a week in wireless


Musical differences

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If iTunes killed the LP, then Spotify‘s bringing it back from the dead (the Informer’s afraid there’s nothing we can do for the Radio Star). And if you’re the kind of person that likes the connected side of Abbey Road or anything by Pink Floyd then this is good news. Or it would be if the Beatles’ or Pink Floyd’s music were available on Spotify. Still, if you’re the kind of person who simply has enough curiosity and the requisite attention span to actually listen to a collection of songs that may last as long as 40 minutes, instead of what amounts to not much more than a series of individual, fleeting jingles, then you’ll be pleased about the album’s rebirth in the digital era. If you’re the kind of person that likes the solo work of Rick Wakeman, meanwhile, then this will mean nothing to you because you’ll only listen to vinyl anyway, due to its ‘warmth’.

Spotify, the service that allows users to listen to a vast range of pop music, streamed over the net in exchange for occasional adverts, unveiled its iPhone application this week, which it has submitted to the mighty fruit in the hope that it will be approved for inclusion in the vendor’s App Store. Whether or not the application will make it through Apple’s rigorous (and at times hard to fathom) approval process remains to be seen. Especially as Spotify could be seen as a competing product to Apple’s iTunes.

The company has uploaded a video giving a brief demonstration of the app, which it says is similar to the existing PC version of the service. However, whereas the PC version of the service is available in an ad-supported, free format, or an ad-free, paid-for version, the iPhone iteration of the service will only be available to premium subscribers paying £9.99/month. Spotify says the service works well over 3G and the iPhone version has the added benefit of an offline mode which allows users to download playlists to listen to in airplane mode or when beyond the wispy tendrils of network coverage.

In more music news, Orange launched a monkey this week, which makes it sound like the cold war Soviet space programme. This particular Monkey, however, is a music streaming service aimed at young and prepaid users, who don’t have fancy-Dan handsets like the iPhone. The carrier has struck a deal with Universal Music that gives it access to that firm’s catalogue, although analysts described the programme’s reliance on Universal as “extremely limited”.

Back to the use of advertising to subsidise content, though, and it looks like it didn’t work for Blyk, which issued a statement early this week, officially repositioning itself as a managed services provider. The UK-based, ad-funded MVNO will shut its doors at the end of August, turning loose some 200,000 youth segment customers. It’s high time they left home, anyway.

In the end, the MVNO was simply way off the mark in terms of subscriber numbers. While it could offer unrivalled targeting to advertisers, it was fundamentally handicapped by its lack of reach. And once it became clear earlier this year that it was not generating enough ad revenue to subsidise what was an already paltry monthly sop of 43 voice minutes and 217 texts to its end users, the game was effectively up.

But the firm’s founder, Pekka Ala-Pietilä, was unwilling to concede that the ad-for-service model was fundamentally flawed when the Informer spoke with him this week. “We did not conclude that it wouldn’t or couldn’t work,” he said, explaining that the firm still backs the concept but accepts the model was wrong.

Running an MVNO was resource intensive and time-consuming, he said, and was not delivering the kind of returns that allowed the firm to deploy quickly in other territories. This is something that it is keen to do, despite no evidence that large numbers of people really want its service. So it will now partner with operators (see its announcement with Vodafone Netherlands from last week), helping them launch and manage their own mobile advertising services.

“I don’t believe we could do that if we hadn’t managed to perfect the media model and gain the experience on the advertising side, the technical side or the consumer side by doing everything from the ground up ourselves,” said Ala-Pietilä, clinging to a positive view of the MVNO.

In the UK, Blyk has now entered into an exclusive arrangement with Orange, which was the host for its MVNO. But it’s not clear that Orange feels as positive about advertising as subsidy as its new managed service provider, with the carrier’s VP of strategy and business performance, Mark Overton, revealing that such activities would not be at the core of the services Orange will be using Blyk to launch. He did promise, though, that it was “the start of a better relationship with our customers”. It’ll be different this time, babe, I swear.

A further announcement from Orange, which is in the midst of signing a deal with retail bank Barclays, is expected next week.

Sticking with MVNOs and their hosts, Virgin Mobile in the US has this week been purchased by Sprint for some $483m. Virgin’s US operation has amassed around five million customers and for each of those customers it has amassed around $40 in debt. Sprint, which already owns 13.1 per cent of the MVNO, will pay off that debt as part of the purchase, which will also relieve Virgin of its 28.3 per cent stake and South Korea’s SK Telecom of 15.3 per cent. It will also buy up the 43.3 per cent that’s publicly traded.

Sprint already owns Boost Mobile, a youth-focused prepaid MVNO and the firm said that Virgin would be a complementary addition to the portfolio. Virgin, meanwhile, will draw $12.7m in brand licensing fees until the end of 2021.

The politicians sometimes say you can spend your way out of recession and judging by Sprint’s results, that’s what it’s trying to do on an individual basis. Net loss for Q2 this year was $384m, which is $40m more than it was for the same period in 2008. Operating revenues fell ten per cent year on year to $8.1bn.

The company had 48.8 million wireless customers at the end of the second quarter, down from 49.1 million at the end of the first quarter of 2009. This includes 34.4 million postpaid subscribers (25.1 million on CDMA, 8.3 million on iDEN, and one million Power Source users who use both networks), five million prepaid subscribers (4.4 million on iDEN and 600,000 on CDMA) and 9.3 million wholesale and affiliate subscribers, all on CDMA.

A little further North, the Nortel asset strip scuffle was decided this week, with Ericsson winning the bidding war for the Canadian firm’s LTE and CDMA assets with its offer of $1.13. That does not buy the Nortel LTE patent portfolio, though, which is understood to be substantial and which may have been the driver behind compatriot firm Research In Motion’s bid to keep the assets in Canada.

Right, it’s not often the Informer gets to say this so he’s going to enjoy it…

Now for some good news from US vendor Motorola! The firm announced a profit for the second quarter of 2009. The company delivered $26m in net earnings, up from a profit of $4m in the same period last year and a run of losses for the quarters since then. The cost cutting strategies have paid dividends.

Quite how long that will last is another matter, though, as net sales plummeted from $8bn in the second quarter of 2008 to $5.5bn in 2009 as consumers stopped buying handsets and operators bought less kit. Sales at the Mobile Devices segment were $1.8bn, down 45 per cent compared to the year ago quarter. Operating loss was $253m, compared to an operating loss of $346m in the second quarter of 2008, but down from $509 million in the first quarter of 2009.

Motorola shipped 14.8 million handsets over the three month period, giving it an estimated global handset market share of 5.5 per cent. The company is preparing to unveil a raft of Android-based devices starting in the fourth quarter in a bid to revive its handset portfolio.

Sanjay Jha, co-CEO of Motorola and CEO of Mobile Devices, said: “We have agreements in place with carriers and remain on track to bring our new smartphone devices to market for the holiday selling season. We are also excited about our 2010 portfolio and are pleased with the customer feedback. In Mobile Devices, we improved the operating loss, reflecting a lower cost structure, and substantially reduced cash consumption as compared to the first quarter.”

The Home and Networks Mobility division recorded sales of $2bn, down 27 per cent compared to the year ago quarter. Operating earnings for networks were $153m, compared to earnings of $245m a year ago.

Finally this week, Microsoft has, after a lengthy pitch of the woo, managed to get itself into Yahoo’s personal space. The two companies this week announced that they will combine their search and advertising experience to take on the might of Google.

Since the collapse of Microsoft’s $45bn offer for Yahoo in 2008, discussion has focused on how else the two giants might combine their strengths. Under the deal announced Wednesday, Microsoft’s Bing search engine will power Yahoo! search while Yahoo will become the exclusive worldwide sales force for both companies’ premium search advertisers.

Recently installed Yahoo CEO Carol Bartz said: “Users will continue to experience search as a vital part of their Yahoo! experiences and will enjoy increased innovation thanks to the scale and resources this deal provides. Advertisers will also benefit from scale and enjoy greater ease of use and efficiencies working with a single platform and sales team for premium advertisers. Finally, this deal will help us increase our investments in priority areas in winning audience properties, display advertising capabilities, and mobile experiences.”

But what this deal is really about is Microsoft and Yahoo going up against the search and advertising giant Google, “providing a viable alternative to advertisers…so that advertisers no longer have to rely on one company that dominates more than 70 per cent of all search,” in the words of Microsoft CEO Steve Ballmer, a man who is clearly bothered at a fundamental level by the concept of a monopoly.

And that’s about the size of it this week. The Informer is now taking his summer holidays and will return in September.

Take care and have a good August

The Informer

RIP Sir Bobby


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