Commentary

Why Apple and Wal-Mart Are Poised To Rule The World Of Mobile Media

As a business traveler, I've witnessed a very interesting shift over the past two years. Business fliers, first to watch DVDs or videos on their laptops, are now watching movies and TV shows on their iPhones or iPod touch -- while laptop playback is on the decline.

Now, this certainly isn't a scientific study, but given how much I fly, it tells me that the ubiquity and ease of use of a mobile device will put more mobile media in the hands of more people faster than anything else thus far. This is worth noting since new technologies often find themselves in the hands of business travelers before they make the jump to the larger, more profitable consumer market.

So why should media professionals, Hollywood studios, wireless carriers (other than AT&T) and phone manufacturers (other than Apple) pay attention to this?

On December 28, Wal-Mart began selling Apple's iPhone -- and made sure that its customers knew about it. The cover of the retailer's 15-page Sunday flyer featured the iPhone3G (8GB) for $197. Best Buy chose to retaliate by dropping its price to $189.99. Frankly, the price difference will probably do little to sway those willing to pop for a $200 phone -- and, more significantly, the two-year contract and monthly data charges that go along with it. IPhone's move into Wal-Mart is not about the discount of a few dollars, it is all about Apple striking while the iron is hot and expanding the accessibility of this must-have product. With one fell swoop Apple (and AT&T) put the iPhone in the retail chain with more accessibility than any of the U.S.-based smart phone rivals.

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So why is this product so hot? It's widely perceived that the "phone" component of the device is not the greatest in the world. So why do so many iPhone users buy the iPhone as a secondary device for video playback, mobile Web, and the applications?

alking down that airplane aisle got me thinking about the increasing need for "pervasive mobility" -- especially as it relates to Hollywood and mobile media. This deserves deeper exploration, especially when factoring in the recent iSuppli figures for Q4/08 that showed -- for the first time in history -- that notebooks outsold desktops, with an increase of almost 40% year-over-year. However even the laptop does not bring with it the advantages of the always with-you, always-connected cell phone -- which is now much more than just a phone. Manufacturers would prefer you take a closer look at the features and applicability to your lifestyle and refer to it as a "mobile device" or "smart phone." But really it's a computer, darn it, with real operating systems (that are getting better with each release), real applications, and unimaginable amounts of fast, cheap mass storage.

So what did Apple do right, and -- more importantly -- what should content providers and other wireless carriers understand in order to take advantage of this trend? What companies are best served to capitalize on getting devices and media into the hands of as many people as possible? As more of these media-ready devices are purchased, how will consumers obtain their mobile-ready content?

There are only a few ways to get video to a mobile device: stream it to the device over the carrier's voice/data network, broadcast to the device via dedicated broadcast spectrum, or sideload the video via a USB cable.

The streaming model was the first to emerge. This unicast model allows content to be delivered on demand and programs can be watched in their entirety. But even with the transition to 3G, this model is still plagued with a cost that is directly proportional to quality. Get close to the bit rate that the consumer finds acceptable and the cost of delivery to the carrier becomes a losing proposition. Delivering video to individual users quickly bogs down the network, preventing the more profitable voice, text, and data communication from getting through.

>The more recent broadcast offerings include MediaFLO via Verizon and AT&T or DVB-H in Europe. This dedicated spectrum is separate from the carrier's voice/data network, so quality is better than that of the 3G unicast model. However, these broadcast content offerings provide limited selection, usually programming that users already have access to at home "for free." But even more limiting is that mobile broadcast does not (as yet) offer time-shifting capabilities. You get what you get when you tune in . . . it's a broadcast schedule, not yours to schedule. By all reports, mobile broadcast is not profitable anywhere in the world. And, unless the event is something that users can or will tune into now, such as news or a sporting event, the broadcast model is probably a losing proposition for most tech-savvy discriminating consumers.

What Apple got right is that simply putting any video on a device is not enough. It has to be "my TV" or "my movies" for me to be willing to pay -- not content selected and programmed by someone else. Moreover, just because the device is a mobile phone does NOT mean the video on the device has to get to the device over the air. Over-the-air video delivery has not -- and will not anytime soon -- provide the choice and control consumers demand of their mobile media. It is this sideload process -- proven by Apple and accepted by consumers -- that meets most of the conditions consumers cite as important.

With intelligent pre-selection software, sideloading provides on-demand viewing of personalized content with a wide selection of programs via a PC-based portal. Content consumption is from the mass storage on the device, not streamed, so the quality (and the user experience) is excellent, as consumers don't suffer through the constrained quality and connectivity pitfalls of being tied to a network. The content is, by nature, time-shifted and place-shifted, which contribute to extending viewing (and revenue) opportunities beyond the home. Want choice? Have you seen how small (and inexpensive) those 16 GB flash memory cards are? They hold about 20 hours of high-quality widescreen video.

Unfortunately for non-Apple consumers, the only company that is really doing all this very well right now is Apple.

And now this device is available in Wal-Mart. This is ironic, since retail pundits figured that a Best Buy-type retailer, with knowledgeable sales staff, would be able to differentiate itself when selling the iPhone. Meanwhile, however, Circuit City is in Chapter 11, which led to online holiday traffic plunging by 21%. It can probably be assumed that in-store traffic also suffered. And Best Buy, citing weak December revenue, announced layoffs were looming. So you tell me -- which retailer is best positioned for retail exposure to the iPhone in 2009?

With the predicted takeover of the world by user-generated content still looking for a viable business model, studios and professional content creators must start looking more closely at the mobile media market opportunity beyond Apple. Otherwise, their whole mobile distribution play hinges on one player. At the same time, carriers who loss-lead devices to gain two-year contracts and hope to recoup cost on data charges and other services, will fall into the trap of not having a fundamental stake in quality content to maintain their customers.

For pervasive mobility and mobile media to really take off beyond Apple and the iPhone, new pricing models and new revenue-sharing models with carriers must happen. And it has not happened yet.

Until then, watch Apple and Wal-Mart rule the world.

6 comments about "Why Apple and Wal-Mart Are Poised To Rule The World Of Mobile Media ".
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  1. Rich Reader from WOMbuzz, January 5, 2009 at 4:11 p.m.

    In paragraph 4, you refer to the iPhone as a "must-have". While it's a hot product with a lot of buzz and cult-like adherents (of whom, many are my good friends) most of us can and will survive just fine without mobile media, regardless of the siren's seductive song beckoning from Cupertino and Bentonville. We're too busily steering clear of Charybdis to become hooked on Scylla.

    http://richreader.blogspot.com/

  2. Drew Robertson from localbroadcast.tv, January 5, 2009 at 4:33 p.m.

    You missed another distribution channel, WIFI. Our company developed a streaming application that delivers linear channels to Symbian phones @ about 1/4 the bandwidth cost of most mobile codecs. Importance? Advertising-supported mobile TV is feasible today. Apple has no interest in supporting the traditional free TV model -- nor should they as what they are doing now is working great. But that's where mobile video is heading sooner not later. And brands, agencies and networks won't want to make Apple or Walmart the gatekeepers.

    Sideloading? I do that now easily with video on my Sansa Fuze. Much easier than through iTunes. And dag if there's no place to stick a SD card into a iPhone.

  3. Paula Lynn from Who Else Unlimited, January 5, 2009 at 5:14 p.m.

    We are way passed the moments of wanting a cell phone. It has become a necessity and most of us can remember the detail of decision. However, as affordability becomes more difficult for massive amounts of people, the absurd costs associated with the iphone and others may put some darkness on purchases. Let's see...$1200 or more per year for a fancy service or a mortgage payment or pay off other debt. In other words, the limitations of advanced cell phone use are limited by cost of operation and squinty screen size. Lets' see what happens when the next and larger wave of foreclosures occur as the exotic mortgage storm begins. Jitterbug anyone?:)

  4. Roger Sanford from Roger Sanford Groupe, January 5, 2009 at 5:22 p.m.

    Tom, as a long time "Applehead" & early adapter, I see the same trend. When I got my first iPhone (now on my 7th, a G3) everyone asked me about it. I went to the Apple Store to learn about it in a class and ended up giving instruction! Now, 4 out of 4 in my family have them, I see them everywhere and what I see is Blackberry on steroids. The reason that Walmart distribution will rock is that the device is so easy to use and understand. It's all about the Aps. Stay tuned, the revelotion wikk be in hand.

  5. Roger Sanford from Roger Sanford Groupe, January 5, 2009 at 5:26 p.m.

    Tom, as a long time "Applehead" & early adapter, I see the same trend. When I got my first iPhone (now on my 7th, a G3) everyone asked me about it. I went to the Apple Store to learn about it in a class and ended up giving instruction! Now, 4 out of 4 in my family have them, I see them everywhere and what I see is Blackberry on steroids. The reason that Walmart distribution will rock is that the device is so easy to use and understand. It's all about the Aps. Stay tuned, the revolution will be in hand.

  6. R Bedi, January 8, 2009 at 12:11 p.m.

    Tom's reasoning is correct on what the consumers prefer when it comes to quality and experience with mobile media. However, as these converged devices and smartphones such as iPhones move to a more PC like capability, storage capacity (or ready access to personal content) is going to be key. After all, why have we loved the PC or MAC so much for so many years. Probably one reason is because these machines provided us with the richest experience with local processing and as much storage as we wanted. With increasing quality and quantity of personal mobile content, it's not possible to store everything in a small device. $400-$800 phones are not a normal spend as they pack more storage. SD cards are a limited solution and prone to damage and loss. Ideally, as a mobile user I want to access any content I own not just a limited set. Secondly, how will media companies 'deposit' their content on my SD card or my phone. The last mile problem for content companies has been one of "pull" versus "pull". i.e. companies depend on consumers to pull content. The ideal way is for a media company to be able to push content to a consumer based on their liking. The quality is best when local not streamed, as Tom's article dictates. Example - CNBC stock update video everyday at 4 PM sitting downloaded on my phone. Except the problem is one of space and access on these devices.

    Check a new offering for mobile phones at www.vizibl.com. It inteliigently creates unlimited capacity on smartphones and allows users to see all their content on their devices. As in Tom's example, a user traveling on an airplane can literally access and bring with them whatever video or personal content they have and play it from the local device. In the earlier example, the user could have a CNBC directory that has the 'pushed' video, local ready to go. It's currently launched on Windows Mobile with Apple, RIM, Android and Symbian to follow. vizibl users also utilize skype like multimedia messaging so that they can send and share their content easily over their mobile phones without restrictions (as prevalent with MMS).

    The combination of Apple and Walmart is immense and daunting. But it only gives encouragement to competitors to do better and consumers to get better quality. After all, it's only when someone has 18 majors does someone else strive to do one better.

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