DELAYED GRATIFICATION
The Wall Street Journal has a page one story titled "Cellphone Start-Ups Struggle as Media Services Fail to Catch On". Here's what they're talking about:
"Setting the stage for another round of losses in the volatile telecom sector, a wave of cellphone start-ups that were counting on TV, music and other premium services to attract users is floundering.
Among the companies struggling to sign up customers: Mobile ESPN, a venture backed by Walt Disney Co., and Amp'd Mobile, a youth-oriented wireless start-up backed in part by Viacom Inc. and Vivendi SA.
The companies are among about 30 wireless operators and hundreds of related wireless-technology companies that have been launched over the past four years. They hope to carve out a profitable niche in the mobile-phone business with networks leased from the nation's major phone carriers and new services pushed by heavy marketing..."
Not since the late 1990s has the telecom sector seen such a wave of investment. In the past 16 months, start-up cellular carriers have raised at least $1 billion, according to San Francisco investment bank Rutberg & Co., compared with just $100 million in the three years from 2002 to 2004."
Although it may be a bit premature to judge these ventures as failures, I can't say it's a surprise.
Almost a year ago, in a post titled "On Wilting Wireless Walled Gardens", I noted how today's major wireless carriers, and most of the MVNO (Mobile Virtual Network Operator) ventures coming online were walled gardens in themselves.
They cater to affinity audiences with flashy, multimedia content and features, but in most cases make it difficult for third-party content to be accessed. At worst, they're corporate vanity projects. At best, they provide desired content to their affinity audiences, but at a high cost.
And that's part of the rub. These MVNOs are in effect leasing the underlying wireless network from operators like Sprint at wholesale prices.
But the oligopolistic, major wireless carriers, themselves find it in their best interest to price broadband wireless data at high tariffs. As a result, most of these services find themselves forced to price their services at "sticker-shock" inducing prices. The most compelling data and content packages typically price out from $70 to over $100 a month...not mainstream pricing by a long-shot.
Besides the cost issue, these services still face "Version 1.0" problems.
A recent review of the video cellphone services by PC Magazine, noted that:
All the mobile video services we looked at—namely Amp'd Live, Cingular Video, Sprint TV, and Verizon V Cast—work on a range of consumer phones. And they all require some patience...
All the services suffer from three flaws that will limit their success. First, nobody has great quality...
The second problem is opacity. No service offers a program guide or any way to figure out which clips are available other than drilling down into dozens of different, little menu options...
Finally, there's still something off about the content mixes, something for which you can blame complex Hollywood revenue arrangements. There's a lot of weird, off-brand comedy and a dearth of good music videos.
The last one in particular is an issue faced by many companies besides wireless carriers and MVNOs. Even Apple is struggling to come to terms with Hollywood studios on the right mix of content and pricing for it's long-rumored upgraded video iPod and iTunes (see this piece in Variety).
Despite these problems and issues, I'll still repeat what I said last July:
"In any case, the snowball has started to roll down the hill...and it's only going to get bigger. The days of wireless walled gardens are numbered."
It'll just take a lot longer than it should.
I agree. The problem is network companies trying to be content creators or providers. The internet would never have taken off, if ISPs had defined the content.
Posted by: swissfondue | Tuesday, June 20, 2006 at 06:40 AM