Enticed By Potential Profit, Carriers Offer Audio & Video Content
MAY 13, 2002
Spider-Man is coming to a phone near you. So are Tiger Woods, Smash Mouth,
Britney Spears and Mickey Mouse in a wave of mobile entertainment sweeping
across the wireless world.
In the months ahead, a growing number of cellular customers will be able to
download ring tones, color graphics, movie trailers and games based on their
favorite films, sports celebrities and recording artists.
The trend is being driven by a convergence of three forces. New technology is
giving cell phones ever-greater capabilities. Wireless companies that have spent
billions upgrading their networks are looking for ways to sell more services
through their expanded pipelines. And entertainment conglomerates such as
Walt Disney Co., Vivendi Universal and AOL Time Warner Inc. have visions of
wireless phones becoming hand-held entertainment centers.
Enticed by that prospect, global media giants and cell phone carriers are
scrambling to tie up relationships with one another.
Disney has lined up deals with carriers, including Sprint PCS and AT&T Wireless,
to provide Disney-themed games, graphics and ring tones to cell phone users
from the U.S. to Japan.
Sony Corp.'s Columbia Pictures has developed relationships with Cingular
Wireless and Sprint PCS to promote such movies as "Spider-Man" and "Men in
Black 2."
Vivendi, owner of the world's largest music company, recently scooped up the
nation's leading supplier of wireless ring tones based on popular songs, ranging
from Weezer's "Hash Pipe" to the Who's "Going Mobile."
"We're seeing a major push by the entertainment companies to take advantage
of the intersection between the ubiquity of cell phones and the digital age," said
P.J. McNealy, research director for GartnerG2, a technology and business research
firm in San Jose. "There's no doubt wireless could have huge promotional
opportunities for them."
Still, much of the excitement is over the potential applications--and potential
profit--for the cell phone, rather than what's currently being realized.
Despite the hoopla and skyrocketing cell phone usage, no one can predict
whether Americans will pay to download music or watch movie clips on their tiny
screens.
"The wireless phone may be the next frontier for the marketing of entertainment
product in the U.S. But the market is fraught with unique challenges," according
to a recent issue of the Entertainment Marketing Letter, an industry newsletter
based in New York.
The use of ring tones, graphics and text messaging to promote entertainment
hasn't taken off in the U.S. as it has in Europe. There, cell phones are more
sophisticated and networks are equipped to handle the higher speeds required
for Internet-ready headsets.
Compounding these technical problems, few U.S. wireless carriers have
compatible systems, so a game developed for Sprint PCS' network can't be
played by AT&T Wireless or Cingular customers.
But conglomerates such as Vivendi, Disney and Sony can't afford to ignore the
possibilities of wireless, analysts said.
"Not only is it a new outlet, it's an outlet we are predicting will grow extremely
popular with the youth and teen market," said Knox Bricken, an analyst with
Boston-based technology research firm Yankee Group. "The opportunities are
huge."
Bricken forecasts that carriers will see a 430% growth in revenue from these
services over the next four years, from $ 215 million to $ 1.14 billion by 2005.
Phone manufacturers, eager to boost sales of their hardware, will roll out far
more advanced handsets this summer, including such features as faster Web
browsing, larger and color screens and the ability to download music, play more
elaborate games and in some cases watch streaming video.
A new Nokia cell phone will come with a movie trailer for the upcoming Fox
Studios film "Minority Report" ready to play.
Carriers are spending billions of dollars this year to upgrade their networks to
carry more data at higher speeds. And they are hungry for new content to fill
their expanded pipelines, with services that generate more subscription fees and
minutes spent on their systems.
Some entertainment executives envision that within two or three years,
mainstream America will be checking movie listings over the phone, downloading
trailers, buying tickets and getting directions to the nearest theater--all with a few
taps on a phone pad.
For now, though, the ties between studios and carriers are more modest.
Consider "Spider-Man." For the last several months, Cingular has been
promoting the Columbia Pictures movie, which opened this month. Fans of the
comic book hero can indulge their passion by downloading Spider-Man graphics,
games and movie factoids on their mobile phones.
"It comes down to a desire to open our movies large," said Rio Caraeff, vice
president of wireless services for Sony Pictures Digital Entertainment.
All the major film studios now include wireless marketing as a component of their
movie advertising campaigns.
Sony Ericsson is introducing multimedia phones this year that will be used as a
platform to promote Sony properties, including both "Men in Black" films and
"Charlie's Angels" as well as games based on movies.
Sony also is developing wireless versions for its own software such as PlayStation
games. One new phone model even comes with a built-in joystick.
"We have very high expectations," Caraeff said. "Mobile gaming is a very big
business in Japan, Korea and most of Western Europe."
Universal Pictures signed a deal with Nokia this year to provide Nokia's U.S.
customers with logos and ring tones from Universal properties, including
upcoming movie releases such as "8 Mile," starring rap singer Eminem.
AOL also has been aggressive in the wireless arena. To help promote its feature
"Lord of the Rings," AOL's New Line Cinema sent out 20,000 text message
coupons to customers of VoiceStream. Fans could show theater managers the
coupon message on their mobile phones and receive free posters from the
movie.
For cell phone users, the onset of mobile entertainment is certain to create some
new, if strange, possibilities. Imagine Arnold Schwarzenegger answering your
voice with his signature "I'll be back."
A unit of Vivendi is busy buying the rights to digitally record the voices of 100 top
celebrities, which will then be offered as a service to wireless carriers later this
year. Celebrity voices also will be part of a $ 6 mobile phone package to be
offered by Vivendi for sale in grocery stores this summer.
Customers of AT&T Wireless can identify callers either by various Disney
characters that appear on the phones when a call comes in (one dwarf, say, for
each family member) or by ring tones from a catalog of popular Disney songs
such as "Zip-A-Dee-Doo-Dah" and "A Whole New World."
"We have high hopes for a big business," said Walt Disney Internet Group
President Steve Wadsworth. Disney also has a deal with Sprint PCS, which will
offer games based on the Disney features "Monsters, Inc.," "Atlantis" and ESPN's
2-minute Drill.
"We feel that wireless gaming is the next step in the evolution of gaming," said
Sprint PCS spokeswoman Stephanie Walsh.
One in six U.S. cell phone users, or 21.6 million people, will play games on
mobile phones this year, with the number increasing to 93 million in 2006,
according to a forecast by research firm Datamonitor.
Disney's wireless push accelerated after its successful foray two years ago into
mobile-obsessed Japan, which offers a glimpse into what could eventually come
to the United States.
Through alliances with NTT DoCoMo and two other carriers, Disney said it has
built a profitable and expanding business in Japan. The company now offers 13
subscription-based services to 2.5 million customers. Among the services: a
Disney fortunetelling service, Pooh screen savers, ring tones and greeting cards,
and virtual attraction games based on Tokyo Disney Resort.
Disney also operates a wireless fan magazine in Japan, which it used recently to
promote the opening of the Disney/Pixar Animation Studios hit "Monsters, Inc."
"We see it as an opportunity to reach consumers any time, anywhere," said Mark
Handler, executive vice president of Disney's international Internet operations.
But whether Disney's success in Japan will translate in America is anybody's
guess.
"It's too uncertain to say whether the DoCoMo model will be a big money maker
for the company," said Larry Shapiro, executive vice president for business
development and operations of Walt Disney Internet Group.
Though charges vary widely depending on the type of package the carrier offers,
customers pay an extra $ 1 to $ 5 a month for individual ring tones and
graphics, with entertainment companies getting about 10% of the revenue as
transaction or license fees.
But the industry is so new that no one is making money off mobile
entertainment, which faces a host of challenges. Among them are how to bill and
market services without offending wireless customers with unwanted advertising.
Scores of telecom businesses that built their models around the possibilities of
delivering services through "third-generation" networks have floundered because
carriers have been slow to adopt new technology.
Vivendi has painfully learned that lesson with its multi-portal Vizzavi Internet
business in Europe.
The joint venture with the United Kingdom mobile operator Vodafone has failed
to live up to the promise of delivering news, sports, movies and games through
cell phones, personal digital assistants and personal computers.
"We were late in terms of developing the right devices for our customers, who
were not able to connect at the right speed and the right price," said Philippe
Germond, chief executive of Vivendi Universal Net.
Vivendi is taking a different tack in the U.S. The company is building
relationships with carriers through its new wireless-services subsidiary rather than
spending millions on launching a new portal.
Robin Richards, CEO of Vivendi Universal Net USA, has high hopes for wireless in
America.
"This is a business that three years from now is a $ 1-billion business for
Vivendi."
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