There's a lot to dislike about wireless media—not the least of which are crummy green-screen graphics, plain text, and slow download times. But there's a key difference between Web and wireless that gets content providers excited: While Web users expect free content, wireless phone users know the meter is always on. That's why many top media companies are looking to wireless for the revenue boost they never got from the Web.
As U.S. network operators roll out their new, faster next-generation networks, and handset manufacturers respond with Java-based phones with color screens, companies like Playboy.com and Viacom Consumer Products hope that wireless subscribers will log onto wireless Web sites, download games, or subscribe to content pushed to phones—and also open their wallets.
Such optimism is warranted, according to David Chamberlain, research director for Probe Research. He says that the mobile phones of the future will function as entertainment devices as well, and will be conducive to "spur-of-the-moment purchases during periods of boredom." Waiting at the dentist? Pay $.99 to download the Monsters, Inc. game and twiddle the time away. Stalled in a marketing meeting? Perk yourself up with a photo of Anna Kournikova in her underwear and pay for it on your next phone bill.
Five years from now, analysts predict revenue from mobile entertainment could be as much as $1.14 billion. Content companies who've done wireless deals either can't or won't say just how much they were worth, although they insist that money will change hands in these deals. But it's a safe bet that in 2002 wireless revenue will amount to bubkis.
Dial Me In
Nevertheless, the licensing action is hot and heavy. Some wireless content distributors believe that locking up premium content early on will give them the edge they need when negotiating deals with operators. Wireless entertainment companies like Versaly Games, Airborne Entertainment, and Finland's Wireless Entertainment Service (WES) are working hard to schedule lineups of successful properties. That's great news for media companies, some of which even get cold hard cash up front when they sign over wireless rights.
The biggest moneymaker in wireless to date has probably been Bridget Jones's Diary. Creative Artists Agency helped author Helen Fielding sell the rights to create short text messages based on her mega-seller to mobile entertainment company Riot-Entertainment. While neither CAA nor Riot-Entertainment has disclosed how much money was generated by those text messages, which cost subscribers about $.32 each, Fielding bragged to the Times of London that she expected to rake in around US $708,000. (Riot-Entertainment, which also had wireless licenses for Lord of the Rings and Marvel Comics, filed for bankruptcy in March when it couldn't dig up extra venture funding.)
In March, Playboy.com began offering paid downloads of logos to use as phone screensavers through WES. The plan is to add additional frills, such as voicemails from Playmates, animated versions of Hugh Hefner and Playmates, and, when technology improves, actual photos of Playmates. Playboy.com president Larry Lux, who was very pleased to announce that his company will break even this year, expects to profit from at least one million downloads through WES this year. However, he says, "We're not looking at wireless at being a major contributor to this year's financials."
Walt Disney Internet Group makes wireless content available through four of the five top U.S. wireless telephone providers and 12 international carriers, with content including games, ringtones and graphics launched in the U.S. in 2001. Disney aims to build a lucrative standalone wireless business that will provide another vehicle for distributing content, such as news and ESPN sports scores, act as an event-marketing channel for sports events, such as the Final Four basketball games, and offer a revenue boost through the development of games and services based on Disney properties. Executive vice president Larry Shapiro believes, "Companies like us, who have strong brands and marketing channels and can devote resources to creating compelling content, can expect great success in wireless."
Other big Web players are also jumping on the wireless bandwagon. In December, AOL Time Warner licensed Warner Bros. characters including Bugs Bunny for ringtones, screensavers, and wireless games directly to Motorola. Viacom Consumer Products licensed seven different properties including Star Trek, Rug Rats Ratrace, Mission Impossible, and Mighty Mouse. "We decided very early that we wanted to be players in the space," says Pamela Newton, vice president of licensing and marketing. "We've taken a strategic position with the platform, and we feel that there are great opportunities."
Although Newton wouldn't call Viacom's wireless revenue to date significant exactly, it has sweetened the coffers. She says Viacom deals always involve an upfront payment based on a guarantee of revenue over the term of the license, and provision for some kind of backend payment if royalties don't meet the guarantee. Royalties could be calculated based on a percentage of the take, a flat rate, or some more complicated formula. Most of Viacom's wireless deals run for a year or two.
Unfortunately, repurposing content for wireless isn't as easy as it is for the Web. Ask a wireless telco about content delivery, and you plunge into acronym hell. There are no standards for delivering, displaying, or charging for mobile media and a plethora of competing technologies. Top-tier media brands—the Disneys of the world—prefer to work directly with the telcos. But most content companies rely on a middleman to handle not only deal-making, but also the technical challenge of complying with the demands of each network operator's system. It's an ever-shifting sector that can be roughly broken down into three types of players:
• Handset manufacturers: Nokia, Motorola, Sony/Ericsson Alliance, and Qualcomm (maker of chips for handsets) are all busily licensing content and games that they can pre-install on their phones to give them a marketing edge.
• Mobile entertainment companies and content aggregators: Like television production houses, mobile entertainment companies produce original wireless content and may also aggregate offerings from other companies.
• Platforms: Some mobile entertainment providers, usually those specializing in games, also offer a technology platform that integrates content with the telcos' network infrastructure.
Eye on the Prize (Money)
Two factors have fired up the wireless content market. First, a few years ago, wireless telcos thought they held the keys to the kingdom. Since they controlled access to "the next Internet," they assumed they could be wireless versions of Yahoo!, making content companies pay for position on their home decks. Oops! Now, with U.S. subscriptions to the wireless Internet gimping along at 4.5% in 2001, according to research firm Intermarket Group, the operators have decided they need familiar, popular content in order to entice their subscribers. And they've finally woken up to the fact that Hollywood doesn't do free. So, telcos are ready to give a little, offering to share not only revenue from paid downloads, but, in some cases, even a share of the revenue generated when subscribers burn minutes to access WAP games and content.
That cut of the usage revenue had been a deal-breaker because coming up with a figure for how much any particular content boosted subscribers' wireless usage was pure guesstimation.
The second factor goosing the marketplace is the rise of companies willing to insulate the network operator from some of the risk and most of the hassle of providing mobile content. These companies make their own licensing deals for content and offer packages to the operators that usually include the software necessary to keep track of subscriber payments and usage.
These content aggregators are avid to differentiate themselves through deals with marquee entertainment properties. At this stage of the game, premier media companies have them by the bytes, so most entertainment companies engage in the kind of rights-splitting beloved by lawyers, but indistinguishable to consumers. For example, Viacom gave wireless game provider Digital Bridges the right to build wireless games based on Star Trek and wireless entertainment company Versaly the rights to wireless Star Trek "content," things like graphics, ringtones, pictures, and text messages.
The media companies want to license as much as they can now, then sit back and see how the whole wireless thing plays out. When he's asked if he worries about overextending his brand, Disney's Larry Shapiro says, "It's a little early to worry about that. Call me back in two years, and I'll be very happy if I have that problem."