Wednesday, 28 March 2007

Sprint to Hollywood and Silicon Valley: Drop Dead

Okay, that's a deliberately provocative headline, but I was very surprised this week when Sprint gave more details on the rollout plan for its WiMax high-speed network. Keep in mind that Sprint's counting on support from the technology and content industries to help make its network successful. They want lots of new devices and lots of new services to drive usage of mobile WiMax.

So, what are the first nineteen cities where Sprint's rolling out WiMax?

There's Chicago, Detroit, Grand Rapids, Indianapolis, Kansas City, Minneapolis, Baltimore, Boston, Philadelphia, Providence, Washington D.C., Austin, Dallas, Denver, Fort Worth, Portland, Salt Lake City, San Antonio, and Seattle.

Let's see, what's missing? Oh, yeah -- the country's two biggest cities, New York and Los Angeles. Plus Silicon Valley.

Hey, I'm sure there are good reasons for the choices Sprint made. I'm delighted they're covering five cities in Texas, and it's great that the critical Rhode Island market will be nailed. But if it's essential to the success of your network that you get support from the tech and entertainment industries, wouldn't you make it a priority to let people use that network in the capitals of those industries, Hollywood, New York, and Silicon Valley? I mean, Portland's a wonderful place, but if I were trying to pick a city on the North American west coast that has tech and entertainment industry presence, I'd rank it just above Ensenada and Anchorage.

So I don't understand what Sprint's doing. I want to root for them, because I like the story they tell about their future business model for WiMax, but they're making it hard to love them.


A couple of other tidbits worth mentioning:

HTC, say it ain't so. Jason Dunn of Pocket PC Thoughts is blogging about CTIA for Microsoft. He says HTC hinted that its upcoming Advantage product will be priced at about $800. Advantage is very interesting technologically -- it's a Windows Mobile mini-tablet, a little larger than a handheld, and could make a very nice info pad. But the right price point for that product is $299. At $800, Advantage is going to be compared to low-end laptops, and it's vastly less powerful and capable than they are. I'm very concerned that if Jason's price information is correct, HTC is going to produce yet another tweener product that'll delight no one and give the info pad form factor a bad name. I love the way HTC is experimenting with different hardware designs, but I wish they'd be more clever about the target markets.

An alternate explanation for the reported collapse of Web 2.0. Venture capitalist Peter Rip reports that Web 2.0 as an idea must be falling apart because traffic to two major Web 2.0 commentary sites, GigaOm and Tech Crunch, has been dropping since late 2006. Peter makes some other very interesting points, in particular on the difficulty of moving Web 2 from a tool to a platform. But I'd like to suggest an alternate explanation for the traffic decline he noted: Maybe those websites have just gone stale. Magazines go through cycles -- for example, in business magazines Forbes was pretty interesting in the1980s, while Fortune was dry as day-old toast left by the side of the road in Arizona. Today their positions are reversed. I think the same sort of cycles are likely to happen in websites, and may be even more frequent, because so many sites depend on a single author who could easily burn out or get distracted.

Is this the beginning of the end for RIM? Maybe not now, but... Richard Windsor of Nomura, one of my favorite financial analysts covering the mobile market, just issued a scathing recommendation to sell RIM stock.
"In order to see further upside we think RIM needs to ship around 1m Pearl devices per quarter to consumers outside of its traditional channels. We have seen no sign of these shipments."

Basically, he's arguing that RIM's dominance in the business communicator market has already been factored into the stock's value, and that to see a lot of upside it has to grow substantially in the consumer market.

I'm not as pessimistic about Pearl shipments as he is -- the early word in the industry was that Pearl was selling extremely well, although it's almost impossible to get reliable figures on phone sales. But I think he's right directionally, even though it's for the wrong reasons. The real question for RIM isn't whether it can break into the "consumer" communicator market, because there's no such thing. There are just communication users, and they use the same devices for both work and personal use. Those people make up about 12% of the population. At some point, between sales of RIM and Treo and all the copycat communicators coming to market, that segment's going to saturate, and RIM's growth will come to an abrupt halt.

The trick is predicting when it'll happen. I don't have enough data to make that call. If anyone wants to invest about $50k in some quantitative research, I could find out. ;-)

Think more creatively about new forms of telephony. Dean Bubley wrote a nice article on possible future uses of voice technology. His point, which I agree with strongly, is that we're paying too much attention to VOIP as a replacement for conventional phone calls. It's important, for sure, but the most interesting change in voice communication is likely to be the integration of voice conversations into lots of different web services. Talking will just be one of the things you do on web sites and online communities. You won't think of it as a phone call, but it'll displace traditional calls as surely as that Vonage handset on somebody's desk. The only difference is, most of the industry won't see it coming.

As they used to say in war movies, "the bullet you don't hear is the one that gets you."

After the death of the album. The mainstream media seems to be finally waking up to the main impact of the iTunes -- it enables people to buy singles instead of albums. That's a financial disaster for the record companies, because they can no longer force people to pay $14 to get the one or two songs they actually want. But I can't see how it is anything but good news for consumers.

Please excuse me if this sounds like bragging, but this trend is what I predicted last year when I looked in detail at the economics of music distribution on the Internet. In that spirit, here's what the newspapers will be reporting in another year or two: more and more new acts will be bypassing the record companies and using iTunes as their music publisher. This will let them keep about 65% of their revenue, rather than under 15%, enabling them to make reasonable money on a relatively small fan base. I believe Apple's fate is to become the music publisher of choice in the US, but the iPod installed base has to grow some more before it'll happen.

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