Stay on Top of Enterprise Technology Trends
Get updates impacting your industry from our GigaOm Research Community
A new no-contract, prepaid carrier called ROK Mobile is joining the ranks of mobile service providers in the U.S., launching patriotically on July 4th. But instead of just offering big buckets of data on the cheap like many of its virtual carrier peers, ROK has added a twist: It isn’t just a gateway to the internet, it’s a mobile music service.
ROK is combining the business models of a prepaid mobile virtual network operator (MVNO) like Straight Talk or Republic Wireless with that of streaming music service outfit like Spotify, but from the customer’s perspective it’s all one service. It will offer a single plan at a single price that includes unlimited voice, SMS and data as well as unlimited access to a 20 million-song music catalog.
And what will that price be? ROK is keeping that number close to its vest until its official launch next month, but ROK co-founder and chairman Jonathan Kendrick and COO Gabriel René sat down with me recently to talk about their plans.
First off, ROK founders aren’t coming from your typical tech or telecom background. ROK’s other co-founder John Paul DeJoria heads up John Paul Mitchell Systems, which creates the Paul Mitchell hair-care line, and he co-founded premium tequila distiller Patrón Spirits in 1989. Kendrick started the ROK Group with DeJoria, which has launched or invested in companies selling everything from mobile TV to mineral water.
Kendrick is no telecom novice. The first iteration of ROK developed the prepaid voucher technology for BT Cellnet (now O2) that is now a key component of any prepaid service. But Kendrick acknowledged that ROK’s primary strength is in marketing, which is exactly what an MVNO is about. MVNOs are network-less operators, selling other carriers’ minutes and megabytes but repackaging and branding the service in a way to appeal to different demographics.
Making music the centerpiece
In the case of this MVNO, ROK is clearly targeting the growing audience for mobile music and online streaming. This a group that’s more tech savvy — they all own a decent smartphone — but one that’s increasingly reluctant to pay for music by the album or by the song, Kendrick said. Thus digital entertainment services began offering music by the subscription, Kendrick said, but consumers have become increasingly frustrated with those subscription options: You either get a limited service laced with ads or you pay a monthly fee.
Paying to make ads go away is like making a negative purchase, Kendrick said. “It’s like buying a non-alcoholic beer because you’re driving,” he said. “You have to, but it hardly seems worth it.” ROK will appeal to an audience that feels music should be a basic feature of any mobile internet service, Kendrick said, just like SMS or voice.
There’s definitely already a forerunner for this kind of business model. Regional operator Leap Wireless launched Muve Music, a subscription song download service included in its higher-end mobile plans. It had a hit on its hand, growing to 1 million users in two years, making it the second largest subscription service in the U.S. behind Spotify despite the fact it was available only in Leap’s limited regional footprint. (AT&T(s t) bought Leap and is now looking to sell Muve.)
Muve, however, is a bolt-on feature to what was essentially a voice-driven prepaid service marketed at low-income consumers and minorities, René said. It is also limited, offering songs by the download only with no streaming or radio features. The fact that Leap was so successful with Muve, despite those limitations, shows there’s pent-up demand for this kind of combination of music and mobile, René said. ROK’s plan is to refine that model, he said, targeting a mainstream audience with more sophisticated technology.
Key to that strategy will be ROK’s music app. It built the service in-house with a development team drawn from the entertainment and mobile industries and it aims to combine many of the best elements of other streaming services on the market, René said. As with Spotify, ROK customers will be able search and stream any song, create playlists and collections and download music for listening when no data connection is available.
ROK is also using algorithm-based personalization technology like Beats Music and Pandora(s p) to offer internet radio services based on specific songs or artists as well as music recommendations. And according to René, ROK has developed some features that will make its service stand out from the rest. It has created “filters,” which customers can apply to playlists and music to further personalize their music streams. René wouldn’t go into too many details ahead of ROK’s launch, but as an example, he said, listeners would be able to filter song lists by their moods.
Though it won’t be available at launch, ROK is developing a web app that will let customers access the service from a browser so they’re not tied down to their smartphones. René said ROK also plans to build other music-related apps available exclusively to it customers, though he wouldn’t reveal any specifics.
Now, here’s the weird thing…
ROK’s app won’t be tied to its phones, but its service will. Anyone will be able to download the app from iTunes or Google Play and even launch a 14-day free trial subscription. But to continue to use the service, you need to become a ROK Mobile phone customer.
That’s a key component to its marketing strategy. Potential customers can test the service before they make the big decision to switch carriers. But ROK isn’t interested in launching an independent music streaming service. It wants ROK Music tied directly to ROK Mobile, the same way Apple’s core services are tied to the iPhone and Mac. When ROK goes international, it will go international as an MVNO, Kendrick said.
Speaking of the iPhone, ROK will sell it along with a complement of mid-range and high-end Android handsets. But it’s also encouraging customers to bring their own phones. ROK is actually working with two mobile operators, one GSM and one CDMA, to make its service available on a much wider variety of devices that consumers already own. Kendrick wouldn’t name those carriers, but we can make an educated guess: T-Mobile(s tmus) and Sprint(s s) are the only two U.S. carriers that will allow MVNOs to sell unlimited data plans.
And by unlimited, Kendrick said he means unlimited. The plans will have fair-use data policies attached them so if you use your phone as your home broadband connection you’ll get cut off, but customers are free to use data on their phones anyway they like, Kendrick said. To help offset its data costs, ROK is tapping Devicescape’s crowdsourced Wi-Fi network.
Will it work? ROK seems to have something compelling, but other carriers have gotten wise to the potential of mobile music as well. Sprint and AT&T are partnering with Spotify and Beats respectively, offering discounts and crafting shared music subscriptions that can be used across multiple devices.
ROK’s success or failure likely depends on the one factor we don’t yet know: price. The current breed of MVNOs have carved a market for themselves with a simple proposition: cheap smartphone data. If ROK can add a compelling music service on top of an unlimited data plan and still undercut the major carriers on price, then it could have a winner on its hands. That model certainly worked for Muve.
This post was updated at 9:15 AM PT to clarify Kendrick’s statements on consumer attitudes to purchasing music.