Delivery, Not Content, is Driving Mobile IT Industry

 
 
By Chris Preimesberger  |  Posted 2005-09-28
 
 
 

SAN FRANCISCO—If Trip Hawkins has it right—and hes a multimillionaire who has been right more than a few times in his business career—then the online wireless IT and entertainment industry had better realize soon that "it isnt all about content. Not now, it isnt, anyway."

Hawkins, founder of the wildly successful Electronic Arts Inc. in 1982 and now founder and CEO of mobile game maker Digital Chocolate Inc., was one of a triumvirate of keynoters Wednesday at CTIAs (Cellular Telecommunications & Internet Association) Wireless IT and Entertainment 2005 conference at the Moscone Center here.

Rob Glaser, Chairman/CEO of Real Networks Inc. and Edgar Bronfman Jr., Chairman/CEO of Warner Music Group, also addressed the audience of about 3,000.

"I know thats a surprising statement, but look at the revenue breakdown in the business: Content sales—meaning games, music, video, etc.—brings in less than 1 percent of all wireless IT revenue. Voice is a $98 billion dollar market, and data is at $4 billion. But content is only a small slice of the $4 billion data figure," Hawkins said.

"What I see at this time is that there is a $94 billion gap to make up, and I think the mobile content industry can indeed catch up to voice. But I believe itll take about eight years to do it," Hawkins said.

This will be accomplished by the creation of more and more successful "social apps," as he called them—online games and services that help bring people together in "virtual villages," which Hawkins, and other visionary IT entrepreneurs, see as becoming more and more instrumental in peoples lives.

These games and services will bring about "new excuses (to engage in) social context," he said.

"Look at all the most successful online services we have now," Hawkins said. "Text messaging, e-mail, chat, voice, personalization of services ... theyre all about people connecting with old friends, meeting new friends, and how they want themselves to be represented.

"The old model was that people grew up in small villages and enjoyed a tremendous amount of personal interaction throughout their lives.

"Now we live in far-flung houses and apartments—most of us in big, impersonal cities—and we spend a lot of time in our cars and at our work desks alone, so were starving for personal interaction.

"Sorry to say it, but an awful lot of us are not happy, and were not sure why. Were bored and lonely. Too often were popping Prozac. We want to interact and be entertained constantly," Hawkins said with a smile.

High quality of content isnt a high priority for the mobile industry, either, Hawkins said.

"Fidelity isnt the issue. (Mobile) applications just need to be simple and work well enough. If you want to play a good video game, better to stay home and turn on your XBox. We need to keep coming up with new ways for people to get together online, new ways to keep the conversations going and get people to hook up with each other."

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He cited the runaway popularity of online fantasy sports leagues for both men and women. "Youd be surprised at how many women are joining those leagues," Hawkins said.

He also mentioned the burgeoning number of people using online dating services and special interest chat rooms, and the number of teens and pre-teens engaging in online games.

"Guys arent apt to call up each other and say, Hi, Im lonely ... lets talk. Theyre much more inclined to join a baseball fantasy league or participate in a March Madness-type score-guessing group," Hawkins said.

"I heard about one very active online game in which two avatars [highly customizable drawings or photos of people, animals, cartoon characters, or inanimate objects that online users employ as identification in communicating with their peers] got married in the game. Later, I found out that the two people behind the avatars really did get married. And have children!" Hawkins said.

If mobile phone content companies can become what Hawkins called "smart BitPipes," that $94 billion gap will be closed in eight years, with enough new social apps.

"This isnt going to happen with traditional content," he said.

Glaser—whose 10-year-old Real Networks has 1.5 million active subscribers to its Rhapsody music-download division—focused on the challenges delivery networks like his have in solving problems related to the "fragmentation of the handset market" due to the explosion in the number of new handset configurations on the market.

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"With the carriers now moving to 2.5G and 3G, products such as streaming radio, on-demand music and on-demand radio streaming will become more attractive to users," Glaser said.

"We have some hard problems to solve: The applications are quite complex, the delivery systems can be difficult to master, and the applications that were once the domain of high-end users are now crossing over to the mass market. But I have no doubts that we and others (content delivery companies) will be up to the task."

Warner Music Groups Bronfman discussed IP litigation involving illegal music downloading and how the litigation has diverted the music industrys attention and resources in the last two years.

"While the Grokster litigation has thrown a spotlight on the Internet, the intertwined destiny of music and technology is hardly anything new," he said.

"The history of singles and albums—whether on vinyl, 8-track, cassettes or CDs—reflects the fact that artists compose songs with an innate understanding of technological parameters, and music companies develop different economic models based on those parameters.

"We are excited by the power of digital distribution now available to every potential artist," Bronfman said. "We (at Warners) see our mission as not to control the means by which artists voices are heard, but to amplify those voices.

"We believe even more today that new economic models which can take advantage of the distribution power of the Internet and wireless platforms will lead to a true renaissance of the music business," Bronfman said.

"Technology shapes music. Music drives technology adoption. If you need any further proof, just look at the iPod."

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