Content Providers Hit Vegas With Plans to Get Untethered

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Gadget makers and gearheads will head to the Consumer Electronics Show in Las Vegas this week to view the panoply of new audio and video products that will soon be offered to U.S. consumers.

The CES is a traditional spawning ground for satellite and home-networking hardware related to cable's broadband space. And increasingly, new consumer products to provide outlets for cable-related content providers.

For instance, wireless providers are moving closer to rolling out next-generation 3G services, which are designed to be faster and more conducive to Internet content. That has caused content providers to look at moving video or audio material into the consumer's briefcase or handbag.

Wireless carriers and content providers are touting the benefits of value-added entertainment options enabled by the 3G upgrade, such as online gaming, instant messaging and the always-popular adult content category.

There should be enough people around to make a hit of 3G services, and the devices that use them. According to International Data Corp. research, there will be 110 million wireless users in North America by the end of 2001. But the biggest disconnect is between 3G's expected user base and the entertainment services' probable user base.

According to most analysts, 3G service — which could cost anywhere from 20 to 50 percent more each month than present cell-phone services — are targeted first at business customers, who would use 3G services and handsets to augment their desktop PCs.

But even before Sept. 11, few managers — or their accounting departments — would have signed off on a $20 monthly charge for a service such as online gaming.

Today, telecom budgets are being slashed and employees asked to reimburse companies for personal calls. Corporate-sponsored entertainment services seem like even more of a pipe dream.

Matthew Feldman is CEO of Versaly Games, an entertainment application provider that recently inked a deal to provide Jimi Hendrix music to users. Although the Hendrix application is clearly one for personal use, he said, employers who still want to encourage cellular phone use for increased business productivity will buy the new handsets, but ask employees to pay for non-business use from their own pockets.

Feldman could be on to something, said Mike Doherty, a senior analyst at the industry research firm Ovum. Although wireless gaming is likely to be one of the main applications that spurs 3G implementation, companies will benefit from employees who can download contact information from a corporate network or view a presentation on their handset, making 3G phones a big seller once they are available.

"The enterprise is the [wireless carriers'] bread and butter and will continue to be," said Doherty. "What we'll see is that there won't be too many pure consumer offerings out there. There's always going to be a bit of a blurry line."

Rather than selling gaming offerings on a standalone basis, providers may try to bundle them in with white-board business applications or pair entertainment news with stock quotes and business news.

"Maybe you'll be able to download snippets of old television shows, but also download snippets of news programs, too," he said.

Not everyone is willing to wait for 3G to make its debut. Today, many traditional video providers are rolling out wireless services using existing bandwidth.

Take World Wrestling Federation Entertainment Inc., the muscle behind cable's grappling fare. Last month, the company inked a deal with Qualcomm Inc. to extend its brand into the wireless world, a move WWFE executive vice president of international business development Roger Marment called another step toward getting the WWF brand on as many platforms as possible.

"As new platforms develop, whether it's video-on-demand channels or wireless platforms, we want our content to be available," he said.

Other traditionally video-based content has also made the leap from the small screen to the even smaller screen of the PDA or cellular phone. Cable News Network, ESPN and the Weather Channel are reaching out to viewers on their handheld devices.

Aside from technology problems, logistical solutions are also required. How do you take a well-known video brand and translate it into a tiny, text-only screen?

The Weather Channel, famous for its on-screen graphics and dramatic satellite video, solves that problem by giving consumers location-specific information, said executive vice president of strategy and development Bahns Stanley.

"People make decisions based on the weather. For example, some people like to surf and they may want to know that the waves [at the beach] are bigger than four feet. We're developing these kind of things," he said.

That's fine, but will people really pay to get paged when the surf's up? A viable business model remains elusive.

BILLING CHALLENGES

Billing also presents a problem, according to Ovum. For example, providers aren't set on a specific billing method yet. Pay-per-use is one option. But in the future, as services become more of a commodity, subscription-based billing may be a better way to go. Unfortunately, neither method is perfect.

In a subscription-based world, users who have paid $10 or $20 per month for online gaming access may stay on indefinitely, clogging up networks and using spectrum and cells so voice calls can't get through.

Conversely, under a pay-per-use model, people are less likely to make as much use of the service as they would like because the threat of a large cell-phone bill looms in the background.

"Every time I'm using the game I have to think, 'Wow, I'm spending a lot.' It's a bit of a struggle," said Ovum's Doherty.

In Europe, customers pay on a per-kilobyte basis, but European telecom users are used to high connectivity charges. In the U.S., where consumers are accustomed to America Online's monthly flat-rate charge, that may not fly.

Initially, providing both payment options may be the only way to go. A subscription model can get people hooked on the technology, but offering a pay-per-use model lets people know such a choice is available.

Eventually — once wireless providers have implemented sufficient network service-quality standards to drop gaming customer connections in favor of voice or e-mail customers — subscriptions may take off.

No matter which option carriers choose, they still face collection problems. Application providers would like carriers to collect the money and split the proceeds, but few carriers are set up for that collection method.

Unplugged Games is working on a provisioning and billing API that will let carriers make one application available at multiple pricing levels. Because it's an application service provider model, any carrier can use it, regardless of existing infrastructure.

BUSTING CHURN

No matter what happens, analysts say entertainment services will become a boon for carriers and content providers.

Aside from revenue generation, gaming and entertainment also addresses carriers' churn problems. Customers who want to download Universal Press Syndicate comic strips or ring tones based on Snoopy might be deterred from ditching a provider that contracts with Airborne Entertainment for another that doesn't.

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