Slimming down the market

It’s been a tough couple of weeks in the mobile content space.
Crown Castle International Corp. fled the nascent mobile TV market last week, absorbing a $10 million hit as it shut down its Modeo business and agreeing to lease the spectrum once salted for wireless video broadcasts. Amp’d Mobile Inc., which marketed itself as much as a content company as a wireless services provider, sold its assets after burning through a jaw-dropping $360 million in venture capital. And content aggregator Oasys Mobile Inc. earlier this month entered Chapter 11 after it defaulted on an $8 million loan.
Perhaps only Attorney General Alberto Gonzales had a tougher July. And he still has his job.
It would be easy-and not entirely inaccurate-to dismiss such misfirings as some sort of barometer, measurements indicative of mobile content’s failure to arrive in the United States. The truth, of course, is far more complicated. But there are common threads that can be found in the wreckage of all three businesses. Bad timing and over-exuberance are the two key common denominators.
–Modeo was the odd man out in a market that, for at least the next few years, will support only two dedicated mobile video networks-if that many. Crown Castle was the second player on the field, but the company lost out to Qualcomm’s MediaFLO, which is poised to dominate the market, and Aloha Partners’ HiWire, which was late to the party but operates in more efficient spectrum. Modeo notched some high-profile content deals, and executives were quick to discuss plans to spend a half-billion dollars to build out a nationwide network, but the company failed to secure a carrier partner even for its New York trial. Ken Hyers, now an analyst with Technology Business Research Inc., wrote presciently last October that “Modeo will end up selling its spectrum to another player in the coming year.” Chalk one up for Ken.
–Amp’d Mobile was the latest in what promises to be a series of gloriously explosive MVNO meltdowns, but the company’s fate underscores more than just the difficulty in finding a workable business model. Amp’d overspent to acquire customers, obviously, and while it generated impressive ARPU, its profit margins were questionable (as its offering of 99-cent full-track downloads illustrated). However, while less than 1% of Amp’d Mobile’s budget was spent on original content, the MVNO’s content holdings are among its most valuable assets. The company’s failures stemmed not from its music or video offerings, but its inattentiveness to mundane back-end “details” such as billing, customer care and operations.
–The bankruptcy of Oasys Mobile didn’t draw as much attention as the Modeo or Amp’d flame-outs, and the startup vows it will continue to do business as it wends its way through bankruptcy court. But Oasys always seemed to be a step behind its competitors. The content company adopted an on-deck strategy under the Summus brand several years ago, then tried its hand as a direct-to-consumer play in late 2005-long after the Jamsters and Blinkos of the world had established solid followings among content-hungry mobile users. Oasys is now hoping to cash in as a content publisher, serving as a liaison between carriers and application developers. Whether any room exists in that space has yet to be determined.
There’s no question that the wireless industry has much work to do before mainstream U.S. subscribers use their phones to watch TV, listen to music or surf the Web. Milestones such as 3G networks, Apple’s iPhone and, eventually, WiMAX will help spur uptake of all sorts of data services, just as high-speed networks boosted Internet traffic on fixed-line PCs.
For the most part, though, the players that have recently gone belly-up have done so because of misguided management. So it may actually be a healthy sign that some of the early players are falling by the wayside as more viable offerings come to market for U.S. mobile consumers.