Bypassing Carriers for Mobile Content

, Internet, Tecnología Personal

Sales of ringtones and games through phone makers and the Web are way up, another sign service providers are losing their grip on the industry

Tonya Carter used to buy cell-phone ringtones from her mobile service provider, Verizon Wireless. But lately she’s found a way to bypass her carrier and download them straight from the Web. Carter, a 33-year-old Houston resident, pays about $10 a month for a service called Thumbplay, which gives her access not only to ringtones but to a gamut of games and graphics.

A growing number of content-hungry consumers are circumventing carriers, depriving the likes of Verizon Wireless, AT&T (T), and Sprint Nextel (S) of a key source of revenue. Currently about 80% of content for mobile phones is purchased from carrier Web portals; in five years carrier portals will account for only 25% of all content purchases, estimates David Kerr, an analyst at Strategy Analytics. U.S. carriers are already feeling the pinch. Growth in revenue from so-called mobile content—ringtones, mobile games, wallpaper, music, and video downloads—slowed to 15% in 2007, according to CTIA-The Wireless Assn., an industry trade group. In 2006 content sales surged 90%, to $1.9 billion, consistent with the pace of earlier years.

Carriers say they’ll make up for the lost revenue through fees for the Web access that makes content downloads possible. «The content piece is not as meaningful for service providers as access,» says Kevin Packingham, vice-president for product development at Sprint Nextel. «That’s what’s really going to move the needle.» Adds AT&T’s chief marketing officer, David Christopher: «We never said these content areas would take over the world.» Indeed, revenue from the larger category of wireless data, which includes mobile content and Web access, rose 53%, to $23 billion, in 2007, according to CTIA. No wonder wireless carriers want users to sign up for data plans. On Apr. 14, Verizon Wireless announced a new $30-a-month data plan for smartphones that offers unlimited e-mail and Web browsing.

A Much More Crowded Field

Still, every source of revenue counts. And the emergence of vendors such as Thumbplay is just the latest indication that wireless carriers are losing their grip on the industry. The field has gotten crowded in the past year with upstarts like Apple (AAPL), which gets a big slice of the monthly revenue charged by companies that carry its iPhone, and Google (GOOG), which came out with a system that makes it easier for indie developers to create and profit from tools, games, and other wireless applications. The Federal Communications Commission has done its part to foster competition by requiring winners of the most recent auction of wireless airwaves to open their networks to rivals’ handsets and applications.

Thumbplay and other content providers are capitalizing on the proliferation of mobile browsers and handsets equipped with Wi-Fi connections. Carriers can no longer act as the sole gatekeepers that determine what services a customer can download onto a phone. «The time when carriers could dictate terms are over,» says John du Pre Gauntt, a senior analyst at eMarketer. Hurst (Tex.)-based Handango sells business and other mobile applications directly, as well as through carrier portals. In March the company struck a deal to sell its wares through Carphone Warehouse, Europe’s largest independent mobile-phone retailer. Handango also hopes to distribute its content through Apple’s iTunes Store for the iPhone. «In the future a lot more of our business is going to come through cell-phone makers and retailers [instead of carriers],» says Handango CEO Bill Stone.

Last year, for the first time, entertainment content was Handango’s leading sales category. Previously it had ranked third, behind business applications. Thumbplay has seen a tenfold increase in video clip downloads since the end of 2007. Its number of weekly downloads of various pieces of content has risen to more than 18,000 recently, from 8,000 a week in July.

Handset Makers Gain the Edge

Apple isn’t the only cell-phone maker looking to benefit. Sony Ericsson and Nokia (NOK) are increasing their lineup of services for mobile phones. In the second half of 2008, Nokia will begin selling devices that come with a year of unlimited access to millions of music tracks. Nokia already offers mobile games and mobile photo- and video-sharing services, and is pushing stand-alone songs at $1.25 a pop.

Content providers say mobile-phone makers and retailers may do a better job than carriers of marketing their wares, anyway. «A lot of time [carriers] focus their marketing on network quality, whereas companies like Apple can focus on [content],» says Handango’s Stone.

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