And The Brands Rush In: The Next Revenue Frontier

Wireless Business Forecast
Vol. 12; Issue 25
(c) 2004 Access Intelligence, LLC. All Rights Reserved.

December 16, 2004 – In a wild flurry of announcements over the past few weeks, major media have lined up to secure places on phone decks in an effort to make mobile data services look a lot like the Web, the newsstand, and even your cable TV grid. To wit, just in the last few weeks:

• MFORMA reaches a multi-year global publishing pact with Marvel Enterprises to bring comics heroes to phones in games and other mobile entertainment formats.
• THQ Wireless signed a multi-year agreement with Lucasfilm to bring "Star Wars" content to games, ringtones and other formats on mobile.
• M-Qube signs the Warner Music label, which will bring a huge catalog of artists along with master and polyphonic ring tones to phones.
• Digital Bridges will develop mobile games under the Sports Illustrated brand
• Dwango partners with BeliefNet to bring faith-based content to mobile as well as with Napster to convert parts of its library to mobile content.
• Dwango also partners with Playboy to expand the bunny empire into images, games, ring tones and video clips for handsets.

What's the sudden big rush to get brands onto phones? Clearly, the cash and consumer interest are beginning to flow to branded data services. Content distributor Dwango reported a 208-percent revenue increase between 2Q04 and 3Q04, with a fourfold increase in ring tone sales. Verizon claims it did more than $500 million in data sales business through its "Get It Now" mobile store in 2003.

More than cash, recognizable content brands now are becoming important to the mobile user's experience. Billboard magazine's running tally of top ring tone downloads very much reflects the artists and songs that dominate the traditional record charts, and contemporaries like Outkast and 50 Cent vied for the first "Ring Tone of the Year" award (50 Cent won). "Content is crucial. It is the power that is driving this multimedia engine that has gotten so much momentum," says Adrian McAloon, head of marketing at Ztango, which just launched the first U.S. ringback service with T-Mobile USA last week.

The mobile content realm has shifted just in the last year, says McAloon, and consumers are expecting their phones to be in sync with the larger entertainment environment. Having a quaint ring tone from an oldies favorite or a Beethoven movement just doesn't cut it anymore. In a recent street-team marketing survey of phone users in Boston, Ztango asked people to compare phone services and offerings. "The availability of the latest content was one of the most powerful word of mouth marketing tools," he says." The consumer associates better services with the best content."

Even Verizon, which prefers to lead its marketing with service, admits content has become an important lure for its customers and a good reflection on the carrier. "Branding matters but, frankly, that's probably second in importance to the user experience," says Verizon spokesman Jeffrey Nelson. "Brands we assertively offer on 'Get It Now' do matter. Obviously, the apps have to be great to use, but the brands we offer reflect on the overall Verizon Wireless brand."

Brands Reflect User Tastes

And the brands, be it a Playboy image or a hip-hop ringback tone, also reflect on the consumer in a way we don't see in other media. The rush to partner content on mobile only resembles superficially the media rush onto the Web in the mid 1990s. In fact, the ways in which consumers engage branding on the two media are quite different. On the Internet, users were drawn to content brands like CNN.com or ESPN.com for the same reasons they bought print and watched cable, because they liked the slant and nature of the content.

On phones, consumers don't just dwell in the content; they use the content to express some aspect of themselves. "Ringtones have grown into an expression of your personality," says McAloon. Indeed, cellphones are advertisements of self, giving people the opportunity to show off the movies, singers or even the information sources they think communicate to others who they are. This means that the thirst for content on mobile phones is being driven by something deeper than merely wanting to be informed or entertained according to one's taste. There is a very real psychological and social factor at work here that suggests phenomenal potential for branding and data sales on this platform.

And unlike the Web, where it was possible in the 1990s for non- traditional content brands to gain audiences and to challenge traditional media (iVillage, CNet, etc.), familiar brands have much more exclusive leverage on mobile. The limitations of phone-based browsing make it difficult for a new content brand to poke through here.

These are some of the reasons why content providers and aggregators are starting to look toward some of the very revenue models for mobile that suffered limited success on the Web. "Subscription models will make sense across the full breadth of our business," says Alex Conrad, president and COO of Dwango, which distributes Rolling Stone, ESPN Bassmaster and now Playboy, among other major media names.

Fishing For Subscribers

Last month, Dwango launched its ESPN Bassmasters fishing game through Nextel for $4.99 a month. The game lets virtual anglers cast a line and actually get called back when it lands a fish. A surprisingly popular feature has been real-time weather effects, in which fishing enthusiasts can play in actual locations around the country and in that locale's current weather conditions. Conrad says he is "very happy with the subscription numbers, and very minimal attrition." He foresees consumers paying monthly fees for content bundles that might include access to a game or a data stream as well as some select value- adds like a set number of ring tone or wallpaper downloads. A Dwango-powered Rolling Stone mobile trivia game will roll out soon under the subscription model as well.

A number of developments on the horizon are set to make content brands even more powerful players in the mobile economy. The arrival of phones with hard drives and multi-media players means that larger chunks of content will be downloaded and re-played. Within the next few years, a traveler may be able to play back a missed episode of a TV program from a PDA or even via a next-gen phone. This could make the value of content on mobile even more important.

"We are looking at full music downloads and music portals in the next generation of mobile entertainment services," says Vern Poyner, CEO of Ztango. Downloading music tracks to phones already is the rage in South Korea, which generally is 18 months to two years ahead of the U.S. mobile market. "People there wear their phones around their necks. Your phone is your iPod that has music on demand," Poyner adds. Ztango, which is a subsidiary of WiderThan.com, a sister company to SK Telecom in South Korea, already is working on full music downloading for the U.S. market.

Can Content Walk The Walk?

Can content really deliver new audiences to carriers? Conrad thinks so. In rolling out faith-based BeliefNet to data services in the coming weeks, Dwango is not only adding a channel for the faithful but it also is bringing to the carriers a massive online marketing engine. "BeliefNet sends out tens of millions of opt-in e-mail messages every month," says Conrad. "This is something where there is an audience of users in another medium that can generate awareness. That's something in which the carriers certainly are interested, if we have content that already has a loyal following. That's where cross-promotion comes in."

Moreover, it is time for media brands to get even deeper into wireless by offering their own branded services, probably private-labeled via the major carriers' virtual private networks. Major cable-TV and cross-platform brands will be looking to offer bundles of content and services sometime in 2005, declared mobile consulting firm inCode in its recent predictions for 2005. "Conglomerates with huge content portfolios will challenge wireless network operators for control of the wireless 'pipe,' forcing carriers to provide differentiated, compelling services for enterprises and consumers," says Jorge Fuenzalida, east coast director for technology and strategy group inCode. An early sign of this transformation is the recently announced deal between Sprint and ESPN, which will create ESPN Mobile, the first wireless phone service from a media brand. In addition to wireless voice capability, ESPN Mobile will bundle in comprehensive a content offering including ring tones, sports-score streams, stats, logos, images, and streaming audio and video.

We guess there are few brands out there that could command enough audience loyalty to become a branded mobile carrier of choice. Sports exacts a special kind of loyalty (or obsession) that makes such a move possible. Could Playboy, CNN, The Wall Street Journal or even eBay become wireless carriers? Probably not. But the nature of the platform does allow for content brands to band together into networks of like-minded content: sports and babes for men, entertainment and lifestyle for women, music and fashion for young adults. These combinations of branded content could create large subscription packages or even branded wireless services.