Palm Flounders

Smartphone and PDA maker Palm is not operating on all cylinders like its new CEO Jon Rubenstein was accustomed to when he was at Apple. This week the company said it was restructuring and cutting 10% of its workforce. Many of the terminations are expected to be executive types that will be replaced by engineers.

Among the company’s woes:

– Apple’s iPhone and a number of iPhone “wannabes” have gobbled up the PDA market.

– Palm says it will lose money in the current quarter.

– The Linux-based replacement for its five-year-old operating system – Palm OS 5 Garnet – probably won’t be finished until 2009.

– The company’s planned Foleo “smartphone companion” was canceled.

– Warranty costs on its new Centro and 500v smartphone for consumers has been higher than expected.

– Its share price is down some 70% over the last year.

Other than that, everything’s fine. Roger McNamee, who joined Palm’s board of directors with Rubenstein, sees clear skies ahead. “You won’t even see it in the numbers for awhile, but the company is off to a great start,” he said.

Mobile Carriers, Content Providers Must Strike a Balance to Grow US Media Market

A new study from Analysys says that mobile carriers and content providers need to work together to better capitalize on and grow the mobile media entertainment (MME) market. The study, “Mobile Media and Entertainment Markets in the US: Value chains and pricing models,” expresses that carriers’ network upgrades to 3G give the opportunity for massive market growth, but it is hard to escape the constant jockeying for position on the mobile Internet market.

“Overly complex pricing models for MME services, as well as carriers’ reluctance to withdraw from areas of the MME value chain that do not play to their strengths, are inhibiting MME market growth,” said Alexandra Rehak, US research director at Analysys and lead author of the study. “Verizon’s recent decision to open its network to third-party applications suggests that US carriers are starting to realize that they cannot do it all themselves.”

Another big focus of the report is the impact that online service providers and vendors are having on the value of MME. This includes looking at, among others, Apple, Nokia, Google and Facebook.

Highlights and important findings of the report include:

Complex pricing and users’ difficulty in discovering services are inhibiting take-up of MME offerings.

Carriers will continue to develop their own portals and MME service offerings to help maintain market share and customer loyalty.

The sheer variety and amount of revenue share arrangements for MME services involves so many parties, that content providers don’t generate sufficient revenue solely from their end-users.

The most successful strategy for any company in the MME market will be to focus on selected, specific areas and improving them instead of trying to be a jack-of-all-trades.

The report examines the ways in which pricing models are developing in the US market. It tries to help all parties understand revenue structures, business models and pricing for MME services and content. It offers an in-depth look at a number of mobile services, including TV and video, music, games, social networking, user-generated content, personalization and adult services.

The report is available from Analysys for $3,000 (£1,500).

For the UK, Football Is Mobile Content’s Bread and Butter

Mobile media measurers M:Metrics revealed this week that football is the gold for mobile media in the UK. M:Metrics has found that over the past two years, there has been a significant jump in accessing sports information on mobiles around the times of major football events.

Accessing sports information comes via browsers, downloads and SMS alerts to handsets throughout major football championships. At the start of the FA Premier League in mid-August 2006, the number of users accessing sports information reached about 4.1 million, a nice jump from the 3.6 million who accessed information in July. The audience definitely fluctuates around the football season, reaching a mark of 4.7 million users in April 2006, as Chelsea made a move to win a possible second FA Premier League title, but dropping to almost three million users in June 2006, the month after the season ended.

A similar surge in accessing sports content happened throughout Europe during the FIFA World Cup in June and July of 2006. This was most significant in Germany, home of the tournament that year, where the number of users who received mobile sports information doubled from May to June.

“This is fascinating data, as it clearly demonstrates the impact the combination of compelling content, context and convenience has on mobile media usage,” said Paul Goode, senior analyst at M:Metrics. “While British operators may be disappointed in their football teams, who failed to advance to the European Cup, they should be encouraged by their performance attracting consumers to mobile content.”

The exact numbers for the World Cup, the 2006 FA Premier League season and other mobile studies such as the October Benchmark Survey, are available through M:Metrics at http://www.mmetrics.com/.

New Captain on Deck at Sony Ericsson

In a Wireless Watch report on a new CEO taking over Sony Ericsson, Caroline Gabriel says:

Sony Ericsson’s new man, 64-year-old Hideki Komiyama, has a hard act to follow, taking the reins from Miles Flint last month.

Like Nokia, Flint focused on branding, and made Sony Ericsson the most successful handset maker on this front by leveraging the Sony Walkman and Cybershot tags. His successor aims to make even greater capital out of those brands, and possibly also Sony’s PlayStation Portable (PSP) gaming device, while also copying Nokia’s shift into multimedia Web services.

Komiyama, a Sony veteran, faces “a daunting challenge,” as consultancy CCS Insight puts it. The area of the market where the company has thrived – multimedia smartphones – is now one of the most competitive, and the move to low-end models remains high risk for a company that, despite its 35% increase in earnings in the first three quarters of this year, cannot leverage the economies of scale or the efficiencies of Nokia.

Komiyama’s initial decisions will focus around software and services, as he bids for an influential position in the evolution of mobile Internet platforms. The Web services strategy has been launched around the PlayNow music system, and will make strong use of the Sony brands, but needs further refining in functionality if it is to compete with Nokia Ovi. The new CEO will also need to streamline the operating system policy – it uses Symbian OS in only 18% of phones, in contrast with Nokia’s 53%, which gives the latter an advantage in efficiency, developer support and time to market. However, Sony Ericsson also needs to make decisions about what to do about Linux and other emerging factors like Google Android, while also chasing a more prominent position for its UIQ user interface, which it shares in a joint venture with Motorola, and which needs to be more aggressively enhanced and marketed to operators and licensees, if it is to make an impact on the ambitions of Nokia Series 60 to be a de facto standard.

Sprint’s Dziak: The Focus Is Still on Voice Services

Despite its recent break with Clearwire, Sprint is still pushing ahead with its mobile broadband plans. In fact, Sprint’s senior VP of corporate strategy Jack Dziak said that his company is two years ahead of mobile broadband competitors with its Xohm initiative.

During his speech, “Mobilizing the Internet: One Carrier’s Unique Perspective” at Mobile Internet World, Dziak also gave up some trends that he sees driving Sprint’s growth:

– The company is seeing 30% year-over-year growth in usage of wireless minutes as the telcos see wireline minutes decline.

– 10%-12% of ARPU at Sprint comes from data services.

– The Internet is mainstay of our daily life; The Internet audience in US is forecast to be 211 million by year-end.

– Broadband is evolving, with the focus moving towards content-rich applications and services.

– Even with the mobile phone turning into a “Swiss Army knife” device, the focus is still on voice services.

– The mobile Internet is not just about speed, but also about capacity.

Regarding Google’s Open Handset Alliance, Dziak sees it as an opportunity for third-parties to leverage Sprint’s assets, while at the same time allowing Sprint to “focus on what it does best – acting as an enabler.”

According to Dziak, Sprint likes the OHA vision for a number of reasons, including:

– It facilitates the customer’s unrestricted access to the mobile Internet.

– It provides tools for creative, innovative and compelling mobile apps.

– It drives mobile data usage.

– It provides the ability to define a new ecosystem and create new revenue opportunities, location-based service and user interfaces.

Sprint is already working with several device manufacturers to bring an open handset to market as quickly as possible.

Dziak sees three “musts” for the mobile Internet:

– Innovation in distribution. This will require a single chip for Wi-Fi and WiMAX.

– Innovation in multimedia solutions, such as mobilizing the MySpace and Facebook generation.

– Affordability of service; the need to offer products and services at very affordable prices.

One of the key elements needed to make a successful mobile Internet a reality is spectrum. “You gotta have it to offer it,” Dziak noted. Sprint holds industry-leading 2.5 GHz of spectrum that provides a balance between coverage and capacity, which he said, means more capacity at less cost.

Mobile Internet: Now & Tomorrow

Vodafone is the leading mobile operator in the world by revenue. The European cellco, which also owns nearly half of US operator Verizon Wireless, was the first carrier to bring a handset with a color screen to Europe way back in 2002. It was also one of the companies to start the consumer data package market in the US and, in 2004, was one of the initial operators to use a 3G network, according to Alexandre Froment-Curtil, head of Vodafone live and mobile Internet, Vodafone group marketing.

During his keynote address at Yankee Group’s Mobile Internet World conference in Boston in November, Froment-Curtil also mentioned that Vodafone has some 100 million data subscribers in Europe with a market value worth some €6 billion.

Froment-Curtil told the audience that content, pricing and speed drove DSL adoption in the UK. Achieving mass market adoption for mobile is more difficult, he said, but noted that in 2007 many barriers have started coming down. Now, there are more networks and technology, lower tariffs and better business models such as advertising, which will help speed adoption.

One major point he stressed during the keynote is that the Internet on mobile is NOT the same as mobile Internet because “mobile Internet” seems like something new, whereas “Internet on mobile is comfortable and familiar.”

According to Vodafone’s own market research, 50% of its consumer customers are interested in the Internet on mobile, he said. More importantly, they’re willing to pay for it.

So, what do they want to do once they have this access?

– Enjoy (content, multimedia)

– Connect (e-mail, IM, blogs, UGC)

– Personal productivity (browsing, search, LBS, buy, bank)

Another key factor, Froment-Curtil said, is that they also want their familiar Internet usage habits on mobile. They’re not looking for an exact replica; they want a user interface that makes it easy to relate to the PC experience, but is designed for mobile.

Vodafone launched its Internet on mobile access in June. It’s live in nine countries. Since the launch, the number of unique URLs accessed has doubled “as users realize that they can go anywhere,” he said. The number of Web pages accessed per user has tripled.

Users also make frequent use of search and bookmarks. According to Froment-Curtil, the top search categories are adult (22%), community (21%) and downloads (18%).

One of the main differences between the Internet on the PC and the Internet on mobile, he said, is that on mobile, users want to find information, not browse.

As for what tomorrow will bring, “mobile will transform the Internet as it becomes the dominant tool for Internet access,” he said.

Some More iPhone Sales Stats to Chew On

French mobile phone service Orange said this week that it sold 30,000 iPhones in the first five days the unit was available.

Comparatively, T-Mobile in Germany said it sold 10,000 iPhones on November 9, the day it went on sale.

Sales figures from O2 in the UK are still unknown.

About 80% of Orange customers bought the iPhone under an Orange contract, similar to AT&T’s iPhone contract requirements in the US. Those customers paid €399 ($585) for their iPhone, the same price T-Mobile charges for its iPhones.

Orange also offers the iPhone for €549 ($800) with other types of contracts, or €649 ($950) without a contract. About 1,500 were sold without a contract, said an Orange spokesperson. There’s a €100 ($150) unlocking charge for any customer who buys an iPhone from Orange to use it on another operator’s network.

Orange is now the only one of Apple’s network operator partners to sell the iPhone unlocked. It has to, in order to comply with a French law forbidding businesses to sell items under a condition that a customer buys another certain item as well.

For a short time, T-Mobile offered unlocked iPhones for a monstrous €999 ($1,500) to adhere to a temporary court injunction. T-Mobile had been sued by rival operator Vodafone, which claimed that selling the phone tied to a two-year contract directly violated Germany’s consumer protection laws. This week, however, a court threw out the case and gave T-Mobile permission to sell the phone under contract.

Initial sales of the iPhone in Europe are trumped by its success in the US, of course, where Apple and AT&T sold 270,000 on the first weekend. But to put it in perspective, the US population is almost four times that of Germany, and around five times that of France.

Report: Multimedia Mobile Phone Shipments Will Exceed TV Sets in 2008

Shipments of multimedia mobile phones in 2008 will exceed 300 million units, more than the shipments of TV sets, according to MultiMedia Intelligence. It defines a multimedia phone as having at least a one-megapixel camera, MP3 audio, video playback, a 16-bit color QVGA screen, Bluetooth and a browser. It says such devices will drive global revenues of $76 billion, with 300 million shipped. That’s more than annual shipments of TV sets.

“The mobile phone will become the world’s most ubiquitous entertainment platform. Multimedia has become the term of the day as wireless service has expanded beyond voice to include a variety of communication, data, and entertainment services,” said Frank Dickson, MultiMedia Intelligence’s chief research officer. “Voice services are suffering under increasing price pressure, forcing operators to leverage data services to sustain revenue growth and offset declining the average revenue per unit (ARPU) from phone calls. Handset manufacturers are racing to meet the consumer and operator demands for increasingly feature-rich multimedia handsets, while controlling handset cost and power consumption.”

The company says the sales of touch screen phones will hit 200 million by 2011, up from almost nothing this year. Apple’s iPhone jumpstarted the trend towards the use of touch screens on mobile phones. The report says touch-screen phones will in four years account for 20% of all handset sales.

The report, “Wanted: Multimedia Handsets: Consumer Desires Meet Operators ARPU Needs,” also found that:

– Integration trends are driving silicon providers to integrate baseband and applications processors into single chips like Texas Instruments’ LoCosto platform. The trend is currently focused on low-end handsets where cost is an issue, but it will migrate to higher end handsets over the forecast period.

– If the definition of a multimedia handset were limited to just phones with an image sensor, MP3 audio support and video playback, 60% of handsets would have basic multimedia functionality. By 2011, almost nine of 10 handsets would qualify.

– Handsets are playing an increasing role in operators’ efforts to attract and retain subscribers. The major operators are demanding exclusive multimedia handsets, innovative form factors and rich multimedia features in smart phones from the major handset vendors including Nokia, Motorola, Samsung, LG and Sony Ericsson.

– A multitude of connectivity options have been integrated into the cellular handset including IrDA, Bluetooth, Wi-Fi and USB. Of these, only IrDA is seeing declining penetration as a percentage of handsets shipped. Bluetooth will be the most ubiquitous connectivity option in handsets, while Wi-Fi promises to have the biggest long-term impact on handset usage.

– Phones with touch screens were a “rounding error” in the market in 2006. By 2011, the number of handsets with touch screens will approach 200 million.

Mobile To Near 30% of Music Retail by 2011

Mobile music is rising steadily these days. Currently it counts for around 13% of worldwide recorded music retail sales, and it is expected to shoot up to almost 30% by 2011 according to a new industry report by Understanding & Solutions. This could amount to as much as $11 billion, which should help to offset a decline in packaged music sales.

“Alongside online, mobile music is essential to the future of the music industry,” said Understanding & Solutions consultant David Sidebottom. “Japan, closely followed by the USA, has the most efficient mobile music landscape: both countries have a concentrated operator base and a large pool of potential subscribers, providing economies of scale for the music companies.”

According to Sidebottom, “In the fragmented European market, some operators have become less aggressive, as they can’t make money directly from selling full track downloads, but this will pave the way for ‘off-portal’ and third-party service providers.”

Nearly all new handsets come with a music function built-in, and recent improvements from manufacturers and operators have improved the experience and ease with which users can search for and purchase mobile music.

When it comes to emerging markets, it is the hope that mobile downloads will be able to control markets where piracy overwhelms packaged sales. Sidebottom said that both China and India are showing “large revenue gains” driven by subscription growths and “music-related personalized mobile products.”

The market might not be as big as some hope, though. According to the Digital Media in Asia Project at Harvard Law School’s Berkman Center for Internet & Society, “the price Chinese consumers are willing to pay for per-song downloads is something far lower than the 99 cents” most sites charge. The project says the small consumer base and the rampant piracy threaten “the future of any for-profit online (or mobile phone-based) music retail business model.”

Nielsen Study Targets Tween Mobiles

The Nielsen Company released its findings from an in-depth study on cross media and mobile media usage of US “tweens” (ages 8 to 12). The report estimates that:

– 35% of tweens own a mobile phone

– 20% send text messages

– 21% download ringtones

While ringtones and text messages are the most prominent secondary uses for the phone, 5% of tweens also access the Internet on their mobile phone. Of this group, 41% access the Net while on the go, 26% access it while at a friend’s house and 17% access it during social events.

Certain media-related phone usage is actually more prevalent at home than on the go, the study found. For those that download or watch TV on their phones, 58% do so at home. Sixty-four percent of tweens that download or play music on their phone and 56% that access the Internet via phone also do so at home.

The market has slowly been moving towards tweens for some time, all the way back to 2001 and a device prototype called “Boomerang,” from Telepong and Flextronics. The Boomerang relied heavily on text and game compatibility while minimizing the importance of voice-based operations. More well-known, children-centered companies, such as Disney, Hasbro, Firefly and Leapfrog, have also produced tween-geared mobiles. By 2010, more than 10 million children ages 12 and younger are expected to carry a cell phone, according to the Yankee Group.

Jeff Herrmann, VP of mobile media for Nielsen Mobile said tweens use media in “very unique and important ways.” He also said that “marketers and media executives need to understand” these youngsters and “and reshape the way we all think about new and traditional media.”

A previous Neilson Wireless study found that more than 33 million folks in the US aged 12 and older used the mobile Web, and more than eight million watched video on their mobile phone (excluding video shot with the phone’s camcorder).

“In addition to the differences between adult and youth media consumers, there’s an important gap between the media behaviors of teens and tweens,” said Herrmann. While 81% of teens spend one or more hours a day on the Net, with e-mail being the most common usage, 48% of tweens use the Net for less than one hour per day and 70% use this time for gaming.

The report, titled “Kids on the Go: Mobile Usage by US Teens and Tweens,” will be released in full on December 14. BASES and Nielsen Mobile, both services of Nielsen, produced it. Besides general trends, it will also provide information on tween and teen demographic profiles, genre preferences, overall use of time on these devices and content brand usages.

“The value of an entertainment medium is directly proportional to how well it is measured,” said Herrmann. “Reliable and accurate measurement of mobile consumers will enable advertisers to properly evaluate the mobile marketing opportunity.”