When the Internet started taking hold in the '90s, Disney and other big-name media companies tested the waters by farming out much of their...
When the Internet started taking hold in the ’90s, Disney and other big-name media companies tested the waters by farming out much of their early Web development.
As the Internet evolved into a larger, more substantial medium, many of these content-producing companies brought development in-house, making Web presence a priority.
A similar evolution might be occurring in a new platform: wireless.
The CTIA Wireless IT & Entertainment show starts tomorrow with many of the largest players in both media and mobile talking about what the future holds.
Although drastic shifts are unlikely to occur soon, the momentum in the mobile-entertainment industry could lead to a change in the way business is done today. The Seattle area, with its growing class of companies involved in wireless-technology development, is likely to have a front-row seat.
These companies are part of an ecosystem bookended by wireless carriers on one side and content owners and media companies on the other. They fill a variety of needs, including developing software and services, forging relationships and partnerships, and aggregating content — from ringtones and music to news clips and games.
For many, the biggest shift could find carriers working directly with content owners, eliminating the middleman role many of them play.
Some of the area companies in wireless entertainment applications:
InfoSpace, Bellevue: Partners with content owners and carriers to produce, distribute and manage ringtones, mobile games and other content.
Has relationships with content owners, including Marvel, and publishes video games, ringtones and other downloads. Moving headquarters to San Francisco.
Dwango Wireless, Seattle: Distributes games, ringtones and other media to wireless carriers.
Versaly Entertainment, Bellevue: Designs, produces, aggregates and distributes ringtones, games, screensavers and other content.
Blue Frog Mobile, Seattle: Sells ringtones, graphics and other content without partnering with wireless carriers.
Reaxion, Seattle: Publishes and develops multiplayer mobile games.
Mobliss, Seattle: Provides platforms for text-messaging campaigns and mobile music. Also develops mobile games.
UIEvolution, Bellevue: Builds software that simplifies wireless-application development and deployment.
Qpass, Seattle: Helps carriers manage the handset storefront.
The trend has started with announcements such as Cingular Wireless partnering directly with Apple Computer and Motorola on an iTunes phone, and ESPN launching its own cellphone-branded service in partnership with Sprint.
“That’s part of the challenges that they [middleman companies] are going to have,” said Michael Gallelli, director and head of product marketing at Bellevue-based T-Mobile USA. “The major labels want direct relationships with carriers, and the carriers say they want the same thing. What’s left? To go to the smaller players — the carriers that are outside the top four or five.”
But the counterargument is carriers are pipes, not media companies, and they want the expertise of a third party to help develop and publish the content. Likewise, wireless development is not the content producer’s core business, and they want guidance as to what and how to market the content.
“These are pretty natural questions and issues,” Gallelli said. “It’s a very dynamic area with a lot of things that can change. Some of the things you can predict and others will catch us by surprise, but at the end of the day, the last man standing — for sure — will be the carrier and the big content companies. Which ones of the aggregators that will be standing will be harder to predict.”
The one thing every company is chasing is the potential windfall.
Blue Frog Mobile CEO Ron Erickson says he’s pumped because, with only one solid year behind the business of mobile content, revenue in the U.S. is already about $600 million. In Europe and Asia, where mobile-phone use is more advanced, mobile-entertainment revenue has hit $4.5 billion a year.
“The cellphone is called the small screen or the third screen,” Erickson said. “This is a media and entertainment device.”
Erickson recently raised $16 million in venture capital to expand his Seattle company, which sells ringtones, screensavers and other content directly to consumers. One of its most popular wallpapers is a Chihuahua with eyeglasses.
Other local companies that fall into this broad category include: InfoSpace, Mforma, Dwango Wireless, Versaly Entertainment, Qpass, Reaxion, UIEvolution, Qpass and Mobliss. They’re engaged in everything from music and videos to software that helps produce content or assist in the billing process. The companies also help manage the relationships with content owners to find the most compelling material to sell.
Several factors have determined how the industry operates today. So far, the power has remained largely with wireless carriers. Because their cellular networks are closed systems, carriers can control what subscribers buy.
The carriers sell digital content by maintaining a portal on the phone that lists products for sale. For a third party to sell content to wireless subscribers, it needs a carrier’s permission to connect to the network.
This kind of control by the carrier has been called the “walled garden.” However, those walls have started to crumble, leading third parties to start selling content directly to the consumer. Slowly, wireless subscribers are starting to buy such content, primarily by sending a text message to that company.
For this to happen, these third parties still must be able to connect to the carriers, and for the most part the carriers still limit the content to only a select number of providers. But those numbers are growing.
By 2007, 30 to 50 percent of premium-services revenue will be generated from outside the wall in the U.S., according to Qpass, which helps carriers with their billing systems.
The trend of more open networks may help companies like Blue Frog and other providers like Dwango Wireless, but it also lowers the barriers for content owners that can also go right to the consumer.
Still, the middleman companies that aggregate content and perform other functions maintain a clear argument: Unlike the Internet and its open platform, the wireless industry is full of clashing platforms, operating systems and programming languages.
Rolling out one ringtone or one graphic to one carrier means hundreds of tweaks, and hundreds more if they sell also to other carriers.
“There are no standards for the handsets. There are 10 different kinds of transmissions, 20 operating systems and even more processors,” said Dan Kranzler, the former CEO of Mforma, which announced Friday that it was moving headquarters from Bellevue to San Francisco.
“I want to make World Poker Tour play around the world and I’ll have to write the code several thousand times. If I’m a big company, I don’t understand this,” said Kranzler, who will now fill the role of executive chairman.
Jim Voelker, InfoSpace’s chief executive, said it goes beyond technical complexity.
“Don’t mistake that the wireless networks or cellular networks are the same as the Internet,” he said. “They are owned by specific companies that invest their money. … The carriers are not going to let the Disneys and people like that of the world unfettered access to that device. There’s always going to be a big piece cut out for the carrier.”
The problems in the wireless industry won’t last, argued Chris Ruff, president of UIEvolution, a Bellevue-based company acquired by Square Enix U.S.A., a game developer with headquarters in Japan.
UIEvolution is working on software that allows its customers, which include content owners, to easily develop material for a variety of handsets and wireless networks. It thinks its software can be translated even further to other devices or networks.
“That’s why UIEvolution exists. We’re trying to make some of the technical hurdles of doing this disappear,” he said. “It’s the nature of all business. The more something becomes strategic, the more likely companies will bring it inside.”
Steve Shivers, Qpass senior vice president of corporate strategy and development, said there’s plenty of room for innovation. As long as development companies continue to evolve with the content owners, they will do OK.
“They have to ask, what are the things that aren’t going to be done in-house?” he said.
Tricia Duryee: 206-464-3283 or email@example.com