Mobile publishers go direct to consumers
To reach audiences that wireless carriers can't or won't serve, wireless publishers are finding clever new ways to market their content.
By Patrick Baltatzis, Business 2.0 Magazine reporter

SAN FRANCISCO (Business 2.0 Magazine) - As the wireless industry gathers this week in Las Vegas for the CTIA Wireless conference, opening this Wednesday, the mobile entertainment business is in the midst of a fundamental shift.

The wireless landscape shifts

Until recently, carriers controlled the content their subscribers saw on their phones, tightly regulating the games, ringtones, and other content they could download. To reach subscribers, wireless publishers had to first strike deals with carriers to get on the carriers' mobile portals.

But, spurred by technological changes, content providers are now offering their products directly to consumers -- which is often niche content appealing to a specific demographic that carriers wouldn't offer to mainstream audiences. And carriers, eager to boost usage of the data services required to download and use this content, are tentatively embracing the trend by opening up their networks to independent wireless publishers.

One publisher leading the charge is Mforma, a cell-phone game publisher which, Business 2.0 has learned, will announce on Wednesday at CTIA that it is changing its name to Hands-On Mobile and launching new direct-to-consumer wireless offerings. To date, Hands-On has sold its content through deals with 150 wireless carriers around the world, but it's now betting that it can supplement those wholesale relationships by retailing content directly to consumers.

On Wednesday, Hands-On Mobile will roll out Daily Devotions, which will push Scripture readings from Christian singer and actor Pat Boone directly to subscribers' cell phones for $9.99 a month.

InfoSpace (Research) and News Corp. (Research) are also among the publishers bypassing carriers to market niche wireless content directly to consumers. News Corp. has already launched its own Web storefront, Mobizzo.com, where it sells games, ringtones, and "wallpaper" pictures for cell phones from such News Corp. media properties as Family Guy and Ice Age. InfoSpace is working with Rainbow Media's Fuse cable channel to market ringtones, graphics, and other content related to artists featured on the music-television network.

The key innovations that are making this shift possible are text messaging, Web-based storefronts, and support by the carriers for downloading and billing so-called "off-portal" content.

Taking texting to the next level

Text messaging, now widespread in the U.S., has grown more technologically sophisticated, and can now be used to download graphics, ringtones, and software. Web-based storefronts make it easier for publishers to market services to customers, who can sign up to have content delivered to their phone via their PCs. The two technologies are often used in conjunction to deliver wireless content: Consumers sign up on a website, and then receive a text message on their phone confirming their subscription to the service.

Most major carriers in the U.S. already support off-portal content, and Verizon Wireless, the primary holdout, is expected to add support for it this year, says Julie Ask, a wireless-industry analyst at Jupiter Research.

"It's a great time for content providers to experiment with a mobile play," says Ask.

There's also a growing audience for such services.

"The mobile phone is the keypad to everything," says Hands-On Mobile CEO Jonathan Sacks, who notes that there are 2.2 billion cell phones worldwide. "This is the biggest media opportunity in the history of the world."

Of course, a service like Daily Devotions won't have mass appeal, which is why Hands-On isn't trying to market it through carriers' mainstream portals. But the company is betting that the service can find a following if it's marketed to the right demographic.

While this arrangement requires carriers to give up some control over what content their users see, they benefit from rising data charges. NPD Group analyst Glen LeBlanc estimates that by 2010, more than a third of consumer spending on wireless services will go towards data charges, replacing falling voice revenues. And Sprint Nextel (Research), one of the first to offer data services over its network, already sees 25 percent of its revenues coming from data traffic.

But benefiting from the data usage that these services generate while keeping customers happy requires striking a tricky balance.

"When we put something on our customer's bill, they should feel that it is money well spent," says Paul Reddick, vice president for business development at Sprint Nextel. "We also want to make sure that the content has had proper rights secured."

Lee Daniels, executive director for technology development at Verizon Wireless, notes that his company also monitors how much bandwidth third-party applications use, to make sure that a user downloading a video at an airport doesn't prevent others from making phone calls.

These concerns will mean that publishers will still need to maintain good relations with carriers in order to stay on their networks. But in the long term, letting publishers experiment and market directly to consumers, serving niche demographics that carriers can't or won't address, can only be good for the carriers. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.