commands."

Many analysts believe the Fly won't have a big impact on revenue and that LeapFrog should stick with the little kid market. "If kids have $100, they'll spend it on an iPod [music player] or a video game," said Anthony Gikas at Piper Jaffray.

The second article looks at some of the hot toys for the upcoming holiday season. The trend is towards higher-tech gadgets, such as MP3 players, video cameras, communications devices and handhelds.

One product covered is the Chatnow handheld communication device from Hasbro that "lets kids talk, send text messages, and take photos." Mirroring his Gikas' comments in the first article, toy-industry analyst Sean McGowan at Harris Nesbitt Securities, said, "Kids don't want a walkie-talkie that looks like a cell phone. They want a cell phone."

Kids today are getting more technologically sophisticated at even younger ages due to the proliferation of PCs and the Internet as well as products like the Leapster, Game Boy and, video games. As they get older they want to mimic older siblings, parents and role models and use the same type of devices, such as cell phones, camera phones, iPods, etc.

This is leading to a convergence in toys and mobile consumer electronic devices. Kids want more interactivity and mobility, but will no longer accept dumbed-down devices the toy industry tries to peddle. Why buy a proprietary CD-based video player such as VideoNow for $50+ and shell out another $5-1$15 for each piece of content, when you can buy a portable DVD player for a little more than $100 and use the DVDs already in your library? Seems like a no brainer.

This trend hasn't gone unnoticed by the toy industry. According to The NPD Group, traditional-toy sales in the U.S. fell 3 percent, to $20.1 billion. When you factor in crossover consumer tech products,that are taking away mind and market share, such as handheld gaming devices, video games, and iPods, the toy industry must really be scared.

So how does this long rambling post apply to the mobile industry? For starters, an opportunity exists to grab more customers from the toy industry by selling appealing mass market mobile devices, content and services at sub $99 price points. For example, a $49 or $59 iPod Shuffle could really propel MP3 players into the mainstream, and push U.S. household penetration easily beyond 11 percent of all U.S. households. Second, the industry needs to design well-thought-out products that people want, are easy to use and perform their function(s) well. Don't add all kinds of bells and whistles just for the sake of it. And oh yeah, make it less than $99.

It'll be interesting to see who will win the hearts and wallets of tomorrow's kids and parents. Can the toy companies move upstream and offer compelling gadgets that can compete with the Apples and Sony's of the world or will the consumer technology companies continue to make serious inroads? I really don't know, but it's time to get off the soapbox and play my son's PSP...

Tuesday, August 23, 2005

A Communicator Only A Trekkie Could Love

For all the Trekkie/gadget geeks out there, Joseph Laszlo at JupiterResearch blogs that a company called Sona Mobile will build and market a cellphone to commemorate the 40th anniversary of Star Trek. The phone will be based on a communicator from the original Star Trek televison series and is scheduled to hit this galaxy on Sept 30.

Apparently it will be a multimedia device, and Laszlo wonders if the designers "can reconcile the desire to be true to old trek tech with the fact that phones today are much much sleeker and smaller than Captain Kirk's communicator." He will award bonus points if they offer "a bluetooth earpiece that looks like Lieutenant Uhura's."

Time Warner Invests In Mobile Games reports on Time Warner's $7.5 million investment in wireless game publisher Glu Mobile. The relaitively small investment (for Time Warner ) seems to demonstrate the company's commitment to the growing mobile content business.

The article cites NPD Group's recent report that "estimated 27 percent of all U.S. cell phone subscribers have used their handsets to play games, up from 20 ercent last year." It also uses figures from Jupiter Research that predicts mobile games revenues could rise from $75 million in 2004 to $430 million by 2009.

According to the article, mobile games generally cost from $4 - $7.50 and that "after the carriers take their cut, developers may keep up to 70 percent." Not a lot of money, but Piper Jaffray analyst Anthony Gikas "estimates that mobile games cost developers up to $300,000 a pop to create," which is a lot less than front-line console games that can reach in the mid-seven figures.

What's left unsaid in these numbers is the time, effort and cost that goes into porting a mobile game to various platforms, and then for each handset. Whether this effort is worthwhile we'll hopefully soon find out...

Motorola's iTunes Phone Closer to Reality?

This past weekend's V Festival in the U.K. has come and gone without nary an iPhone siting. However, with Motorola's recent FCC approval for the E790 iTunes cell phone, the much-hyped music phone might finally see the light of day in the near future.

Mac News World reports that analysts believe the "phone will not replace iPods or steal market share", but will be complementary device, like the Shuffle, that lets iPod users take some songs with them on their phone.

Jupiter's Michael Gartenberg on why the phone has taken so long to come to market said,"My guess is that the relationship between Motorola, Apple and a carrier -- and having to come up with something in harmony -- is what's taking so long."

Most analysts concur that Motorola has a good chance at success in the nascent mobile music market.

David Chamberlain at In-Stat said, "The market has barely started to mature, hobbled by a lack of handsets and an inability to handle the sticky digital rights management issues. In Japan, full-song downloads are a significant source of revenue for KDDI's Chaku-uta service, and DoCoMo is starting to offer music downloads on its 3G FOMA network."

"There's definitely going to be a market, and I think it's going to be a successful product," Gartenberg remarked.

According to NPD research, "20 percent of digital music buyers also have paid for ringtones, which is nearly four times the rate of the general population." Earlier research from In-Stat claimed 9.4 percent of mobile phones users wanted to play tunes as well.

"This tells me there's a huge crossover population between cell phone users and digital music buyers,"said Isaac Josephson at NPD Group.

Chamberlain added that people "were willing to pay extra for a phone that had the capability and were also willing to pay quite a bit for the files themselves. Only half of those wanted to purchase and download the music over the carrier's network."

I think a better market opportunity exists for an Apple-related music phone than a carrier/music industry model that believes consumers will be willing to pay more than 99 cents a song for the privilege of hearing it on their handset. However, we'll have to wait a little bit longer to see how it plays out. Plus of course, the Moto E790 actually has to make it to market, and we know how long that can take...

Nokia Assumes Top Position in 3G Handsets

Strategy Analytics released market share figures that claimed 9 million 3G handsets were shipped globally in Q2 2005 with Nokia taking the top spot with a 17 percent market share. According to analyst Chris Ambrosio:

At 17 percent, Nokia's 3G market share is almost half its overall global total of 33 percent. WCDMA (3G) technology, which accounted for just 5 per cent of total handset sales during Q2 2005, remains a market in the early stages of development, but it is worrying for a cluster of aspiring Asian vendors that Nokia has already become best in class. Early market-leaders NEC and LG have been overtaken by Nokia and they have significant work to do to match up in the next battle for WCDMA phones priced below US$200 wholesale, which will present significant mass-market opportunities in 2006 to 2010.
Analyst Neil Mawston added, "Step by step, Nokia is regaining ground in high-end device segments that it has lost to Motorola, Samsung, LG and others over the last couple of years."

The other key finding was that even though Motorola was gaining share due to the success of the Razr V3, it "is on the back foot in 3G (WCDMA)" and "urgently needs design improvements in this segment."

The Evolution and Death of the Laptop

Rob Enderle writes a commentary for Technology News that takes a look at the future of the laptop and its challengers. Enderle first takes a stepback to the past and credits Apple for not only setting "a very different standard [for laptops] with regard to form factor and performance" with its Titanium line, but for also creating one of the first true mobile alternatives, the Apple Newton.

Enderle chronicles the history of mobile devices that started with the Newton, and led from Palm Pilots and Blackberries to Handsprings and Pocket PCs. He then discusses the various platforms and the current state of the burgeoning smartphone market. He states:

A lot of this should change for the better over the next few months, but handheld computers are on death watch right now and these new smartphones only showcase a potential alternative that is more phone-like. However, with smartphones, there is a rather big size and usability gap. When it comes to size, people continue to prefer small phones, which creates an upper limit that may be too low for most seriously thinking of replacing a laptop for anything more than e-mail, scheduling, and contact management.
In the end, even with all the new types of technology available (i.e. wireless, tablets, mini-displays), Enderle beleives the laptop will still remain the top mobile computing plstform for the next five years. But he rightfully concludes that "the market desperately needs to move to a more appliance-like device that is much more portable and much less power-hungry."

Monday, August 22, 2005

Why Qualcomm Has Its Wallet Out

BusinessWeek analyzes Qualcomm's latest acquisitions and predicts more of the same as the company continues to stay ahead of the latest technology trends. In the space of a few days last week, the company acquired two companies, Elata and Flarion. The Elata purchase was to diversify further into software for cell phones and complement the company's BREW efforts, "allowing carriers to sell and deliver content to thei customers mobile phones."

It's on the network side of the equation where more work needs to be done to expand "its patents portfolio to encompass non-CDMA technologies." Analyst Albert Lin at American Technology Research said, "CDMA will be important for another 10 years, but after that it could be largely obsolete. The world will demand more." And so will investors who are use to the company's 42 percent operating margins and hefty royalty fees.

According to IDC's Shiv Bakhshi, "Qualcomm has to buy all the wireless know-how it can get its hands on to hedge its bets." Lin thought the Flarion acquisition is a good start, since its FLASH-OFDM (Fast Low-Latency Access with Seamless Handoff-Orthogonal Frequency Division Multiplexing) technology is "at least three times the capacity of today's CDMA."

Where Qualcomm will go next is anyone's guess. Possible targets could be in the WiMax or Ultra-Wideband (UWB) spaces opined Peter Hofstra, analyst for AIC funds in Canada. Lin predicted an investment in a mesh networks business was plausible too.