Here Come the Media Phones
By Mark Frauenfelder, Wed Nov 19 14:45:00 GMT 2003

The Nokia 7700 doesn't look like a phone. It looks like a fancy desk clock from The Sharper Image. There's no keypad; instead, it has a large (640 x 320) touch sensitive color screen displaying the latest revision of the Symbian operating system.


Besides its suite of full featured PDA apps, it also has the capability to play MP3s, Real Audio files, and FM radio (allowing users to vote on songs and enter contests with participating radio stations using its "Visual Radio" system). Users can also download movie trailers and purchase tickets. With the optional Nokia Streamer SU-6 accessory, they'll be able to watch digital broadcasts (when they become available). Oh, and the 7700 will let them make and recieve voice calls, too. But the most striking thing about the 7700 is its encapsulation of the mobile industry's desperate longing to get out of the phone business.

All the players are trying to come up with a way to dig out from under their 3G-license induced debt, and they hope the solution is to be found in interactive services and streaming audio and video. Nokia is just one of the many manufacturers and carriers who long to sell pricier devices and premium services. Several other manufacturers are adding TV receivers to their phones, and Qualcomm is developing a video streaming solution for mobile phones. The DVB-H (Digital Video Broadcasting: Handhelds) standard is designed to conserve battery life, and keep streams flowing when the device is moving in a car or train. NEC also has a prototype of a mobile phone that can display digital TV, which will probably be released at the same time or before the 7700 (scheduled for a Q2 2004 release).

Media Eggs and Mobile Chickens

There's definitely a market for consumer media services, at least in some countries. NTT DoCoMo's i-mode, the most successful mobile media operation to date, boasts 39 million subscribers. But the question is, how big is the potential market in Europe and the US? As I noted in my journal last week, a Research and Markets study reports that about 95 percent of carriers' revenue comes from plain vanilla voice service. Text messaging rakes in another 5 percent or so, and the rest, a mere 0.5 percent, is derived from WAP, EDGE, Wi-Fi, and other services. Ouch.

And while Vodafone's Live! gets a lot of hype, the year-old video on demand service has just 3 million subscribers, representing less than five percent of Vodafone's total subscriber base.

It's too early to make the claim that most people don't want handhelds that play live audio and video and offer interactive multimedia services and entertainment. The lack of interest might be a classic example of the chicken-or-egg syndrome. Are customers staying away from premium services because they don't like the services being offered? Or have carriers and manufacturers been afraid to invest the money it takes to create compelling media phones and media services when the customers don't seem to want them?

Where's the Media?

Users could very well be willing to pay for new, expensive media-ready phones, and the services to go along with them, but no one is sure exactly how much they are willing to spend. Will they be willing to pay enough to even cover the costs of media development and deployment? Content doesn't come cheap. In fact, it's always more expensive to create content than you think it is (even when take this fact into account.) Look at all the Web companies that spent hundreds of millions on content creation and are now either dead (DEN.net) or still smarting (Shockwave.com).

There's a lot of money at stake here, and you have to wonder if the industry is putting it in the right place. Ask any user on the street whether he wants better phone reception or clips of last night's football game and guess what his answer will be? Another snag is that some European citizens may have to pay hefty licence fees to use the phone as a digital TV set. Nokia is currently looking into the regulations to find out whether or not mobile users would need to fork over the fee.

With the mobile industries move into media (and the vast resources it's devoting towards developing content and media partnerships), the egg has been laid. Whether or not it hatches remains to be seen.