Mobile Sands

June 6, 2009

Smartphones may Herald the Golden Age of Internet Radio

Though Internet Radio has been around since the mid-nineties, it has not seriously challenged good-old FM radio (“Network radio”) in the same way that Internet video (YouTube, hulu and others) have challenged Network/Cable TV.  The reason – over 60% of radio listening is done “on-the-go”. And of the 40% of radio listening that is done at home, most is done while doing other things around the house – not when the listener is on her PC.  Well,  3G-capable smartphones change all this.  

Pandora, NPR, Y!Music and more

Pandora, the web-based service that let users create their own radio station, is the #1 free music application on Apple’s App Store, and is ranked #20 among all free apps.  Other personalized streaming audio apps on the iPhone include Slacker and CBS-owned Last.Fm.

Interestingly, network radio has been quick to enter the smartphone radio market.  NPR makes 300 of its stations available through the Public Radio Tuner app, ranked #5 among all free music apps.  Clear Channel, the largest owner of FM radio stations in the US makes some of its channels available through iHeartRadio.  Many CBS stations can be heard via AOLRadio.  Yahoo! Music launched an iPhone version of their service few months ago, and one can listen to thousands of radio stations from around the world using apps like Radio, ooTunesRadio, allRadio and WunderRadio.  

Many Internet Radio apps are quickly making their way to other smartphone platforms as well.  Slacker offers a Blackberry App. Pandora has been available on Blackberry, Windows and over 50 feature phones for a while but it recently made a  conscious choice to focus on Palm Pre as its second major smartphone platform. As a result, Pandora comes pre-installed on the Pre.  Mumbai-based Geodesic is focusing on Blackberry and Symbian phones instead with its Mundu Radio application.

Unlike mobile video, carriers are not blocking Internet radio

Wireless carriers are not blocking Internet radio applications because its bandwidth requirements are in line with 3G.  Internet radio stations use streaming rates between from 28.8 kbps to 128 kbps, speeds that can be easily supported even over moderately loaded 3G networks.   Someone who commutes for 2 hours/day for 22 days a month and listens to Pandora at 128 kbps would download around 250 MB of data – not a very large amount, and definitely within the data caps imposed by most 3G providers.  

Time for 3G carriers to challenge Satellite Radio

The main value proposition of satellite radio has been that one can listen to hundreds of radio stations, without the hassle of searching for the right one when crossing over from one metro area to another. Well, now a listener can do exactly that and much more with Internet radio on her mobile phone. She can listen to thousands of radio stations from around the globe or even better, listen to a station completely personalized to her tastes.  And do all this without paying anything over and above the price of the a 3G data plan.  

Though 3G carriers are not actively promoting Internet radioon phones  and challenging satellite radio, they should, and make a play for the dollars that are going to Sirius/XM today.  Sirius/XM charges $9.99 – 19.99 for its multiple radio station services and had 18.6M subscribers at the end of Q1’2009.  If these 18.6M subscribers were convinced that they could get the same selection of radio stations (or even better – personalized radio stations!) on their 3G phones – in addition to email, web and more – it would be easy for them to sign up for a $30/month plan.

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May 8, 2009

Palm Pre May Revive Sprint’s Fortunes

Filed under: iPhone, Smartphones — Tags: , , , , — AJ @ 8:44 pm

Palm Pre has been getting rave reviews from all those who have seen it and many believe if there was ever an iPhone killer, this is it.  In a few weeks, Pre will be available exclusively on the Sprint’s network and combined with all the operational improvements Sprint has done in the last 18 months, it may very well revive Sprint’s fortunes.

What’s special about Pre?

 It has singular design vision – just like the iPhone. Almost two years ago, Palm managed to hire Jon Rubinstein, previously Apple’s head of hardware engineering and the guy behind Apple’s product design revival over the last decade – from iMacs to iPods (see details in Newsweek story). As WSJ reported in December 2007,  Jon has been actively involved in designing Palm’s smartphones and setting its strategy. Plus, as the Executive Chairman of the company, he has given “design” a seat on the board.

Palm started building buzz around the Pre at CES 2009 and it wowed everyone who saw it. Here is a link to a video recording of Pre’s CES debut. And here is another video that shows some of the really cool features of the phone – including its advanced multitouch capability, QWERTY keyboard, and amazing graphics.  At the heart of Palm Pre, is a new operating system called WebOS. According to a recent article in The Industry Standard, developers who have created apps on WebOS agree that it lives up to its hype. And according to Fast Company, Palm Pre can give iPhone 3.0 (the next-gen iPhone) a run for its money.

Though Palm will not have the tens of thousands apps that Apple boasts at the time of launch, it is working on getting all the top applications on the device before launch, from Google and Facebook to integration with MS Exchange and Pandora.  Just like iPhone, its browser is based on WebKit and beautifully renders web pages. And yes, it has a music store too – from Apple’s arch-rival – Amazon. 

Sprint has dry powder

 Palm Pre may be able to work a charm at Sprint only because Sprint (under CEO Dan Hesse) has aggressively trimmed its capital and operating expenses over the last 18 months, and has maintained positive free cash flow despite losing almost 6 million post-paid subscribers. 

Sprint has countered some of  the subscriber losses by winning pre-paid subscribers (its Boost service added ~700K subs in Q1’09) and adding more wholesale subscribers (like Amazon Kindle).  But more importantly, it has slashed cap-ex (Q3’07: $1.2B, Q1’09: 0.3B), and trimmed operating expenses (SG&A Q3’07: 2.7B, Q1’09: 2.2B). As a consequence, it generated $536M of FCF in Q4’08 and $796M of FCF in Q1’09. At the end of March 2009,  Sprint had $4.5B of cash and cash equivalents – a significant war chest to compete with the biggies.  (All numbers from Sprint Investor website)

A resurgent Sprint – small, nimble and hip?

If Palm Pre lives up to its hype, it would help Sprint reverse post-paid subscriber losses.  Consumers want cool devices, and just like Apple, Palm has its cadre of loyalists.  Not only can the Pre win new subs for Sprint, it can create a positive “hip” halo around Sprint.  The Pre, combined with the growth of Boost Mobile, could help Sprint reverse the trend of subscriber losses and may even add 5M between March and December 2009.

The world (yes, that is correct) needs Sprint. The US has been the center of wireless innovation – from new air interfaces like CDMA and WiMAX to devices like Blackberry, iPhone and now Pre – because it has carriers that need to compete.  And for competition to be vibrant, Sprint needs to be successful.

April 28, 2009

Amazon Gets eBook Store on iPhone by Acquiring Stanza

Filed under: App Store, eBooks, iPhone — Tags: , , , , — AJ @ 3:10 pm

One of the key features missing in Amazon’s Kindle iPhone app is the ability to browse and purchase eBooks.  A customer must purchase eBooks through Amazon’s website and add them to her account, before she  reads them using the Kindle iPhone reader.  As I have speculated in earlier posts, this feature is missing because Apple does not want anyone, especially Amazon, to create an alternative to its App Store on the iPhone.  However, one eBook seller that had slipped through iPhone’s app approval process was Lexcyle/Stanza – back in the days when Steve Jobs was saying that “people don’t read anymore”.  Yesterday, Amazon acquired Stanza and may have fixed that gap in its offering.

Back in January (before Kindle’s iPhone app was released), I spent some time comparing Stanza and Fictionwise’s’ eReader. While (in my opinion) eReader offered a better reading experience, Stanza offered a better way to browse and acquire books.  Stanza has tie-ups with several book sources (Fictionwise, feedbooks, Smashwords etc.) and provides book reviews from GoodReads. Unlike eReader, customers could browse through all these book catalogs without logging in, and it was easy to purchase books.  

Stanza grew quickly and was downloaded over 1.5 million times. However, things started changing after Amazon released the Kindle App in early March.  Another established bookseller, Indigo, released its Shortcovers app. And, at the same time, Stanza’s main book seller partner, Fictionwise got acquired by Barnes and Noble.  Plus, several publishers are now selling books as stand-alone apps on iPhone. With larger booksellers in the game, Stanza probably became untenable as a stand-alone business, and agreed to Amazon’s embrace. Amazon now gets the Stanza store, and we wil see how the Stanza store changes in coming months.

March 28, 2009

Open Access Makes Networks Valuable Platforms – Not Dumb Pipes

Filed under: Android, App Store, iPhone, LTE, Mobile Apps, New business models — Tags: — AJ @ 2:13 am

“Open” is in the air 

Recently AT&T chief Ralph de la Vega talked about open development platforms with FierceWireless. In his view, handset platforms are not open if they use proprietary APIs to access handset capabilities and he stressed the need for open APIs within handsets. A friend at Verizon reminded me earlier this week about Verizon’s Open Development Initiative (ODI) which allows third-parties to get hardware certified to work on Verizon’s network and Verizon’s upcoming 4G innovation lab

Among handset vendors, Nokia wants to open-source Symbian and Google is already doing so.  Google’s Android, in particular, is widely regarded as open. In contrast, many industry commentators, including FierceWireless editor Sue Marek, call iPhone and Blackberry closed because Apple and RIM will not license their OS to other handset vendors.

 Defining “open”

 If we are willing to accept the Internet as the gold standard of openness, the more a system resembles the internet, the more open it is. Therefore an open system is one that

  1. Anyone can access on equal terms
  2. Anyone can build content and applications on equal terms
  3. Anyone can distribute their content and applications on equal terms

Based on this definition, Apple’s iPhone provides a remarkably open platform for application developers and consumers, even while Apple keeps its OS closed to other hardware manufacturers. In a sense, iPhones are a similar to Sun Servers that power large parts of the Internet – a proprietary hardware/software combination that is available on equal terms to users and developers.

 “Open” does not mean “free”

Since the terms “open source” and “free software” have been used interchangeably, it has created the impression that free means open. This is not true in general. For example, free broadcast TV is actually a closed system.

On the other hand, two of the most valuable “open systems” we all use – the electricity grid and the phone system – are not free. However, they are open because everyone can access them on equal terms. Anyone can create applications and end-points for them (cordless phones, answering machines, refrigerators) and can distribute these applications. Technical standards that require patent holders to contribute IPR under a FRAND regime are open in the same way.

 The “dumb pipe” misnomer

Whoever came up with the term “dumb pipe” did a tremendous disservice to the mobile industry. Imagine how people at facebook would have feel if they were dubbed  “that dumb online directory” for offering open access to application developers. Instead facebook have been celebrated as a “platform”. In the same vein, the right way to describe a network that provides open access on equal terms is not “dumb pipe” but “platform.”

Once network providers start thinking of themselves as platforms, they will see the benefit of allowing huge number of third-parties to create applications on their platform.  Most of these applications will fail, but the applications that succeed will not only make the developers who creat them rich, but will also make the network  incredibly valuable for consumers, and for the investors who own the network.

 

March 20, 2009

With iPhone OS 3.0, Apple Takes Aim at Game Consoles

Filed under: App Store, games, iPhone — Tags: , , , , , — AJ @ 12:44 am

Apple may have single-handedly revived the mobile games market.  Within 8 months of iPhone 3G’s launch, more than 6200 games are available on Apple’s App Store and 74% of them require payment.  And iPhone users are downloading them, voting with their dollars for the games they like.  At the end of January reported that 32.4% of iPhone 3G users download games, compared to 3.8% of all mobile subscribers.  

With iPhone OS 3.0, Apple is going after gaming consoles popular with casual gamers – Nintendo DS (NDS), Playstation Portable (PSP) and Nintendo Wii, by providing:

  • Peer-to-peer gaming over Bluetooth. P2P gaming (over WiFi) is a very popular feature of NDS and PSP. Apple claims that its “Bonjour” application will discover other users who are playing the same game, and customers will not have to do manual Bluetooth pairing
  •  Accessories controlled via iPhone. Accessories are a big part of Wii’s value proposition, enabling products like Wii Fitness and EA Active. Now similar applications can be created for iPhone devices

Further, iPhone OS 3.0 will offer “In-App” purchases. This enables developers to use business models similar to those used for PC games. Developers can

  • Offer subscription based pricing, popular with PC-based MMOGs
  • Start users on free version, then convince them to upgrade to a premium version
  • Sell a wide range of virtual goods

By offering developers 70% of the selling price, Apple has attracted a wide range of developers – small and large. Several experienced independent game developers have hit the jackpot and some small development teams like Smule are turning their hits into venture-funded game studios.   At least two large publishers, EA and Gameloft, are making a significant investment in iPhone games and seeing real revenue.  Gameloft has 20 games available on iPhone and, by early March, had seen 2 million downloads. With In-App purchases, Apple is further sweetening the deal.

Apple’s installed base is still a fraction of NDS, Wii and PSP. According to Nintendo’s Q4’2008 results, they had sold 96 million NDS and 44 million Wii devices worldwide.  Sony PSP has an installed base of 50 million units. In contrast Apple announced on March 17th that it had sold 30 million iPhone 3G and iPod Touch. Probably, just 30% (i.e. 9 million) of these are used for gaming. Still, Apple is growing its base at a rapid clip and I will not be surprised if the number of iPhone 3G and iPod Touch devices crosses 100M by the end of the year – a respectable market share compared to the console biggies.

Update (03/25/09)

March 14, 2009

Windows Mobile Needs a Killer App To Attract Developers

Filed under: Android, App Store, iPhone, Smartphones, Windows Mobile — Tags: , — AJ @ 5:22 am

Earlier this week, Microsoft announced that like Apple, Android and Nokia it will give developers 70 percent of app sales revenue.  However, unlike other platform providers, it will provide  “transparency throughout the certification process, and guidance and support from the stage of development to the final sale to the consumer.”

Microsoft’s differentiation sounds good on paper and I have read analysis which claims that since developer relations is Microsoft’s strengths, leveraging it against the czars of Cupertino is a wise thing.  Even if Microsoft can economically provide cradle-to-adulthood support to hundreds of thousands of developers, will that be enough to attract the best developers to WinMo?

The best development teams are breaking down walls to create fantastic apps. They will build their apps for platforms which consumers buy.  Android is a case in point. Despite all the buzz around it, Android Market has around 1000 apps compared to over 27,000 on the App Store. Unless the G1 moves off-the-shelf as fast as iPhone, majority of developers will not invest in it.

To really get legions of developers on board, Microsoft must find a way to make Windows Mobile devices fly off the shelves. To do so, Microsoft needs to internally develop (or acquire) at least one application that alone provides enough reason to buy and love a WinMo6.5 device – a killer app.  Blackberry’s killer app is Wireless Email and Apple’s killer app is Safari.  What does Windows Mobile have up its sleeve?

To close off, I don’t think is lousy in supporting developers, it is just selective.  Recently, I went for a talk by Jamie Gotch, one of the two developers who created the hit iPhone game, FieldRunners. Jamie talked about how extensively Apple promoted their game once it had received great reviews from users and the press.  And this afternoon I was reading about how Apple has allowed another top gaming app iMafia – a multiplayer online role playing game – to do microtransactions. Bottomline –  if a developer builds an app that consumers love, Apple will bend the straitjacket and provide it great support.  Rest of the developers should just be happy that they get to hang out with the hip crowd.

March 9, 2009

Blackberry App World Looks Well Thought Through

Filed under: Android, App Store, iPhone, Smartphones — Tags: , , , — AJ @ 8:58 pm

Recently, RIM disclosed more information about its planned application store, now called “Blackberry App World”. Information on a FAQ posted on RIM’s website shows that its store addresses several shortcomings of Apple’s store and tries to replicate what worked well for Apple. Here are few things that I liked:

  • Leverages Paypal to reduce purchasing friction – Customers with Paypal accounts will not have to go through the hassle of establishing a new account to download their first app. This is similar to Apple’s strategy of leveraging iTunes accounts to reduce friction on its App Store.  However, it remains to be seen if Blackberry will use free apps on its store to drive Paypal sign-ups,  something Apple does.
  • Sets $2.99 as lowest price to entice developers to invest – Blackberry is pushing for higher quality applications because it is unlikely to beat Apple on the sheer number of applications (Apple claims to have over 25,000). Though there is no guarantee that a $2.99 application will necessarily be better than a $0.99 one, it does provide developers with a business case to invest more.  Blackberry users will not lose out on apps are available for $0.99 on App Store because most such apps have free (“ad-supported”) counterparts that will eventually make their way to Blackberry
  • Allows developers to offer “Try and Buy” – Blackberry allows developers to chose if they want customers to try their application before they buy it. This is a better model than Apple’s, where developers who want to encourage trials have to create and distribute a “Lite” version or Android’s where all apps are “try and buy”by default (since they are returnable in 24 hours)
  •  Offers flexible licensing schemes to attract enterprise software vendors- Blackberry allows software vendors to run their own license distribution servers. This enables software vendors to implement pricing schemes in which they sell a pool of software licenses to large corporations.
  • Is customizable per operator – Gives operators (and developers) control over which apps are distributed in which markets.

Blackberry’s policies combined with the fact that it offers a higher revenue share (80%) than all other application stores should win it developer support. Now, Blackberry needs to do three more things to effectively compete against Apple:

  1. Offer a fantastic shopping and usage experience to buyers
  2. Convince operators and developers that it has momentum
  3. Create awareness about the applications available on its platform

Let us wait and see how it goes.

    March 4, 2009

    Apple allows Amazon to Sell eBooks on iPhone

    Filed under: App Store, eBooks, games, iPhone, Smartphones — Tags: , , , — AJ @ 3:35 pm

    Apple approved Amazon’s Kindle eBook reader app on the iPhone today. A few days ago, it had allowed Indigo Books’ Shortcovers eBook store.  In a previous post, I had speculated that Apple may not do so and try to sell eBooks itself. Not so.  In the last two months, Apple has also allowed several third-party browsers – something many did not expect last year.  

    These deciscions indicate that Apple cares less about selling digital content (books, apps, games, music) and more about dominating the smart phone market; that it regards Nokia, Blackberry, Windows and Android as its competitors competitors – not Amazon.  And that it regards building a profitable app ecosystem as a way to strengthen its position as the leading smart phone supplier.  This seems like a very wise strategy.  

    Now that Apple has opened the door to companies who want to sell different forms of digital content on iPhones, one of these days, we may even see a digital music storefront show up in the App Store! And maybe some startups will try to create niche marketplaces to sell apps on the iPhone.

    I did download the Kindle app on my iPod Touch.  It looks like a rushed job – a land grab rather than a landmark. Right now, it is exactly what Amazon’s spokesperson calls it – a companion to Amazon’s Kindle device.  A user cannot browse or buy books from the app; that can only be done online or via Safari.  Not exactly, “1-click” shopping.  Further, Amazon does not provide any free, off-copyright books. I expect App Store users to rate the Kindle app at 2.5/5.  Still, not great news for startups like Lexcyle. Or for publishers who are troubled about Amazon’s power in the book industry and would prefer open formats like ePub rather than Amazon’s proprietary format.

    February 21, 2009

    Android Market’s Return Policy Will Discourage Developers

    Filed under: Android, App Store, iPhone, New business models, Ovi, Smartphones — AJ @ 5:03 am

    Looks like Android team did not see PinchMedia’s presentation on “iPhone AppStore Secrets” before publishing Android Market Business and Program Policies that allow buyers to return an app within 24 hours of purchase! 

    PinchMedia is a New York based company that provides app developers with an analytics library to monitor usage. 30 million of the over 500 million downloads from Apple’s store had their analytics software. The numbers collected by PinchMedia show that less than 30% of people who paid for an app used it after 24 hours.  This is not surprising considering that the average number of apps downloaded per iPhone exceeds 30. Those who did not use an app 24 hours after buying it effectively got suckered, but considering that most apps are priced around $0.99, looks like many consumers don’t mind doing a paid trial.  And if you are a developer burning the midnight oil, paid trials rock.

    No one gets paid trials in the Android Market (are paid trials evil?).  So once buyers realize that the new fart app (or the advanced tip calculator app) is’nt any more useful than the one they already have, they return it.  This no questions asked return policy will definitely increase the number of paid applications trialed, but is it good for developers?

    I don’t think so. The folks at Google could argue that “no-questions asked” returns leads to happier customers.  But will these happier customers pay more for apps on the Android Market than they do on Apple or Nokia’s stores? Unlikely. With a few exceptions, two apps that do approximately the same thing will be priced at approximately the same price in different app markets.

    If the average retun rate on Android turns ends up being 75%,  a developer will need four times as many downloads on the Android Market than it  gets on the Apple’s store to make the same amount of money.  That may happen someday, but for now, developers are better off creating paid applications for Apple and Nokia’s Ovi (Symbian) stores.  And I hope the folks at RIM do not follow Android’s path while creating the Blackberry Store.

    February 13, 2009

    An Amazon App Store?

    At MWC next week, Nokia, Samsung and Microsoft are expected to either showcase their mobile application marketplaces (“app stores”) or at least share detailed plans regarding them. Google has announced that its Android marketplace will start supporting paid apps next week. Blackberry  and Palm have already joined the race to build app stores. The one company that has every right to be in race, but has been conspicuously quiet is Amazon.

    An “App Store” is a store

    Handset vendors rushing to emulate Apple’s success may be forgetting that Apple was one of the world’s leading online retailers of digital content – long before it launched iPhone or its App Store.  Apple, in fact, launched iTunes “jukebox” in Jan 2001, 10-months before the first iPod hit the market.

    Apple’s experience in selling music and video online is evident in the way it organizes mobile apps in the iTunes store, from creating top-10/top-50 lists in a wide range of categories to highlighting notable new apps and providing automated and staff recommendations.  Consumers have shopped with iTunes for years. How many handset companies have this kind of expertise?

    So, why not partner with Amazon?

    In coming years, for a handset to succeed, it will need a rich set of applications. People will not only buy a handset for how it looks or what it costs, but for what it does. Applications will be source of stickiness for both handset vendors and operators. Operators and handset vendors who will not have access to a large ecosystem of application developers will lose subscribers, market share and profits. See my previous post comparing Verizon and AT&T’s performance in Q4’2008.

    Not only is Amazon trusted by millions of consumers and has the technology to sell in a compelling manner, but it also has demonstrated that it can succeed in selling digital content. It started a digital music store in Sept 2007 that, in 14 months, became the #2 digital music store. Still far behind Apple, but way ahead of Microsoft. With Kindle, it has shown that it can not only sell lots of DRM-free MP3, and but also work with a large number of publishers and create a profitable, new market.  Can Nokia claim such success with N-Gage?

    I am all for the creation of mobile application marketplaces and wish that the new entrants succeed. I just have a nagging feeling that these attempts will look similar to the attempts of dozens of bricks-and-mortar retailers to enter the online retail business in mid-1990s.

    Place in the sun for Third-party App Stores

    Thankfully, all handset-platform vendors other than Apple are allowing third-parties to create marketplaces. This has allowed companies like Handango and PocketGear to be built, and is allowing Samsung to launch an app store. This keeps the doors open for Amazon to build an app superstore in the future, or for other customer-focused niche marketplaces (think Zappos) to appear.

     

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