Kaufman Bros: Impressions Of CTIA

CTIAInvestment banking firm Kaufman Bros went to CTIA, and thought the atmosphere was “somber” and “cautiously enthusiastic”. They sent a short newsletter…
“The industry is seeing another year go by with ringtones still the most popular category of content and applications. Mobile games are seeing several bottlenecks in the industry; mobile music and TV are emerging but participants are still searching for the right business model. It might be presumptive conclusion on our part, but this could be the reason for the lack of exhibit floor participation by major players.”
Mobile music hot topic of the conference
Kaufman Bros believe “there are fundamental differences between the online and mobile music models which could prevent commoditization on the mobile platform”. While online has “unlimited” distribution models leading to price wars “mobile will have limited distribution i.e. carrier decks”, and this will mean the mobile music model will emerge as a partnership between the content provider (owner) and carrier, with no role for any one in between, according to Kaufman. I’m not sure I agree with the assessment that mobile music will only be distributed from the carriers decks, nor with the implied assumption that mobile music and online music will not be competing against each other.
Mobile gaming continues to be the next big thing
While there is a lot of excitement over mobile games Kaufman sees several bottlenecks in the development of the industry:

  • Carriers are limiting distribution: Carriers have spent billions on building out their networks and hence want to control the distribution of content for a larger piece of the economics.
  • Demand and supply: Research has proven that in the mobile arena, customers want casual games and a large % of mobile game players are women. Despite this information, most of the games being produced are action games, geared mostly toward men.
  • Content owners are limiting availability: Brand owners are being very cautious with their content and evaluating their options – should they do direct deals with carriers or license the brand to third parties?
  • Limited cell phone capabilities: Only a subset of phones are capable of advanced apps like games and TV and this is a severe bottleneck.

Mobile TV
“Mobile TV, in our opinion, might be closer to the mainstream than most people expect,” wrote Kaufman. “We believe that brand owners and service providers have assessed this business correctly, not only as a medium for re-purposing old content, but also as a platform for new original content. Popular categories of content include news, comedy and Hollywood. According to some estimates, this could develop into 10 times the value of mobile gaming.”
And the carriers?
In Kaufman’s view carriers need to do a few things to encourage mobile content sales. First, they need to increase off-deck sales… “carrier decks are not made for browsing and hence only the top few listings get most
of the downloads. This has restricted growth and developers are suffering as a bargain. Second, data services are expensive…”at $10-$15 per month, the value proposition is not there for the customer. In the experience of SK Telecom, voice is the main mobile application and the other services need to be made more affordable.”
Once SK Telecom started offering all-you-can-eat music for $5 per month, mobile music sales have stayed ahead of CD sales in South Korea.
I don’t know how keen the carriers are to lower their data charges, probably not very…but with the broadcast technologies in development there should soon be a cheaper way to get content to the handset, especially mobile video, of course.
Our CTIA/MES coverage is sponsored by Motricity.

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