"Legal P2P Music", really?

I've been spending some time recently reading about music "state-of-the-nation", sorry if none of this is news to you.

So as I was having lots of fun at MIDEM in January, hearing a lot about services that recognize and legalize P2P music sharing, I was thinking of those services that have users upload music and share it. I was wondering how does that not clash with the content owners need for revenues: their hook so obviously giving something minimal, limited, as the hook to get you to buy the real thing. usually that hook would be called "preview". the 30-seconds version of the real thing, and a link to a music store.

So in telling the users they can upload and share the music, the name of the game is to remove liability by telling them what content they should not upload...Not sure ho many users read that piece.

So it was interesting to read about WMG suing imeem (I know, water under the bridge), how they settled, and an interesting comment:
"Good news for imeem..but the damage seems to have been done. Most popular songs on there are only in "preview" mode now, which only plays 30 seconds of each song rather than the whole clip..that was the single appeal of the site: full on demand music."
Very true, I think.

Report: 61% of US teens download music illegally

As I mentioned in my post discussing where consumers get content from, I said: "Don't ignore the P2P elephant: 48% sideloading music from you-know-where is not something one can ignore and pretend its going to go away. I don't even think legislation can make P2P go away but some think so. No, I think we're looking at a vanishing consumer wallet and people will not pay (much, if anything) for music. We need to figure out alternative revenue channels for the operator, content owner, retailer etc."

A new survey shows that 61% of US teens download music illegally. Not a big surprise, frankly. Ask any teen around you whether they pay for music... the answer is no.

The survey noted an overall "discretionary recession" in teen spending, finding a 15% year-over-year decline in spending among young men, and an 11% decline among young women.
This is the dynamics that will make operators focus on networks as the revenues from mobile content require skills, and budget, that brands, advertisers and content owners have, not necessarily operators.

Another interesting comment was: "Six percent of students indicated they own an iPhone -- double the market share found in a fall 2007 survey -- and 9% expect to buy an iPhone in the next six months."

The iPhone UI really does make a difference to the teens. I believe iPhone and the likes will bring teens to use their phones as their music device. This is a huge opportunity for the direct to consumer content business.

Mobile Barcodes Flops With Students-DUH!

This is so infinitely infuriating. While in the UK I-Nigma is getting down to business and generating mobile barcodes left and right on every magazine and billboard (good on ya!), the US is still mastering at taking a good piece of innovation and making it fail. Miserably. Every vendor and operator has a different view on the symbology, architecture and how the ecosystem should be built.
It's enough to read the comments on this post to understand the level of these discussions are the US.

Why does I-Nigma and their users get it, and we can't get a solution in the US? Why do US companies invest in existing technologies that don't require new ecosystems (evolution vs. revolution)?

Because technologists are making the decisions in the US. And they don't understand that the mobile market needs to be owned by marketing focused people. They need to stop thinking about technology, symbology and patents, and start thinking like Google would think of it. How would ad agencies deal with it.

To read now how barcodes failed at a very-visible Mobile Discovery trial, who did not setup the required arrangements with the operators beforehand, didn't setup the expectations correctly, and then used a topless woman for the promotion...well...what can I say?

End with a very old joke:
The Polish invented the toilet seat. The Americans swept the world with their design, based on the Polish one and adding a hole in the middle.

Good innovation can happen in the US, but the UK folks will succeed with it.

Congrats to Andy Letting, a friend who is moving into the right space in the right time.

A good problem to have

As an engineer who turned to marketing, I keep coming across situations where you want to promise the sky, but you also know the limits. A good lesson one of my previous CEO taught me was: whenever you think of starting the limitation "BUT...", that's when you put the lid on it.
Because that's how technology moves forward. If customers were buying existing technology there wouldn't be any innovation. This is why you want to keep your sales guys somewhat aware of what the product can (or rather, can't) do, but they and the market are the ones who will pull you forward.

The thing is, sometimes you cheat. You know the product can't deliver to the spec. Do BMW's really make it to the top speed? who knows? whose going to test it? The wisdom is not to get caught, at least not big time.

Because when someone calls the bluff, it can become painful. And I think that's what's lined up for operators with their data network. They were betting on lack of applications that will drive the data network. And they were right for the longest while.
Now, when video is hitting the mobile space, uplink and downlink, it is becoming difficult, and frightening.

So when I read this article about "Researcher warns on flat-rate plans’ effect on carriers", and I read "ABI is also worried that unlimited plans may encourage an increase in unsolicited text messages, instant messaging and picture mail usage.", I think, no, they've got the wrong end of the stick. This is the time to crack the champaign. Because for the longest time mobile geeks complained about people "not getting" picture messaging, Mobile IM, Mobile video etc. "usage/adoption is low" you could hear everywhere.

Well if now people get it, then there could not be better news! That is a good problem to have like my friend Jack always tells me. The operators need to figure out how to keep up the technology and harvest the revenues: making their network perform, and cutting rev share deals with content owners and advertisers.

Mobile D2C content requires leadership, even from Nokia

I came across this article today in Fierce Wireless, talking about Nokia having to "sweet talk" operators over revenue share concerns.

Focusing on network operations and letting brands promote content D2C for rev share is not common amongst many operators yet.

Mighty Nokia having to walk the line carefully and explain the benefits to all shareholders is just an example for how young the D2C ecosystem is, and that no one is immune from playing ball with the operators, who will not be forced into it.

The good news, Nokia is the kind of player who can plow the way for all those of who will follow.

Flixwagon: A shooting star? (Phones to replace camcorders?)

Overnight it seems like a new mobile video startup, Flixwagon, had managed to grab a lot of attention. Uplink live video for the community is a real interesting cool proposition. They also seem to have relations in the right places, from VCs to a S60 dude filming his own wedding.

I have my own thoughts on community uplink mobile video. What is the implication for
users and for operators?
(Flixwagon help:) "Since the Flixwagon mobile application uses the internet to broadcast videos, we recommend that users upgrade their mobile plans to unlimited internet access. On average, a minute of broadcast uses up around 1Mb of your data plan. With unlimited access, users will not incur any minute-by-minute charges associated with mobile internet usage."

That's actually great for operators, drives people straight into the stores to get data plans. Finally an application that people want that requires data. No more "operator pushed" data plans. That's smart.

What do operators have for data in their stores?
Vodafone UK will give you monthly 120MB for 7.50 pounds or for 1 pound/day for casual use you'll get up to 15MB. You'll find this "unlimited with fair use" policy everywhere.
Sprint, a good representative of the new US "Simply everything" set of plans from operators, will give you for $99/month "unlimited data", with the small print "Service is not available to use as modem, ..., other systems that drive continuous heavy traffic or data sessions". W/o a data plan, Sprint data will cost you 3c/kB.

So imagine these guys want to go way beyond YouTube (As you have a cell phone in your povket always, whereas PC cam is...well...connected to a PC). Here's some YouTube stats:
200K video uploads daily. Average Video Length slightly below 3 minutes. Average Age of Uploader: 26.57. That's clearly going to change.

Back-of-envelope math: that's 200k*3*1MB/min = 0.6TB of data/day uplink.

... 0.6TB/day...

here's an interesting quote: "YouTube videos take up an estimated 45 terabytes of storage - about 5,000 home computers' worth - and require several million dollars' worth of bandwidth a month to transmit."

Remember how the introduction of iPhone brought AT&T data network to its knees? I wonder what would this do to the operators, technology-wise and commercially.

I think these guys have got their technology and commercial work cut out for them. Good luck to them!

If you're into weddings, watch the video here



Now all that's left is for someone to step on and play the broker between all these feeds and the news, sports, entertainment channels...

D2C mobile content: Consumers obtain content from various sources (ABI Research)

Just as I was answering a LinkedIn question: "What will it take to create a significant revenue stream from advertising supported products and services on mobile phones and mobile services in a market that is fragmented and tightly controlled by mobile operators?" with the straight answer, Direct to consumer content and services, led by big brands who want to get closer to their audience will drive operator rev share deals, I came to read this post on ABI research's report.

ABI research ran a consumer survey and found pretty compelling D2C findings:
"today’s mobile consumer is more likely to watch a video from YouTube on his or her phone than a video from the carrier’s own service, but is more than twice as likely to get ringtones from the carrier than from any other source."
"(ABI's Michael Wolf:)...despite the strong control most carriers retain over the network, their control over the mobile content ecosystem remains limited. The consumer will see more and more options for obtaining rich media in the future."

Here's several interesting numbers:

• Video consumption (13% of all survey)
• YouTube 35%
• Operator 31%
• Other 24%
• Music
• Sideloaded 48% (Don't ignore the big P2P elephant in the room!)
• Operator 35%
  

"We expect to see increased content acquisition directly to the phone from the Web. And despite a loosening of control over content delivery to consumers, we believe the carriers will ultimately benefit as they open up their networks and handset platforms and look into taking advantage of increased advertising-supported content delivery.”

Wow. I could not have said it better.


Couple of my observations on the numbers above:

• YouTube 35%, Operator 31%: That's very compelling. I heard UK kids are hooked on YouTube on mobile, but didn't realize it was now and that big. I relate the video story being bigger success D2C than it is on-deck in that operators can best leverage the introduction of video to let D2C players sweat it, while they harvest the rev share and data plans, and increase user satisfaction on their network
• Music stats
• Don't ignore the P2P elephant: 48% sideloading music from you-know-where is not something one can ignore and pretend its going to go away. I don't even think legislation can make P2P go away but some think so. No, I think we're looking at a vanishing consumer wallet and people will not pay (much, if anything) for music. We need to figure out alternative revenue channels for the operator, content owner, retailer etc.
• Operator 35% means that there's not a huge D2C music play. why? probably because on deck music was first before anyone thought D2C and the operators are heavily promoting their stores. But I think that's going away: operators are beginning to feel the tiny margins grinding them and they will reverse the model. Instead of managing the store themselves (very costly), they will endorse 2-3 D2C players for their "on deck recommendations", allow D2C to happen on their network and harvest the rev share+data plans.

Anyway, I found this ABI research summary very encouraging. Interested in your thoughts.

As a side note, you may know Groove Mobile sold to LiveWire earlier this week. One outcome is that I'm on the market. Feel free to contact me if you have any needs for a wireless guy. I know something about lots of things (codes, content, D2C, LBS,...) and can make coffee :-)

Vision meets Practicality

Recently I've heard of quite a few mobile startups who decided to be practical about their strategy. Got me thinking of how far do you go believing in a future vision vs. solving a "today" problem.

More and more startups are saying client applications are difficult (dev, QA, distribute, make people aware and use), and so is mobile web. In that kind of environment, why bang your head against the wall? why not use existing well known channels (voice+SMS) to provide the offering? here are a couple of examples:

• Mobivox (BTW, Thanks Nitzan for the good talk you gave this W/E) are saying: mobile Skype is difficult. Let's create a mobile voice portal, where people can dial a number to call their friends, email or text, search, shop,...
• Kadoink are into experiencing music predominantly using a voice call?
• Padpaw are facilitating small social groups using SMS
  
• and Locamoda are saying location oriented interaction could be done in front of an electronic display over SMS

So I think its an interesting trend, which could very well take off and make these guys a lot of money (it better be given the $$ VC put into it). And it's very practical, can't argue with that.

My dilemma as a wireless geek, if you will, is where does that leave the technology, the industry and the consumer.
On one hand it can't be good. Take Mobivox solution for example. A voice portal vision begs the question why do we need WAP portals at all? If they figured out people would rather call a number to search then go to Google's WAP, then that's a very serious point to consider. If people rather make a local call to make a long distance call cheaper, then it begs the question what happened to the hyped "presence (your friend status change) will drive increased traffic"? Reality check: Presence did not take off, nor did IMS, and possibly will never take off. Especially if there's no more business drive behind it.
Why sweat IMS (as example) if nobody cares?

On the other hand it's not so bad news. The "workaround" (sorry if blunt) that uses existing known methods to achieve a functionality could in fact drive the awareness needed to make the case for the "appropriate" solution. For example, some will remember 4-5 years ago there was a discussion of IP vs. CS PoC and IM. Everybody was thinking IP was the way to go. heck, we're talking all-IP networks right? Kodiak's CS solution was treated as the black sheep. well guess whose solution is making strides today. But if users get hooked on PoC, this could eventually drive investment in IP-based PoC.

Anyway, interested in your thoughts re making the "visionary" vs. "practical" strategy direction isn't obvious.

Will D2C drive mass market content consumption?

Interesting discussion this week over Sue Marek's (from Fierce Wireless) post re D2C (gloomy?) likelihood to drive mobile content revenues:

"(re Motricity)...In its place is a more realistic view of the mobile content marketplace and an acknowledgment that you can't be all things to all people. With that in mind, the company is getting out of the direct-to-consumer business...I think it's time for mobile content firms to take a realistic look at the market and understand what's working and what isn't. It's time to stop investing in things that aren't working (direct to consumer) and focus on the basics."

Is it?

I agree that there are a pile of challenges standing in front of mobile content as a whole, add some that mount on as one goes D2C, and yet, I argue that if any channel is going to become mainstream for mobile content, it is going to be D2C.

It is going to be D2C because of two main reasons:

• Technology challenges are going away, opening the playground for big players: sure, there's UI issues, HW (where's my headset?) issue, battery, bandwidth, usability etc etc. but the bottom line is that iPhone UI-likes are here and coming, networks bandwidth is getting better, the recognition that the everyone should be allowed to publish, promote and bill (where appropriate) for their content is there. That means that web-traditional concepts like CPM, CTR and such, analytics etc., are all enabling traditional web (big) players to view mobile as a natural additional channel to have direct relationships with their audience. Mobile is attractive for brands, fan clubs etc.
• The D2C commercial model makes sense (or otherwise, the current one doesn't)
  
• Big players can join the game: Brands, artists, fan clubs: To them, mobile now can become just another channel of promoting their brand, product or service. They spend marketing $ cross carrier anyway, right?. they now have the ability to offer content or services to 100% of the addressable audience (vs. from one operator's deck, addressing 20% at best). They fully independently control the experience, do CRM, support, bill etc. It's a no brainer to strap a mobile channel to existing other channels.
  
• Operators: Operators aren't content retailers: they are content enablers. For operators (IMO), the model where they have to fund development for a tailored solution, then they have to spend the marketing, that does not work. The model that would work is referring selected retailers per content type from their deck, and taking a rev share on that content sold on their network. The additional upside is that bigger players will want to become in that on-deck list of recommended D2C retailers, who will spend cross-network marketing $$ anyway.
  

Last, I want to introduce another comment here. the traditional on deck model is limited also in the type of content and services that operators will license, introduce, market and support. D2C is the way to enable UGC or independant content, they type of content that will bring surprising consumption behaviors.

Interested in comments...I think D2C is new and not easy, but we'll get there, it will take some vision.

PayForWhat?

Recently I had a chance to gt more familiar with PayForIt, "...the new payment service, supported by all licensed UK mobile operators, designed to make it easy to pay for low cost services on the mobile phone."

Also as an introduction I'll say, couple months ago in Boston TiE Wireless meeting on the subject of Mobile payments, I was thinking "why are US startups reinventing the wheel when there's a live, successful reference across the pond?"

To the benefit of PayForIt I'll say it's a game changing cross carrier play. And everything cross-carrier, IMO, is good. PayForIt specifically allows ANY retailer, small as large, to bill for their content: Brands, bands, artists, developers,.... Awesome.
It's pretty thought through and good UI:
(Source) "PayForIt has almost completely eradicated failed transactions, says Bango research."

Complements done, one fundamental gap is the following (check out the latest scheme rules Section R1.5.1):
"all mobile screens presented to the consumer by Accredited Payment Intermediaries"

Nice.

Consumers visit the retailer page, discover content, then being handed over to this "Accredited Payment Intermediaries" page to pay, and then, well, hopefully, are redirected back to to redeem their paid content.

Image courtesy: MXTelecom

I have two reservations with this model:

• Technical: While this may have been an acceptable model in the internet, it is (IMO) unacceptable in the mobile web. What if you enter a tunnel as you just got charged? who knows you paid? does the retailer have an idea you paid? can you redeem the content you just paid for? this has clearly not been thought through
• Commercial: This is just asking for a brawl over who owns the customer for support (the retailer, obviously) or for marketing (Oh, now that's different: I can see the operator, billing vendor, retailer and content owner having a blast over this)
  

Now I can see why the operators and the "Accredited Payment Intermediaries" would put this in place to save them the cheerful chore of trying to police what's happening on their network. I also acknowledge their past bad experience with retailers who offered content with dodgy small print terms.

But there's some sense to be put in as well. The billing transaction could have been completed just as well through a billing web service backend API, and the operators/billing vendors can have alternative ways to police what's presented and enable billing only after their approval.

Handing over the consumer for billing is a bad idea and calls for trouble. The retailer should own the experience end-to-end.