Friday, September 30, 2005

Canalys: Changing Times in the Smart Mobile Device Market

Canalys issues apress release that finds "shipments of converged smart mobile devices, namely smart phones and wireless handhelds, grew from 3.6 million in H1 2004 to 9.6 million in H1 2005, representing a 170% year-on-year rise." At the same time, "the EMEA mobile phone market excluding these converged smart mobile devices rose by only 11% over the same period."

Canalys analyst Rachel Lashford said, "The smart part has more than doubled in proportion, from 3.2% of the total cellular device market in the first half of 2004, to 7.5% a year later." Canalys expects combined shipments of smart phones and wireless handhelds in EMEA to hit 16.9 million unitsor 13% of the overall cellular device market in the first half of 2006.

Mobile e-mail is driving the market and leading the way in EMEA for the first half of 2005 were Nokia Series 60 handsets with over 80% of the market followed by Nokia’s keyboard-oriented Series 80 models accounting for another 13%. Windows Mobile, Palm OS and BlackBerry smart phone platforms combined to represent 5%. In the handheld device space, Windows Mobile was used on almost two-thirds of the devices with the other third taken up by RIM and the BlackBerry.

"RIM has enjoyed tremendous growth in EMEA over the past year, with total device shipments (smart phones plus wireless handhelds) up 130% in the first half of 2005. But it is seeing increasing competition from other players now as the market is proving to be so lucrative. With Nokia and Microsoft respectively announcing the Nokia Business Center and the Windows Mobile 5.0 Messaging and Security Feature Pack, the challenge will increase,” Lashford added.

Disney Mixes it Up with Pint-Sized MP3 Player

Technology News reports on the recently announced Disney Mix Sticks MP3/WMA player for kids. The $49 themed digital music players, such as Forever Princess and Sassy Pixie, among other models, will be available at Target, Sears, Limited Too, Walmart.com and Disney's online store in mid-October.

Jupiter Research analyst Michael Gartenberg commenting on "Disney's dual-strategy of offering some prerecorded Disney-esque content while still allowing kids to download their favorite songs from the Internet," said, "Disney didn't take the exclusive route where you can only play Disney content. They are leaving it open. And at $49, it is certainly priced to move."

"The Mix Stick has a kid-friendly notion about it. This might be an option for parents who are not be inclined to spend the premium iPod price for a younger child. But I don't know it going to have that cross appeal with adults. Adults tend to want the cachet of the iPod," he added.

New Sony PSP in 2006 With hard Drive?

GameBiz Daily reports that in his latest research note, Piper Jaffray analyst Anthony Gikas is predicting a brand-new PSP model next year. "We also expect Sony to launch the next generation of its PSP (including an audio/video hard-drive) in mid-2006," Gikas said.

The article questions why Sony would launch "a new PSP so soon after the introduction of their very first portable game system." One guess is to "expand the PSP's multimedia capabilities (something the portable is already doing very well with) by including greater storage space" via a hard drive to take on the iPod and other protable media devices.

Would love to see what the BOM cost for that baby would be with the nice big screen, proprietary UMD drive and a hard drive as well. Figure the hard drive alone will add an extra $90-100 so unless the costs of other components drop a lot, we're looking at a retail price in the $300 range. Or else Sony can sell it at a bigger loss....

ARCchart: Handset Differentiation is in the Pink

ARCchart looks at the recent trend by handset manufacturers to differentiate their designs and target specific markets, such as women between the ages of 25 to 35. As noted, the color pink seems to be the flavor of the month with screens doubling as mirrors.

ARCchart believes there is an "increasing need for handset vendors to move away from competing on technical superiority" since in the "past three years, the average handset margins of the top six vendors have fallen from around 16% to just 10%." ARCchart predicts the "days of double-digit [handset] growth are over, and vendors will struggle to maintain their levels of profitability if margins continue to deteriorate."

Aesthetics and design is becoming increasingly important and "plays a significant role in triggering an emotional response from consumers in mature mobile markets. The handset has become the most ubiquitous item of personal consumer electronics ever produced; it travels everywhere with its owner. As a result, the mobile phone can act as a canvas for an outward and visible statement of the owner’s tastes and values. This moves simple aesthetics into the realm of fashion and style."

ARCchart notes the industry is becoming aware of this and cites various examples. It concludes that

While we might write-off the painting pink strategy as simply the first fumbling steps by handset vendors as they become more sophisticated in their use of style to segment their market and elicit an emotional bond with consumers, an important question remains: Can these handset companies ever reposition their brands away from technology and into a context of fashion and style?

At Cellphone Show, the Talk Is About Music

The The New York Times covers CTIA and finds that music via cell phones is the big buzz. As Clint Wheelock at NPD Group pointed out, "wireless carriers were hoping to follow the huge success of the Apple iPod music player."

With more music playing handsets coming to market and the U.S. carriers looking into different business models, such as streaming and over the air downloads, expect to hear a lot more noise on the topic.

Edward S. Snyder at Charter Equity Research expressed skepticism on new phone features, but was optimistic about music phones since listening to music is a mobile activity as opposed to watching video. He
believed in time the huge size of the cellphone market "gives carriers and handset makers a chance to become the main source of portable music players."

"It's a very big threat to existing portable music companies," Snyder said.

Why Apple Won't Up-Charge Downloads

As the war of words escalates, BusinessWeek looks at why Apple won't raise prices for donwloading digital songs in the wake of mounting music industry pressure. The industry wants more flexible pricing than the 99 cents a song via iTunes, but so far Steve Jobs and Apple are not budging..

According to research from Ipsos/Insight there is some price elasticity that consumers are willing to bear. Matt Kleinschmit at Ipsos/Insight said, "You could indeed take the price above a dollar with little impact."

Also on the subject of whether higher prices would drive more consumers to piracy as Jobs claims, Ipsos-Insight "surveyed consumers who are experienced at downloading music from both online stores and from free file-sharing services. When confronted with a simulated market environment, 62% favored the free file-sharing services. Take file-sharing off the table, and 44% say they wouldn't bother downloading music at all, while 39% say they prefer iTunes-like pay-per-download services over subscription services."

Of course, Apple is dealing from a position of strength due to the market dominance of its iPod line and continuing to put pressure on competitors with new products like the nano. As Michael Gartenberg at Jupiter Research observed, The iPod drives people to iTunes, not the other way around."

Informa: TV and Music on the Mobile Key as Handset Market Slows

Informa Telecoms and Media will issue a report next month that finds handset vendors need to "look to new features and supported services to rekindle growth over the next five years, with music player and mobile TV providing huge revenue-earning potential. Digital media broadcasting receivers on handsets could be of greatest significance." Informa predicts reduced growth rates for handsets due to key prosperous markets reaching high penetration levels, and forecasts handset sales will reach 899 million units by 2010, from their 2005 level of 743 million.

Dave McQueen at Informa said, "The mobile market has developed substantially over the last 18 months, particularly with the eventual take off of 3G networks in Europe and in North America following the lead taken by Japan and Korea. The migration from 2G to 3G is likely to be accompanied by dramatic changes in the industry value chain, with the mobile handset community increasingly shifting its focus from voice to data services support. These new trends are changing the industry landscape and creating many new and exciting investment opportunities. To stay ahead, leading players need to differentiate their products by means of new technologies. Standards, alliances and partnerships also need to be created throughout the technology value chain, to ensure that technology diversity does not result in unwanted market fragmentation."

Thursday, September 29, 2005

Jupiter: Turn the Teen into a Lifelong Customer

Thomas Husson posts at the Jupiter Analyst Weblogs about the challenges of turning teens into lifelong customers as the European mobile industry begins to segment its audiences and marketing efforts. He cites examples of this new trend, such as Vodafone's recent launch of Simply for 40-60 year olds and Passport for tourists and business travellers, and Telefonica's new product offer targeting families.

Husson comments on the fickle nature of teens, their love of brands and the challenges in marketing to this group. He makes the following observations on their importance over the long run to the industry:

When evaluating the ROI of their investment, most operators forget to include loyalty. Youth do not necessarily provide short term profitability, but their ability to develop products that drive profitability for the mass-market as a whole is huge: they have a higher demand for communication devices, they are early adopters of new technologies and they are family advisers!

ROKR Marriage Rocky

The RED HERRING reports that the Motorola, Cingular and Apple relationship is going through some rocky times following recent statements by executives, such as Moto CEO Ed Zander's infamous comments, "Screw the Nano. What the hell does the Nano do? Who listens to 1,000 songs?" To compound problems, the Rokr is getting a lukewarm response from consumers and Cingular is planning its own music downloading service.

David Card at JupiterResearch said, "The ROKR is not a great product. It’s a big clunky phone. We think there are going to be a lot of phones sold that play MP3s, but there is not going to be a lot of downloading over the air in the U.S. Most of the wireless carriers are obsessing with the over-the-air delivery. They should focus more on docking rather than downloading on the cell network."

Card added, "In this country the carriers have the upper hand, not the handset manufacturers, because our phones are heavily subsidized. In five years we believe there will be more music phones than MP3 players."

Tinker Bell Does MP3

The RED HERRING reports that Disney is entering the digital audio player market with its Mix Sticks MP3/WMA player.

The $49 player is geared for children 6 to 12 years old and has 128MB memory on board as well as a MMC memory card slot that can also take Disney Mix Clips cards, which come pre-recorded with albums such as "Radio Disney Ultimate Jams, Greatest Hits Volumes 1-6". The Mix Clips albums will be priced comparable to CDs.

David Card at JupiterResearch said, "Disney has tried this before with a branded CD Walkman and DVD players, and it’s never had a big impact on market share. I think the MP3 player is cool, and they will sell a few of them, but this will not reshape the MP3 industry. It’s interesting that you can copy music onto them, and Disney is also going to sell music on little cards [Mix Clips]."

"The reason the iPod is successful is because it is easy to use and people already had large MP3 collections. Six-to-10-year-olds don’t have large collections of MP3 files. You are not going to see a whole bunch of 6-year-olds ripping their CDs and copying the files onto these things. Perhaps the 11-year-olds will," he added.

The price point seems right for a mass-market audience, and Disney is hoping parents think so as well. It will also be a good test of whether there is a market for selling pre-recorded content on memory cards since the pricing and usage model seems to be more in line with the target audience than SanDisk's overpriced efforts....

Sony Ericsson Gets New North American Leader

The News & Observer reports that Sony Ericsson has named AT&T Wireless Services exec Najmi Jarwalaa as its new president to oversee the company's struggling North American operations.

According to estimates by Strategy Analytics, the four-year-old joint venture attained just 3 percent market share in North America last year. Chris Ambrosio at Strategy Analyticsm said, "In the U.S., it's been a perpetual issue. They're down towards the bottom."

Yankee Group analyst John Jackson added, "Their problem is, they may be ahead of the market a little bit. Their portfolio position is to be your next handset, not your first."

Roger Entner at Ovum Research, commented that Sony Ericsson was "being squeezed by Motorola and Nokia from one side and by Asian competitors from the other side." He said, "He really has to give Sony Ericsson back its profile and distinctive nature, rather than being driftwood."

Jupiter: SanDisk's Folly

Michael Gartenberg posts his thoughts on SanDisk's efforts for putting protected content on memory cards at the Jupiter Analyst Weblogs. He opines:

Let's see, instead of a cheap CD, I instead pay a premium for a memory card that is easily lost or broken and heavily copy protected? One of the reasons portable music players are popular is they let consumers take all their stuff with them in one handy place. The last thing I want to do is carry around a load of memory cards with me. Can't see anyone who would think this a good idea on the consumer side of the equation. Look for this one to die quickly.
I agree with Gartenberg that SanDisk must be crazy thinking people will pay a hefty premium, while getting very little in return, but I still think there is a potential market for pre-recorded content on memory cards. Just not at those prices.

Many in the prime target audience have grown up on the Game Boy cartridge model so carrying memory cards might be a natural evolution if the price and usage model is right. Also most cell phones and devices have limited onboard memory, but are more frequently being equipped with memory card slots. The concept of distributing pre-recorded content on cards starts to make more sense if you take this in account, again if the price and usage model are right. Companies are already testing the business model, such as EMI and Cellphone Warehouse in the U.K. issuing pop star Robbie Williams greatest hits plus extras on a memory card, so we'll see what sticks....

CTIA News Roundup III

The latest news with analyst quotes from CTIA:

  • Roger Kay at Endpoint Technologies Associates via PCWorld.com on new mobile security specifications
  • Roger Entner at Ovum and Charles Golvin at Forrester via Reuters on carriers increasing revenue from data services
  • David Linsalata at IDC via PC World on mobile content and gaming
  • John Jackson at Yankee Group via Reuters on Cingular selling the Nokia's 9300
  • Albert Lin at American Technology Research via the San Francisco Chronicle on mobile video

Strategy Analytics: Orange UK Full Music Track Download Service is Top of the Pops

Strategy Analytics has issued a new report that finds "Orange has the Best in Class Full Music Track Download service in the UK, with a 15-plus point performance gap over O2 and Vodafone," based on "hands-on consumer testing by Strategy Analytics' Advanced Wireless User Panel." According to the report, Orange led in five out of six test categories, including: Speed of Portal Navigation, Speed of Download, Clarity of Catalog Interface, and Portal Layout/Usability.

Kevin Nolan at Strategy Analytics said, "All first generation Full Track Music Download services in the UK receive a failing grade on download speeds, price and DRM. Operators must address these key weaknesses in order to realize their visions of mobile music revenues."

Phil Taylor at Strategy Analytics added, "Consumers are acutely aware of the limitations of cellular music services in terms of download speed, impact on battery life and device memory, and lack of content portability, not to mention price differentials between cellular and online services such as iTunes. Until operators address these limitations, Strategy Analytics expects very low levels of Full Music Track Download usage via the cellular network."

So Orange is the winner, but it really doesn't sound like a ringing endorsement for full track mobile downloads, does it? It sort of like being voted the smartest person in the remedial education class....

Wednesday, September 28, 2005

Ovum: O2 to launch i-mode

Carrie Pawsey at Ovum posts about O2's announcement that it will launch i-mode data services at the start of October in the UK and Ireland, with a German launch during H1 2006. She comments that "O2 has been talking about i-mode for a long time and it's good to see that it is now bringing the service to market."

Pawsey looks at the pricing schema and launch promotions, and how it differs from O2's WAP product, Active. She notes that:

i-mode got off to a slow start in Europe, but we are now starting to see some encouraging results, particularly from players such as Bouygues and Telefonica. We think O2 was right to wait to launch i-mode. How it will work in Germany remains to be seen - after all, e-Plus has already launched the service there. We know that O2 will not be calling it i-mode, nor will it use the yellow i for its brand - which will feature prominently here in the UK and Ireland in its launch marketing.

The other question is how O2 will continue to run the two data brands of Active and i-mode. O2 states it is not divesting itself of Active, but we can't see the long-term viability of both. For now, Active offers a wider handset portfolio, but once this is addressed by i-mode and we see an i-mode Nokia handset, then we would expect to see Active be withdrawn.

O2 Finance Boss Predicts Mobile Firm Failure

WhatPC? reports that O2's CFO David Finch suggested on an analyst call that one of the five UK mobile network operators may fail next year.

Rachel Lashford at Canalys commented "I have not heard such a suggestion before but it would not be surprising in such a saturated market. But predicting a failure in the market is a bit premature unless Finch is looking at O2 that is. But there is little doubt that there will be some consolidation."

I'm sure she said a lot more and I wouldn't be surprised if her quotes were taken out of context, but you just have to love it when analysts hedge their comments...

Sony Ericsson's Walkman Phone in Short Supply

CIOL carries a Reuters article that reports Sony Ericsson is having trouble "meeting demand in Europe for some of its latest models, such as its first Walkman phone, due to popular demand." The company denies it's due to supply chain or logistical problems.

Ben Wood at Gartner said, "Sony Ericsson's W800 Walkman phone and the K750 are seeing healthy demand in distribution and retail. They are in short supply at retail."

Strategy Analytics estimates "Sony Ericsson will sell 1 million Walkman phones in the 4.5 months between the launch and the end of the year, half of the estimated 2 million ROKR music phones made by Motorola."

Jupiter: Game Boy Micro Is a Fantastic Mobile Game System

Michael Gartenberg at JupiterResearch posts his thoughts on the Game Boy micro. An avid mobile gamer and gadget aficionado, Gartenberg thinks the micro is "going to be a huge hit." As he notes, simplicity and design is all important, and when you add in great gameplay and a 700+ catalog of games, Nintendo has a hit on its hands:

The form factor is amazing, it’s smaller than the SMT-5600 phone that I carry but it’s a full GB SP in every respect. The screen is amazing. It’s incredibly bright and the small size packs the pixels together nicely making the image look sharp and clear. While critics talk about the lack of new features, they miss the point. The RAZR was just another Moto phone and the nano just another iPod. This is about form and how well it works in the mobile setting. Speaking of the nano, one of the things about the micro that’s excellent is the fact that you can change the faceplates. So if the screen scratches for example, you can just swap in a new one. This is a device that will appeal to gamers of all ages and yet doesn’t look or feel like a toy. Nintendo knows gaming, so all titles for the SP will work on this device as well and that’s a nice catalog of really good titles across all genres. This is going to be a hot seller for the holidays.

M:Metrics: Content Filtering Rears Its Head

Mark Donovan writes a lengthy post at the M:Metrics Blog about mobile content filtering and ratings in wake of growing calls to the industry to crackdown on exposing minors to adult content. As Donovan notes, initiatives are in process to tackle parts of the problem but they probably won't solve everything.

Part of the problem is there is potentially a wealth of content that is not porn, which the industry wants to sell but is not appropirate for kiddie consumption, such as the Sopranos or Sex in the City. Donovan points to M:Metrics data that "shows about 40% of mobile subscribers over the age of 13 are on family plans (and you can certainly bet that 100% of subscribers under 13 are). When we look at content consumption, the percentage of family plan subscribers is often higher (though it varies by content and activity)." Donovan states:

Parental controls need to go beyond just barring access to naked pictures, it should include things like limiting the minutes allocated to your children, white listing and black listing phone numbers, and limiting the times when a child can make or receive a phone call from someone on the white list. These are the sorts of controls that a carrier (or MVNO) that wanted to establish themselves as a trusted family provider could implment. The reverse is also true--if I wanted to establish myself as the leading brand for horny lads over 18 I would have to ensure that such controls were in place.
Parents have to take some responsibility too because the mobile industry is not responsisble for raising your child (nor is the film, TV and video game industries for that matter). You can't watch your kids 24 hours a day, but you can at least try and monitor what they have access to.

I also sense a business opportunity here. Could a Stuff or Maxim MVNO be in the making?

Two Reports on Mobile Data Usage

Antone Gonsalves writes two separate articles on reports about mobile data usage. The first at InformationWeek cites findings from Telephia that "subscribers who bought a data package paid on average nearly 5 percent more in the second quarter to $7.86 a month from $7.51 a month in the first quarter."

Of the top five U.S. carriers only about 20 percent of customers are subscribing to data services with the penetration rate highest "among young adults between 18 and 24, with 45 percent subscribing to data packages. Penetration numbers decreased as people got older. For people from 25 to 36 the rate was 32 percent; 37 to 55, 21 percent; and 56 and older, 12 percent."

Tamara Gaffney at Telephia said, "With penetration among young people being so high, it indicates there's a lot of demand for data. This speaks well for the future."

The other article at Mobile Pipeline reports that JupiterResearch predicts mobile users might use local search but probably won't pay for it. The firm found that only "1 in 5 consumers are willing to pay for directory service on their cellular phones and only 7 percent would pay for local search."

JupiterResearch analyst Julie Ask said, "The adoption of these data services and technologies on the phone isn't that high yet, and usage isn't that intense. It's just going to be hard to make money over the next few years."

On the topic of carriers trying to increase ARPU via their data networks, Ask commented, "That's the million-dollar question. They're hoping data will fill the gap, but it hasn't yet."

RealNetworks to Run Cingular Mobile Video Service

CNN/Money picks up a Reuters story that reports Cingular Wireless plans to use RealNetworks video streaming technology to deliver video to mobile phones. The Cingular video service will be introduced at year-end to coincide with the carrier's rollout of its 3G network. According to the article, "Cingular also plans to use a mobile version of RealNetworks RealArcade video games."

Roger Entner at Ovum said, "If Microsoft had won this contract the battle for the mobile media player market would have been close to being over. This is version 2.0 of the media player battle. It shows that somebody is fighting back."

Seems like RealNetworks is making some inroads in the mobile market. First the deal with Sprint to stream music to handsets and now this...

The Rolling Stones Get Gruvi With SanDisk

Following hot on the heels of SanDisk's announcement yesterday on a new line of memory cards with pre-recorded multimedia content, the San Francisco Chronicle reports that a version of the Rolling Stones next album "A Bigger Band" will be available on memory cards in November for fans of the geriatric band for the low, low price of $39.95.

So what does that price get you? Copyright-protected content and the opportunity to preview, purchase and download songs -- directly from the card -- of the band’s back catalog, through either a PC or a supported mobile phones. Woo hoo!

Analyst Richard Doherty at Envisioneering Group said, "We see this announcement as only the tip of the iceberg in terms of the number of studios and labels who say, 'Oh, I can work with this.'"
The Gruvi cards come in miniSD, microSD and SD formats, with up to 2 GB of memory.

Harry Wang at Parks Associates added, "In the future, this media platform can be used to download movie content online." However, he expressed skepticism that consumers would be willing to purchase expensive flash cards with content "when they have shown they only want two or three songs they like that they can download off iTunes."

Let me first preface this by saying I've never been a big fan of the Rolling Stones, but that is neither here nor there. This format might be great for the music industry, but did anyone ever ask consumers what they wanted? As I stated earlier, I think there is a market for pre-recorded mobile mulitmedia content on memory cards, but there has to be some value add and/or pricing has to be comparable to CDs and DVDs. At $39.99 a pop it's hard to justify the purchase unless you really need access to the Rolling Stone's back catalog in digital form.

I know it's an apples to oranges comparison, but I can go on iTunes and get a special version of Death Cab for Cutie's latest ablum "Plans" for $11.99. What do I get for that price? The album of course, but also a making of the album video and a special cover version of Teenage Fanclub's song "Start Again" both of which are not available on the CD. Oh yeah, I can also purchase Rolling Stones songs and albums as well. And best of all, I can transfer everything to my smartphone.

So why do I need to spend $39.99?

CTIA News Roundup II

I'm still way behind so here's the next batch of CTIA generated news with analyst quotes:

  • Ellen Daley at Forrester Research via the RED HERRING on the growing focus on the mobile enterprise
  • Roger Entner at Ovum via The Atlanta Journal-Constitution on the numerous new options available to cell phone users
  • Roger Entner at Ovum via the RED HERRING on the ESPN MVNO and other announcments at CTIA
  • Allen Leibovitch at IDC via IT Week on SanDisk's gruvi TrustedFlash MicroSD memory cards.
  • Linda Barrabee at Yankee Group via CNET on mobile entertainment
  • Roger Kay at Endpoint Technologies Associates via Techworld on efforts to make mobile phones more secure

Analysys: Mobile TV and video services could stretch 3G networks by 2007

U.K. firm Analysys has issued a report that warns mobile TV and video services could stretch 3G networks by 2007. Dr Alastair Brydon at Analysys said, "The capacity of a typical W-CDMA network could be exceeded as soon as 2007 – for example, if 40% of 3G users take up mobile TV and video services and each consumes only eight minutes of video per day."

Dr Mark Heath at Analysys remarked,"Broadcasting technology will be the only realistic means of supporting peaks in demand – such as those created by major news stories – and extended periods of mobile TV viewing." Heath pointed out that the 3G feature "MBMS (Multimedia Broadcast and Multicast Service), which could be available from 2007, has the potential to make 3G itself the most attractive broadcasting solution."

"MBMS is based on relatively small changes to the existing 3G standard. It does not require additional spectrum or licensing and, perhaps most importantly, MBMS has the potential to enable mobile operators to continue to control the mobile TV and video market," Heath added.

Key findings include:

  • Operators see rapid development of mobile TV and video services as a means to drive 3G take-up and increase ARPU
  • 3G will carry the majority of mobile TV and video traffic for the next five years, but high take-up and usage could fill networks by 2007
  • MBMS will add broadcasting capability to 3G networks, without the need to invest in a completely new system, such as DVB-H, DMB or MediaFLO

Another Palm, Windows Recap

Here are a few more articles/posts on the Palm, Microsoft and Verizon deal. Forbes writes about how Palm built the market, but now needs Microsoft to penetrate the enterprise. The article includes quotes from Sam Bhavnani at Current Analysis and Susan Kalla at Caris & Company.

Tekrati covers a research note from Info-Tech Research Group that predicts the Windows-powered Treo will spell the demise of the PalmOS.

Lastly, Michael Gartenberg at JupiterResearch blogs his thoughts on what the announcement means to the various players. In a nutshell, Microsoft is the

Big winner of the day. Palm was a platform rival in days gone by. Jeff Hawkins was one of the biggest critics of Microsoft’s efforts. This is a huge win from a psychological perspective and from a market perspective. Microsoft has the potential to be a very strong player in the mobile space. Great device, great form factor, great partner with EV-DO and it’s all running Windows Mobile 5.0.

Tuesday, September 27, 2005

Ovum: O2 Trials TV Broadcast to Mobile Phones

John Delaney at Ovum comments on O2, Nokia and several broadcasters teaming up for the UK's first trial of multi-channel mobile TV. The service is based on the new DVB-H (Digital Video Broadcasting - Handheld) standard and works by beaming a signal to a digital TV receiver in Nokia's new 7710 handset. The trial will run for up to six months. O2 customers taking part in the trial will not pay to watch the TV element of the trial, although all their voice and data calls will be charged under their existing tariff plans.

Delaney notes that although mobie TV and 3G seems to be a "match made in heaven" for everyone involved, there are still a couple of big snags. The first is technology related and the second deals with that all important factor, customers.

Delaney notes 3G is "designed for point-to-point traffic, not broadcasting, which uses valuable cellular spectrum very inefficiently." Even though the O2 trial is using DVB-H to address this issue, radio spectrum "has not yet been allocated in the UK; and very few phones are currently compatible with DVB-H."

More importantly is the customer issue. As Delaney rightfully observes, even if O2 customers enjoy the free mobile TV trial, it:

won't tell O2 whether or not people like mobile TV enough to buy an expensive new phone that can receive it, and to pay regularly to watch it. The triallists will be given their phones and will be watching TV for free. Equipment vendors are citing "willingness to pay" surveys to show that people will pay up to 10 euros a month for mobile TV, but we generally view such surveys sceptically. It's one thing to say that you're willing to pay; it's quite another thing actually to pay.
Have to agree with Delaney on this. The carriers can assume all they want based on these "surveys" but until money has to change hands for mobile TV services then all bets are off...

In-Stat: Music Could Prove More Popular Than Gaming in US Mobile Market

In-Stat has issued a new report that suggests that there is a greater interest in mobile music among U.S. consumers than mobile gaming. However, "the ecosystem that will permit widespread uptake of music applications is not yet mature," and key issues, such as pricing, revenue sharing and Digital Rights Management (DRM) need to resolved before the market takes off.

David Chamberlain at In-Stat said, "The window to catch a group of wireless users we call ‘Mobile Music Intenders’ - those interested in mobile music services - may be closing soon,. They’re ready to buy new handsets and they’re willing to pay extra for handsets that play music. Without available music services or handsets, carriers may miss this opportunity to grab what could end up being a very lucrative mobile music market."

Highlights of the report include:

  • Music Intenders are willing to pay extra for their mobile phones. Over one-fourth spent more than $150 for their current handset; more than two-thirds expect to buy new phones before the end of 2005.
  • Overall, 34% of wireless subscribers surveyed are “somewhat”, “very”, or “extremely” interested in mobile music services.
  • Survey respondents who could be classified as “MP3 Intenders” have a distinct demographic profile when compared with the general population. They are younger, male, prefer Sprint PCS and T-Mobile, and spend more on their handsets.

SanDisk Enters Digital Scene For Delivering Entertainment

The Wall Street Journal (subscription required) writes that SanDisk will be launching at retail new TrustedFlash memory cards, under the brandname "gruvi," that can include pre-recorded copyright-protected multimedia content and offers the ability to unlock and/or download content to the card. Card pricing starts at $39 with memory capacity from 256MB to 2GB.

On the potential for selling pre-recorded content, such as music, on memory cards, Richard Doherty at the Envisioneering Group said, "It's a huge change in the way people think of music. I think it will appeal to people's lifestyles."

David Card posts at the Jupiter Analyst Weblogs that "most people see a higher value in physical than digital music," but asks whether the world really needs "another physical format for music that offers nothing but capacity. And copy protection, of course."

One of my clients is in the memory business and so I'm a believer that there is a market for publishing mobile content on memory cards for use on one's handset or mobile device. Critical factors will be usage model and of course pricing.

At $39 a pop for SanDisk's product, I could go down to Target and purchase a CD for $9.99 and a DVD for $14.99 and still have money in my pocket to take the whole family to McDonald's to feed off the dollar menu (that is if my wife would let us eat beef, but that's another story). After a couple of hours, all that content (not the McDonald's food of course) could be on my Audiovox SMT-5600 smartphone AND my son's PSP with the music on his iPod Shuffle as well. So unless SanDisk can deliver a lot more value for that $39.99, I have a hard time seeing where there market will come from....

One-Third of Mobile Games Are Free

GameBiz Daily writes about a recent report from Telephia on the mobile games market that highlight some trends in mobile gaming on cell phones. The report found that:

  • 64 percent of all games downloaded in Q2 2005 are revenue-generating purchases while the remaining 36 percent are free
  • puzzle/strategy games had the highest percentage of free downloads (48 percent) and the strongest revenue performance, with a 27 percent share and the second-highest average paid price of $4.27 per download.
Kanishka Agarwal at Telephia said, "At this early stage of the game, publishers are employing different strategies with pricing and promotional incentives to learn what will gain the most traction with consumers and deliver the best revenue performance outcome. Accurate data on adoption and price elasticity will play an important role in these pricing strategy decisions."

Motorola Wins New Cheap Phone Deal with $30 Model

Reuters.co.uk reports that according to the GSM Association, "Motorola will sell more than 6 million mobile phones for less than $30 each in a new programme to bring cheap handsets to developing markets."

This is part of the Emerging Market Handset (EMH) programme in which "ten operators in developing markets have promised to buy about 6 million of the two models Motorola will submit to the programme, including the new C113a model which is exclusive to the programme and the C113."

"You're definitely looking at single digit margins, but Motorola will use the ultra low tier to attract consumers to its brand and eventually sell up more expensive models," said Gartner analyst Ben Wood.

Alan Hellawell at Lehman Brothers added, "We had anticipated pricing of $33-$35, and are surprised to understand that half of the 10 bids submitted were below $30."

CTIA News Roundup I

Since I'm falling a bit behind today and there is a lot of mobile content news being generated at CTIA in San Francisco, I compiled a roundup of some of today's articles with analyst quotes:

  • Julie Ask at JupiterResearch via the New York Daily News on MTV and Warner Music teaming up to provide mobile content
  • Clint Wheelock at NPD, Albert Lin at American Technology Research and Mark Donovan at M:Metrics via InfoWorld Nederland on the importance of mobile content delivery for consumers
  • Seamus McAteer at M:Metrics and Clint Wheelock at NPD via the Sacramento Bee on the market for mobile multimedia content

iPod Nano Complaints Pour In

Smarthouse reports on the rising number of customer complaints burning up the Web concerning the iPod nano. The article states the chief complaints claim the nano gets scratched too easily and the screens are cracking.

Jupiter Research analyst Michael Gartenberg said, "The nano will take normal use, but it's difficult to keep the player in pristine condition. It is susceptible to nicks and scratches from everyday use. But that is the nature of an ultra-portable product."

Gartenberg did note that the nano's problems showed "the power of the Web as a forum for customer complaints." He remarked that "Stories like this one demonstrate the importance of every company monitoring what is being said on these discussion boards so they can react. Even if there is nothing inherently wrong with the product, even if every single one of these instances were user negligence, which may or may not be the case, it doesn't really matter. You need to respond one way or another."

On the subject of whether this situation will harm Apple's rep and business, Gartenberg opined "The average consumer isn't going to come in contact with most of these stories. Their purchase is based on what they see on TV and in print ads. All the other positive associations of the nano will ultimately impact their buying decisions."

Nokia Takes on Rokr with New Music Phone

NewsFactor Network writes about the new Nokia 3250, the company's first music phone and answer to the over-hyped Motorola Rokr. The GSM handset has a unique base that can twist to transform its telephone keypad into song-control keys and has a memory capacity of up to 1GB on microSD memory cards.

The cell phone will run Windows Media music player and is capable of over the air downloads. David Linsalata at IDC said, "Handset makers have an opportunity to gain ground in the digital music area because people typically take their phones everywhere." He noted that although it wouldn't replace digital music players, "consumers could be drawn by access to music if manufacturers and carriers break down perceptions of the phone as a communications-only device."

In WhatPC?, Gerry Purdy at MobileTrax said, "I'm very positive about the fact that we see a lot of phone developers incorporate music and thereby give the iPod a run for its money."

Purdy notes the 3250's maximum 1GB storage capacity via a microSD memory card that Nolkia claims can hold 750 songs is a distinct advantage over the Rokr's 512MB miniSD card that is capped at 100 songs. "That is a limiting factor that needs to be relieved," said Purdy.

Cellphones Emerge as Local-search Tool

The Seattle Times covers CTIA-related announcements from InfoSpace and Action Engine that focus on the mobile local search market. Julie Ask at Jupiter thought local search would become "a big opportunity for wireless companies, but not immediately." According to Jupiter surveys, "20 percent of consumers pay for information via 411, and even fewer, 7 percent, pay for local search." Ask said, "It is the time to get in and learn and cut your teeth. If you don't, you are going to be left behind."

M:Metrics also is finding that it's a small market. "Only 7.6 percent — or 13.8 million of the 181 million subscribers in the United States — accessed restaurant information in the three months ended in June. Slightly more, 15.8 million, connected to a Web search."

In-Stat: IMS the Holy Grail?

Another new report from In-Stat finds that the IP Multimedia Subsystem (IMS) "is a revolutionary vision for the future of the telecommunications industry, leading to new multimedia services, new network architectures, new business models and relationships, and new end-user devices with new capabilities. In the long term, all telecommunications services (voice services, business networking services, the Internet, IPTV) will be provided through IMS.

Henry Goldberg at In-Stat said, "IMS will deliver the ‘Holy Grail’ of convergence of access to multimedia services/applications across any end-user device that all service providers are seeking to offer their customers in the future. But providers have a long list of challenges facing them that must be overcome to fully migrate to a converged network architecture for their entire wireline and wireless businesses."

Key report findings include:

  • The migration towards IMS will be a gradual evolution where service providers initially deploy overlay networks to test new services and the workings of the new architecture.
  • A key challenge for service providers is to understand the types of multimedia services that different market segments will be willing to buy.
  • Service providers are migrating to VoIP infrastructures based on softswitches to reduce costs. In-Stat believes that there is a strong impetus for service providers to instead put in an IMS infrastructure which can deliver the same VoIP services and cost savings, but also adds the potential for increased revenues from a variety of new multimedia services.

Monday, September 26, 2005

In-Stat: Bluetooth Product Shipments More Than Double Again

A new report from In-Stat finds that for the fourth consecutive year, Bluetooth-enabled product shipments more than doubled. In-Stat predicts that "this year’s shipments are forecast to be 316 million units, a total that will rise to 866 million in 2009.

Brian O’Rourke at In-Stat said, "Mobile phones are at the core of Bluetooth’s popularity. They are in turn helping Bluetooth penetrate into other products, including notebook PCs, mono and stereo headsets, automobiles, and portable digital music players."

Key findings include:

  • Bluetooth will need to constantly adapt in the face of competition that includes Wireless USB, Wireless 1394 and Wi-Fi.
  • Results from In-Stat’s Residential Technology Survey (RTS) of typical US consumers indicates increasing recognition of Bluetooth and significant interest in cordless stereo headsets.
  • Chips complying with Bluetooth 2.0 + Enhanced Data Rate (EDR) are beginning to hit the market in 2005, providing both greater bandwidth and lower power consumption.

More on Windows Palm

More analyst quotes as the articles get filed from today's big event. In Reuters , David Linsalataat IDC, cautioned that forming an alliance with Microsoft, Palm might alienate some Palm purists. "It has the potential to (increase) their share, but this might lose some Palm die-hards."

Over at WhatPC? , the journalist put a different spin to today's Palm, Microsoft and Verizon announcement by with a sensational headline, but pretty much cameto the same conclusion as every other article so far.

David Linsalata at IDC said, "This is the best option for Palm. They get a potentially larger market and PalmSource isn't on a sure path."

Tim Bajarin at Creative Strategies added, "If you go into IT accounts where Exchange is a large part of the architecture, Palm OS loses. This [Windows Treo] allows Palm to get into the enterprise."

Gerry Purdy at Mobiletrax commented, "It increases Palm's credibility in the market place," and "Microsoft finally get a major phone player with high volume expectations."

Lastly, the Asscoiated Press writes on the potential impact on PalmSource. Todd Kort at Gartner said, "Palm has been stuck with this ancient operating system. They had no choice but to modernize."

On the subject of buying the Be operating system for it multimedia capabilites, Kort added, "It fell on its face. Buying Be has taken them down the path to destruction."

Ross Rubin, at NPD Group remarked that the "Windows Mobile platform offers better support for such things as video and photos. It also offers superior call management." He said, "These are features that PalmSource promised with Cobalt. One of the criticisms levied at PalmOS is that it isn't great for managing voice applications. Microsoft treats voice as a first class citizen."

Study Faults High Cellphone Taxes

The Wall Street Journal writes that "high taxes on the sale and use of mobile phones are complicating efforts to bring low-cost, mobile communications to people in the developing world." The study of tax rates and cellphone usage in 50 sample countries was conducted by Pyramid Research and Frontier Economics on behalf of the GSM Association. The study concluded that eliminating value-added and customs taxes on low-cost phones would increase mobile-phone "penetration" by between 9.8 and 19.6 percentage points.

According to the study, "cutting taxes could increase overall tax revenue in the 50 countries by $25 billion to $45 billion (€21 billion to €37 billion) over five years." The study also found that in 14 of the 50 countries surveyed, "the average wireless subscriber pays more than $40 a year in mobile-phone related taxes."

For example in Turkey, "taxes represent around 43 percent of the total cost of owning a mobile phone."

Bajarin: Palm's New Treo Now a Windows Mobile Smart Phone

Tim Bajarin at Creative Strategies posts his thoughts at Technology Pundits on why the new Windows powered Treo is good for Palm, Microsoft and the enterprise. Bajarin notes that although the "Palm OS is a great OS, the fact that it did not have strong IT support in enterprise markets, especially when Microsoft’s Exchange architecture was at the center of an IT deal, this move now assures Palm that their Treo with Windows Mobile can get a piece of this business as well."

He thinks the partnership means serious competition for Dell and HP, who will need to do a lot of catch up to match the Treo's look and feel as well as one-handed usage. He also thought it wouldn't spell the end of the PalmOS. "The Palm OS will most likely be optimized for use in more consumer oriented devices, and especially the PDA’s Palm is making for the consumer and SMB markets where the need for Windows Mobile support for back end architectures is not an issue," he said.

Bajarin concludes that "the move by Palm to include a Windows Mobile 5.0 based Treo in their line is good news for Palm, Microsoft and IT customers everywhere and can only help grow the entire smart phone market in the future."

Enderle: Palm + Microsoft

Continuing on his theme comparing the roads taken and not taken by Apple and Palm from earlier in the month, Rob Enderle writes today at Technology Pundits about the Palm, Microsoft and Verizon's announcement this morning. Enderle notes that Palm is diverging from Apple's go it alone strategy, although he finds "it interesting that the one dominant product line that Apple itself has runs on a Microsoft platform (iPod)."

Enderle's believes the partnership is "clearly targeted at the under penetrated opportunity that RIM now so well targets, not only will provide the strongest alternative to date to RIM but, much like the iPod did in the MP3 space, the best opportunity so far to grow the market."

He then concludes:

If this partnership is successful it will not only showcase the power of partnerships but once again the opportunities Apple continues to miss being unable to take a similar path. It is interesting to note that Microsoft has three shots at this one with Palm, one with HP, and one with Motorola. That’s 3x the odds of any one of the hardware vendors and, if nothing else, certainly makes the partnership path seem more lucrative.

Palm Puts Windows in Treo Smartphone

Some of the first post announcement articles are starting to roll in that includes analyst viewpoints. In Technology New, Roger Entner at Ovum said, "I think it clearly shows a few things: One, that money is more important than egos. Microsoft and Palm used to butt heads with each other. That is not happening anymore."

Entner noted the new influence carriers, such as Verizon, can have in a converging world. "They certainly match the two together. Microsoft and Palm are significant customers to Verizon," he said. Entner also observed that "It's becoming more and more like the desktop computer market, where there are many vendors making hardware and few vendors making software."

"I don't think it's the end of the Palm OS. But it's a disappointing day for Palm OS," he added.

Yankee Group senior analyst John Jackson believed the deal showed that "connectivity is king" instead of "personal information management and PC sync capabilities of yesterday's PDA." Jackson said, "End users are gravitating to the value added services that offer this connectivity associated with the device out of the box."

Over at Australian magazine SmartHouse, Tim Bajarin at Creative Strategies said, "Treo is the best-selling smart phone, with 110,000 to 120,000 units sold each month," but have had trouble penetrating the enterprisexcept "through the back door," with IT workers purchasing individual units.

In comparison, Bajarin said, "Windows Mobile-based smart phones have been the handheld most able to get through the front door. "This gives IT managers a wider choice for Treo devices." In addition, Bajarin said, "if you're Siebel or SAP, you've likely created a mobile application for Windows Mobile. Now, the most popular smart phone supports Windows Mobile."

Neil Strother at the NPD Group added, "Palm was always up against market giants like Nokia and Motorola. Like it or hate it, you know Windows." He also noted the deal allies Microsoft "with the popular Treo line, which is important given that Windows Mobile-based products are not blowing people away."

It's A Prepaid World After All

Yahoo! News picks up an article from Investor's Business Daily that writes "except for the U.S., Japan, South Korea and France, most wireless phone users around the world go the prepaid route." According to Yankee Group, the prepaid market is 66 percent in Europe, while Asia is more than 70 percent and Latin America is roughly 90 percent.

The article offers a lengthy analysis of the prepaid market and outlines the opportunities and challenges faced by carriers trying to service and profit from this growing market. Yankee Group predicts the worldwide wireless market will grow to 2.25 billion subscribers by the end of 2006, with prepaid customers accounting for 62 percent of the market. In the U.S., Merrill Lynch expects the prepaid market will double over the next few years, accounting for more than 20% of all U.S. wireless users by the end of 2009.

InfoSpace to Offer Mobile Search

The Seattle Post-Intelligencer reprots that InfoSpace plans to announce "a new search technology that will make it easier for consumers to find restaurants, maps, driving directions and other information on their cell phones."

The subscription service will "integrate maps, business directories, restaurant guides and other information into a single application that can be quickly accessed on the go."

Mark Donovan at M:Metrics said, "That is an approach that we have not seen before and I think it has a chance of catching on." Donovan noted "that about 15.8 million people perform searches on a mobile phone in a month."

"We have yet to see a killer 'app' for mobile search. We are going to have to wait and see whether InfoSpace has cracked that code," Donovan added.

Neil Strother at NPD Group commented, "The mobile Internet is still painfully slow. If I am in a pinch and need directions, I will be probably just call someone. It has to be snappy fast. ..."

M:Metrics: Ringtones and Mobile Music

According to M:Metrics' latest August Benchmark Survey, "although ringtones are universally popular among both males and females, there are significant differences between the sexes when it comes to the types of mobile music downloads."

M:Metrics found that although females are significantly less likely to use most mobile data services compared with males, "they are about 6 percent more likely to download ringtones, representing 52.6 percent of mobile subscribers who purchased at least one in the quarter ended August 2005. Females predominate in certain music genres for ringtones and are 60 percent more likely to purchase a pop ringtone than are males, for example. Males are 68 percent more likely to choose a hard rock or heavy metal ringtone. Overall, hip-hop is the most popular genre across both genders, accounting for 20 percent of all downloads and just beating the rock or alternative category as the most popular genre for males."

Mark Donovan at M:Metrics said, "Mobile phones are used in a social context, and as such the phone a consumer carries makes a personal statement. Mobile phone users—particularly youth and young adults—turn to ringtones as a form of social expression. This data indicates that the female predilection to accessorize extends beyond the material world: women are picking up the hottest pop ringtone like they would a new pair of shoes or handbag. Males, on the other hand, prefer to project their masculinity through their preference for hard rock and non-musical ringtones, such as sound effects and celebrity voices or movie clips."

Other highlights include:

  • males are 16 percent more likely to have subscribed to a ringback subscription in August
  • mobile subscribers appear most interested in moving music tracks from their computer to their phone, with 12.7 percent indicating they are likely to do so in the coming year
  • less than 9 percent of mobile subscribers reported that they were likely to subscribe to a mobile music service in the next 12 months

Music Biz Explores Wireless Frontier

Leading into CTIA in San Francisco this coming week, Reuters U.K. picks up a Billboard article on the growing market for mobile music on cell phones. Andrew Seybold said, "We're heading into areas where there is no market research. The only way we're going to find out what consumers will buy is to try various things and see what sticks."

For the over the air music download model, one of the key questions is how much are consumers willing to spend. Has iTunes set the bar at 99 cents or will consumers tolerate a price premium for the added convenience?

Nick Holland at Pyramid Research said, "To pay double or treble the amount of what you would be paying for the same track online is not going to receive the traction they're looking for. They will probably start off with a price point that is high and then discount it quickly as they realise that demand is not as anticipated."

Nokia Gets Cozy With Eclipse Foundation

Linux Insider reports that Nokia this week "joined the Eclipse Foundation as a "strategic developer" and board member" and will support the "Eclipse open-source community's work by contributing software and developers to a proposed new Eclipse project."

Jupiter Research analyst Michael Gartenberg said, "The name of the game is developers, developers and developers. The more you can get people on to your platform, the more attractive the platform then looks to end users that have to make deployment decisions."

"It's too early to tell if this will pay off for Nokia, but I think we'll see a lot of efforts from Nokia to evangelize the marketplace so it does happen," Gartenberg added.

Sunday, September 25, 2005

Ovum: Vodafone Analyst and Investor Day

John Delaney at Ovum posts his thoughts after spending a day with Vodafone's top management at the company's analyst and investor day. One key fact he learned is Vodafone's 3G user base is now up to 4.35 million at the end of August.

Delaney noted "Vodafone continues to post good numbers, and it is an increasingly formidable outfit," and provides his thoughts on the company's efforts in various geographies. He commented that the presentation on U.S. efforts, of which "Verizon generated over 16% of the Group's revenues in the last financial year," seemed like an afterthought with only a couple of bullet points and a 10 minute speech from Verizon's new CFO accompanied by no slides and no Q&A towards the end of the day. Delaney stated that "Verizon is an awkward fit with the Vodafone Group in many ways; its treatment yesterday felt like a theatrical metaphor for that situation."

Delaney did point out one potential issue for Vodafone's long-term prospects, emerging markets. He stated:

We expect the world's next billion customers to connect to mobile networks during the next five years. If we had any money staked on Vodafone for the long haul, we'd be wondering: how many of those billion does Vodafone expect to be connected to networks which it controls? The most effective way to grow a business organically is to win new customers. Vodafone's footprint doesn't yet cover the places where most of those new customers will be.

Palm Teams with Microsoft on Smart Phone

A couple of more articles about the Palm, Microsoft, Verizon announcement tomorrow morning. In the Seattle Post-Intelligencer, Todd Kort at Gartner said, "This is very important for Palm. PalmOS is a fairly ancient operating system, and if Palm had stuck with it, (Palm) might have followed PalmOS into oblivion." Kort noted that five years ago the PalmOS "used on 70 percent of the world's smart phones and personal digital assistants. Now its market share is in the low single digits."

Pablo Perez-Fernandez at ThinkEquity Partners added, "For Microsoft, this means they have broken into one of the leading smart phone manufacturers, and it validates their software."

Over at Forbes, Roger Kay, at Endpoint Technologies Associates said, "It's clear that Palm has been losing ground to RIM. The Blackberry has been setting the pace with features that are especially popular with business travelers."

Bruce Richardson at AMR Research added, "Microsoft is hedging its bets on what the device of the future is going to be. The laptop of the future is going to be a cell phone and, obviously, Microsoft is continuing to put up as much barbwire and reinforcement around the Office franchise as possible."

Will Ringtones Go the Way of the Beeper?

Technology News asks the question: is the ringtone market here to stay or on its way out? Matt Kleinschmit at Ipsos-Insight, said, "What we're now witnessing in the mobile arena is similar to what has already occurred in many places outside the U.S., and represents yet another opportunity for industries looking to monetize U.S.-based digital music distribution. Through a combination of increased ringtone availability and the desire to personalize one's mobile phone with their favorite or the most popular rings, the growth in this already burgeoning industry will likely continue unabated."

However some in the industry argue full track music downloads might take a bite out of the ringtone mania. According to a Ipsos-Insight study "6 percent of mobile phone owners report having downloaded full songs to their mobile phone, with smaller portions of the mobile population experimenting with downloading ring backs, short video clips and music videos."

Kleinschmit added, "In many cases, these broader download offerings have just entered the market, yet we are already seeing leading-edge mobile users beginning to experiment with them. This suggests that users may be increasingly seeking mobile entertainment content options beyond just music-related offerings, and points to the potential for broader multimedia-related services that could be offered from a variety of distribution partners."

IDC analyst Lewis Ward said, "Ringtones is an emerging young [market]. Many people don't even have a phone that allows them to download a ringtone or just haven't ever downloaded a ringtone yet. So the idea that we've already hit some sort of saturation point is just not true. We are certainly not forecasting the disappearance of ringtones based on the emergence of full tracks."

Saturday, September 24, 2005

Weekly Roundup

A roundup of mobile analysts in the news for the week ending September 24:

  • Martin Olausson of Strategy Analytics via Newsweek on EMI's digital efforts
  • Richard Dohert at Envisioneering Group and Gene Munster at Piper Jaffray via the San Francisco Chronicle on the Apple iPod nano's ooh factor
  • Nitin Gupta at Yankee Group via The Boston Herald on the music phone market.
  • Ross Rubin of NPD group via USA TODAY on the perpetual hunt for more Battery life and storage for mobile devices
  • Serafino Abate at Ovum on Hong Kong licensing proposals paing the way for convergence

Cell Phone Makers Singing The Praises Of Wireless Music

The articles about music on cell phones is getting a wee bit tiring, but as long as they keep writing them and analysts keep quoting, then I'll continue posting. Investor's Business Daily writes the latest about where the market stands for the mobile music market.

Gartner analyst Ben Wood said, "If you look at the hype-ometer, music is definitely the hottest. But no one has quite got the right model for the business yet."

"The Rokr was kind of a disappointment,. You hear a song, go home, find it on iTunes, connect your phone and download. The real goal is to download it directly," Wood added.

Howver, other than the carriers and record labels, who really wants to download music over the air? Don't look at the Japan market for guidance even though the market for full song downloads has grown to $400+ million this year. It's a very different usage model over there with not as many people owning home PCs as in the U.S. With the PC as the main conduit for digital music in the U.S., will consumers want to pay extra for the convenience of getting a song anytime, anywhere? We'll see....

Fuel Cells on the Horizon?

For the more technically advanced members of the audience comes this article in Fuel Cell Works about the potential for direct methanol fuel cells (DMFC) in mobile devices versus other technologies. Most of the article is way over my head but the end goal is to find "a cheap and easy means to power mobile phones, with recharging taking only a few seconds."

The articles notes two of the obstacles facing the industry: size and commercialization. Regarding the former, Stuart Robinson at Strategy Analytics said, "Fuel-cell technology still needs to be shrunk to fit in a phone. This is still five or more years away from mainstream development, but we will see some small test products on the market before then."

Viswanathan Krishnan at Frost & Sullivan commented that "We have to bear in mind that the anticipated weight reduction and the flexible geometry of fuel cells will be able to drive miniaturization of the fuel-cell technology."

On the latter, Robinson added, "At the moment, there are insufficient data points to plot a curve. By next year there will be enough points on the curve to extrapolate." He warned that "confusion over new regulations concerning the transportation of methanol and hydrogen fuel cartridges could cast doubts on the commercialization of fuel cells."

Krishnan predicted everything will be sorted out once the technology issues are addressed. "For example, the cost of the whole system should come down the moment the volumes increase while the methanol infrastructure is going to grow as there are more end-users."

Friday, September 23, 2005

Palm, Microsoft and Verizon Team Up

With the announcement earlier today that Palm, Microsoft and Verizon would be holding a special press event on Monday, September 26 @ 9am in San Francisco, the resulting articles and analyst quotes are starting to pile up. Most prognostication centered around a new Windows Mobile-based Treo, aka the Treo 700w.

Yahoo! News picks up an Associated Press article where Rob Enderle said, "In terms of the level of importance, this would be — in this space — the same thing as Apple announcing they were going to be using Intel processors. Microsoft understands the back end and Palm understands the front end, and the two of them — if they can work together — they can do some incredible things."

Regarding the market gains Microsoft has made in the mobile space, Charles Golvin at Forrester Research remarked, "No question that Microsoft has made significant inroads compared to where they were just a couple of years ago — which was no where. Microsoft in the long term wants the kind of strong position in mobile devices that it has in PCs. They would like to have 90-percent market share on PDAs, smart phones or cell phones."

A CNET article focused on the impact of the announcement on the enterprise. Sam Bhavnani at Current Analysis said, "The big deal is that it will help Palm significantly in the enterprise space, a segment they have often gone after but have never totally been able to solve."

"As corporations make large-volume purchases, Palm is in good position with this Windows-based device because of the longstanding feeling of compatibility between branded devices,. For example, Microsoft desktop OS and Microsoft Outlook will work better with Windows Mobile than with Palm OS." This is far from the case in Windows Mobile 2003 where syncing Outlook leaves a lot to be desired, but point well taken.

Lastly, in the San Jose Mercury News, Richard Doherty at the Envisioneering Group said, "It's a very big deal because Palm, for many, many years has relied on its home-grown operating system." Doherty pointed out that Palm decided to branch out "in order to compete better with other multi-function phone makers that have made strides possibly because they were not as tied as Palm has been to one particular system."

Interestingly, not much has been said about the third partner in the triumvirate - Verizon. Traditionally, Sprint has been the first to market with Treo devices so this upcoming announcement is a departure from the norm. Hopefully the new device will be EV-DO enabled. Wi-Fi would be asking for too much but gladly accepted...

Wireless Carriers Banking on Mobile Music

Yahoo! News carries an Associated Press story on using the phone as a portable music player. One of the factors that might possibly hold back the market as noted by Charles Golvin at Forrester Research is the fact most American music fans "have grown accustomed to using their home computers to buy, listen and organize their digital music."

David Card at Jupiter Research believed there was "great potential in sideloading," but was skeptical about users paying to download full tracks. He rightfully pointed out that iTunes "became popular because people fell in love with Apple's iPod music player, not the other way around." Card said, "People who think you're going to spend boatloads of money to fill up anything with downloads, by far, there's not enough evidence to support that yet."

Last, but not least, pricing will be a huge determining factor whether over the air music downloads take off. Everyone's waiting to see if consumers will pay a premium to get their music anytime, anywhere....

Jupiter: Microsoft, Palm and Verizon Press Conference on Monday

I just got a heads up from Michael Gartenberg at JupiterResearch that Microsoft, Palm, and Verizon will be holding a press conference Monday morning September 26 in San Francisco. All the heavy hitters from the three companies will be there - Gates, Colligan and Strigly. As Gartenberg writes:

hmmm, I wonder what they might want to talk about? I've already discussed what the implications of one thing these three partners might announce here.
Let me guess. Could it be the Treo 700w? Another of the industry's best kept secrets...not...

Jupiter: Thought for the Day

Michael Gartenberg posts a very interesting thought of the day at the Jupiter Analyst Weblogs. As Gartenberg notes, last year at this time various companies were telling him they were planning to roll out their iPod mini killers over the next year. Gartenberg writes:

During this period over at Apple, Steve Jobs was meeting with his team to kill the mini and replace it with the nano. Kind of makes you wonder about what Steve's meeting with his folks about right now, doesn't it?
Definitely food for thought on why Apple is always staying ahead of the competition. So what's next? Video? Phone? Or something way out in left field? Methinks left field is as safe of a bet as all the others...

Sony's Restructuring Plan Brings Praise, Skepticism

The Los Angeles Times covers the recent restructuring plan from Sony that garnered some praise as well as skepticism from the analyst crowd. On the restructuring itself, Richard Doherty at Envisioneering Group said, "We all went through this more than a year ago. There isn't a radical difference between what was said today and what was said last year under a different chairman and CEO."

Coooperation between the various divisions was also an issue. Sony CEO Sir Howard Stringer pointed out that the PSP was a prime example of cross-company cooperation since the device plays games, video and music. Mike McGuire at Gartner commented that "Creating a seamless link between the device and the service is crucial. That's what Apple has done, and that's what Sony wants to do with the PSP. Consumers are nothing if not foragers of digital content. With the PSP, you can connect to the Internet, browse and download content other than games."

Making that work is another story. Mark Stahlman at Caris & Co said, "Previous management understood what needed to be changed, but they were unable to make it happen. To actually make these changes is a massive challenge. It can't be done quickly. There will be people who will resist. There's no avoiding a good deal of internal conflict."

Analysts praised the company's focus on the Playstation division. P.J. McNealy at American Technology Research remarked, "Given the fact that PS3 means much more than just video gaming, it's going to be important to all their media studios. This comes at a time when all internal content — whether or not it's music, movies or games — will be important to the PS3. It's the promise of the vertical, which Sony has had for many years but has never really delivered on."

Stringer also targeted the company's television business, which saw sales drop 21% in the quarter ended June 30 as low-cost competitors grabbed market share in the fast-growing flat-panel business. The poor showing contributed to a $330-million loss in the company's electronics unit that quarter.

Another focus area is the company's TV set business. Some analysts are taking a wait-and-see approach. Mitsuhiro Osawa at Mizuho Investors Securities in Tokyo said, "Basically, the direction they laid out is good. "This Christmas will be the first big test, with products like televisions and the new Walkman. We'll see in January if they've cleared the first hurdle."

Rockstar to Debut Upcoming Film on PSP

The Washington Post (registration required) reports controversial video game maker, Rockstar Games, is working on a documentary about the struggles of a lowrider car club in Los Angeles that will make its film debut on Sony PSP. The movie, called "Sunday Driver", is scheduled to hit the small screen in October and will be the first to make its premiere on the proprietary UMD format.

Rockstar, the creator of the very popular and controversial Grand Theft Auto series, is touting this as the brand's entry into film. Currently there are about 40 PSP games available and 145 video titles on UMD. According to Sony "five or six video titles have sold more than 100,000 copies each."

Michael Pachter at Wedbush Morgan Securities said the "movie will attract a nice intersection of people who know who Rockstar is and people who own a PSP, but that he doubted that it would be a commercial success." Pachter viewed the venture as "a vanity production by a company that has gotten wealthy from Grand Theft Auto."

Vanity producton probably, but quite possibly a clever marketing ploy too? Considering the PSP badly needs a breakout hit and Rockstar is planning to release its next Grand Theft Auto game, titled Liberty City Stories, next month on the PSP, the UMD film just might be the perfect medium for cross-promoting the new game and geting the juices flowing so to speak. I can see a number of ways the film and game can help promote each other and build the "brand". A cunning plan if you ask me....

More Ditties About the Ditty

Technology News adds its two cents on Dell's recently announced DJ Ditty personal audio player. Jupiter Research analyst Michael Gartenberg commented that although feature wise the Ditty matches up well with Apple's iPod Shuffle, it's not a true comparison. He said, "Apple has done an incredible job of evangelizing the market on features and, of course, on brand and cachet. So while people talk about the fact that the Ditty has a screen and the Shuffle doesn't, Apple has made the lack of a screen a feature and not a liability for consumers."

"Dell believes the market is still somewhat nascent. The vast majority of consumers don't own MP3 players, but the problem is that the iPod has become a different device. IPod is not a generic term for MP3 players. There's been no brand dilution of iPod. Consumers are very specific. When they say they want an iPod, they want something from Cupertino with white headphones," added Gartenberg.

Will Mobile Trends Affect Handset DSPs?

The 3G Portal reports on the latest research from ABI Research that identified the following four major trends that will affect mobile handset digital signal processing:

  1. Transition of cellular protocols to 3G and 4G standards
  2. Advanced multimedia such as video conferencing, 3D gaming and graphics, and mobile TV
  3. Wireless connectivity technologies such as Wi-Fi, Bluetooth, GPS, Ultrawideband, and WiMAX
  4. Efforts to improve link margins and communications quality
Alan Varghese at ABI Research nopted there were two pathways: evolutionary or disruptive and revolutionary. He siad, "The evolutionary path involves increasing reliance on hardware accelerators and coprocessors to offload the DSP's work. But this approach might run into problems: it is going to be too complex to support all the hardware required for all the protocols mentioned above. A hardware-centric architecture also precludes quick adaptations to new requirements."

ABI Research sees revolutionary promise in new software-defined architectures as they finally become viable in the handset. "Considering that the mobile phone DSP is approximately a $5 billion industry, current market leaders may need to start looking over their shoulders," Varghese concluded.

Thursday, September 22, 2005

ARCchart: Cellular Centrino Style

ARCchart analyzes the impact of recent announcements by Verizon Wireless in the US and Vodafone in Europe "to have their respective cellular-based broadband technologies integrated into laptops, allowing connectivity to their networks out of the box." The throrough analysis looks at the various announcements and the implications for Wi-Fi and WiMax. ARCchart opines that:

Wi-Fi is here to stay, and it is conceivable that, very soon, all laptops and non-cellular handheld devices will have the wireless technology embedded. Things are less secure for WiMAX. Increasingly, cellular operators are accelerating their evolutionary journey towards next generation 3G and many will have these networks deployed by the time mobile WiMAX networks emerge. With 3G integration into laptops, the strength of Intel’s ‘Centrino WiMAX’ trump card is considerably diluted.
As ARCchart notes, pricing will be critical, but "if the cellular operators are prepared to respond to the pricing challenge (as fixed-line operators are increasingly doing in response to VoIP), then WiMAX will have a battle on its hands."

Sony Cleans House, Refocuses

CIO Today reports on Sony's re-organization that will eliminate nearly 7 percent of its workforce. Roughly 10,000 jobs will be cut from Sony's 150,000 workforce by the end of the 2007 fiscal year. Sony will also shut down 11 of its 65 manufacturing plants, eliminate 15 product categories from its electronics division and discontinue 20 percent of existing products.

Michael Gartenberg at Jupiter Research said, "The first steps will be to reorganize what they need in terms of head count, and the second is to reinvigorate and revitalize the product lines." According to Gartenberg, Sony needs to "capture the hearts and minds of consumers" and "reestablish the company as the name synonymous with a particular product category in the much the same way that Sony was once able to make its name synonymous with the Walkman."

On the otherhand, Nitin Gupta at Yankee Group thought Sony "should form strategic partnerships to support core product categories, such as gaming, televisions, home audio and video." Gupta said, "Transformational ideas like the Walkman are hard to come by these days."

"Sony has tremendous brand strength in portable-audio players. And the digital-audio market is going to expand dramatically in the next few years," Gupta added

According to a recent Yankee Group survey, "Sony is at the top of the list in terms of all portable audio. That is a strength that Apple does not have." Gupta opined that "They have the potential if they can bring competitive products to market."

Over at CNET, Stephen Baker at The NPD Group suggested Sony cut some low-visibility categories such as non-MP3 portable music players, clock radios and car stereos. "These midtier categories, ones where Sony has a history and where they may have a large but not a dominant share, are the logical ones to cut," Baker said.

Forrester Research analyst Ted Schadler thought Sony needed to better coordinate its engineers and product planning or risk losing out on more sales. "Apple has accomplished this in music because it designs end-to-end and because they entered the market with a digital rights management-protected product (read: iPod) when no one else did. But it was a one-off, not to be repeated in television, personal video, mobile communications or photography," Schadler said.