“News of my death has been greatly exaggerated,” Mark Twain is said to have written in 1897, when he remained hale and hearty.
Qualcomm Inc. has taken a page from Twain and added a biblical twist, as it hails its new incarnation of BREW as “the second coming of BREW.”
As with any effective marketing slogan, there’s more than a kernel of truth at its heart. BREW, which stands for Binary Runtime Environment for Wireless, is now more of a branding strategy than the execution environment it began life as, according to Qualcomm. BREW today is positioned at a crossroads-still under construction-where network operators, handset vendors and mega-content brands will meet to slice up the direct-to-consumer pie.
On the consumer side, M:Metrics reports that the demographics for BREW-enabled content bodes well for the future: that the market has reached more than 44 million users in the United States, hungry for mobile content and with disposable income.
First, a glance at the past. “Second comings” imply a transformation.
In the late 1990s, Qualcomm originally created BREW to resolve time-to-market issues for its own handsets. The San Diego-based company developed BREW to work between a phone’s core chipset software and third-party applications to facilitate porting core applications like browsers and phonebooks onto handsets, resolving the need to do separate, deep-level porting of applications on each new phone model. When Qualcomm sold its handset business to Kyocera Wireless Corp. in late 1999, Qualcomm kept the rights to BREW.
“As we looked at BREW, we realized that it could become a key to accelerating the adoption of advanced data services,” said Mitch Oliver, vice president of product management for Qualcomm Internet Services.
At that time, that meant short messaging service. Qualcomm wanted to create an entire service for network operators, so it built a number of components around that device environment, including secure delivery of executables to the handset, software development tools and settlement services that ensured compensation to all parties. BREW launched in October 2001 as a commercial offering.
“We wanted to be sure we attracted the large-brand media companies, so we had to make sure they’d be paid for every transaction taking place, that they were getting detailed reporting data so they could do forecasting and market analysis,” Oliver said.
BREW launched quickly with numerous operators, including Verizon Wireless, Alltel Corp. and U.S. Cellular Corp. That was the picture, until 2004. In the past year or so, Qualcomm spent about $93 million to separately acquire United Kingdom-based companies Trigenix and Elata. Trigenix had developed markup language to enable developers to build user experiences with a software development kit. Qualcomm integrated Trigenix’s language with its own to give developers deeper access to phone functionality. Elata had created a Java vending machine to allow Java on mobile devices and Qualcomm modified it to enable “any type of content on any type of device.” Qualcomm combined the strengths of both to create a “broad and deep” delivery system for content-ringtones, wallpaper, BREW or Java-based apps, streaming video, streaming audio-to any type of handset, be it BREW, Java or simple browser.
Qualcomm then unbundled its BREW offering into three distinct core services. BREW now is “a set of solutions to enhance the discovery and delivery of compelling wireless data,” according to Oliver. So “discovery”-where things are on the handset and how you find them, which has been a hurdle to the uptake of wireless data-means bringing data services more to the forefront of the device, based on customizable user preferences.
The BREW uiOne offering is designed to enhance the discovery of content for subscribers. On the delivery side, deliverOne is an in-network (not hosted) solution coupled with authentication and authorization systems to differentiate service delivery platforms. BREW’s marketOne is a hosted service for discovery and delivery of hosted content.
Oliver said that 69 operators have launched some form of BREW service, about 50 percent hosted, 50 percent in-network. Verizon Wireless probably is BREW’s most visible customer, relying on the platform for both its CDMA2000 1x-based Get It Now service and its flagship CDMA2000 1x EV-DO-based Vcast. According to Verizon Wireless spokesman Jeffrey Nelson, the carrier supports BREW as it moves to the next generation of broadband networks-EV-DO Revision A.
“Our goal from the beginning was to show to the large brands, the large media companies, that this is a market worthy of investment,” Oliver said. “We knew for this to succeed that we had to convince Disney Mobile, Sony Corp., EA Mobile-the types of players that would bring legitimacy to this market. So one of our early focuses was on revenue assurance, being able to show those large companies the kind of reporting that tracks a user going from a demo to a subscription and the average length of a subscription for that consumer, which allows them to do true business forecasting.
“Where we see this going is that it enables large media companies to do direct-to-consumer,” Oliver added. “That’s the next frontier.”
Frontiers, of course, tend to be rough-and-tumble arenas beyond the fringes of civilization. And, to hear U.K.-based Informa Telecoms & Media tell it, this frontier will be no different.
As mobile phones are used as channels for multimedia content, content players and network operators are likely to clash over the lion’s share of the revenue, according to Informa. As direct-to-consumer-dubbed “D2C,” or “off-portal” in some quarters-stands now, content providers are “happy enough, but far from entirely happy,” said Mark Halper, author of the report “Mobile Content Direct to Consumer.” Global, mobile entertainment revenue is projected to double in the next five years from $21.3 billion this year to $42.1 billion in 2010, according to Informa. Network operators, handset vendors and content companies may be girding for a multibillion-dollar battle royale; particularly the operators and content companies.
“When two industries chase $42 billion together, sparks fly,” said Halper.
Network operators and content companies may be working together now, perhaps each with BREW as a facilitator, but meanwhile content companies are seeking their own, independent path to the end user for a bigger slice of the proverbial pie.
Network operators are the “first stop” en route to the consumer and they’re trying everything, Halper said. Operators undoubtedly will play a role, but if they insist on too great a share of the revenue, they may choke off the traffic that will propel the uptake of data services-the tide that operators’ hope will lift average revenue per user as voice revenue flattens.
According to Halper, evidence suggests that content companies have a variety of ways to go D2C. Wi-Fi connections could bypass operator portals, handset vendors could provide the means for end users to reach branded content from partners, or end users could load their own content from home or the Web. A record company might buy wholesale access to an operator’s network, in a scenario Halper dubs “MVNO-lite,” and charge subscribers for access, perhaps giving operators a smaller slice of pie than they’d like. Nokia Corp. recently announced it was seeking an agency to develop a global, online music presence, with a focus on China and the Far East, perhaps where resistance to off-portal content is low. Nokia and Motorola Inc. are embedding links to Google Inc. and Yahoo Inc. on some handsets, though network operators in operator-centric markets such as the United States may well choose not to carry those models to preserve their position in the food chain, Halper said. In Europe, operators still seek to pay off the enormous investments they made in 3G networks and spectrum. All of these scenarios provide “fertile ground for middlemen” such as integrators, aggregators and middleware vendors, Halper said.
“In my opinion,” Halper offered, “operators have to lighten up on their desire to control content, accept a smaller slice of the pie, and they’ll see more volume in content transactions.
“I’m not an expert on BREW,” he added, “but if it does what it’s intended to do, it can serve both operator and content provider by tracking patterns of use, which can help grow the space for both parties.”
As for the consumer, M:Metrics reported recently that 44.2 million BREW-related subscribers in the U.S. are looking for content and ready to pay for it. The most “voracious” consumers are the 18- to 24-year-olds who spend their parents’ money on mobile games. That segment is 21-percent more likely to use BREW than another form of middleware, according to Seamus McAteer, senior analyst and author of the M:Metrics research.
“These favorable demographics are good news for BREW developers, who have the added advantage of being able to reach 86 percent of the installed base of 3G devices,” McAteer wrote. Subscribers of 3G services are almost three times more likely to download a mobile game than 2G subscribers, he added. That’s fertile ground for all in the value chain.
According to a report from Current Analysis, operators have not sufficiently promoted mobile gaming, however, and raising prices to raise ARPU is likely to backfire. Carriers should seek out third parties that enable them to track consumers’ purchasing habits-which is where BREW comes in.
“Qualcomm has yet to address a flaw in the platform that would help carriers better promote their services,” the report stated. “None of the BREW-based carriers has the ability to let customers purchase content online and have it sent to their phones. This added flexibility would not only help Qualcomm’s BREW-based carriers take on Java-based carriers like Cingular Wireless [L.L.C.] and Sprint Nextel Corp., but it would also counter the upcoming trend of off-portal content availability.”
“Not true,” said Qualcomm’s Oliver, though he acknowledged few if any current applications in this area. “It’s very easy today from a Web site purchase standpoint to deliver ringtones and images that are fairly consistent and ubiquitous across all devices.” If the content runs only on certain phones, however, filtering the presentation to the consumer will be critical. Pricing an application might vary according to the handset for which it’s destined, based on the handset’s features. “We’ve offered operators the tools to do that and we’re working with specific operators to roll that out,” Oliver said. “It’s not that it can’t be done. The challenge is how to do it without creating customer confusion.”
In short, as operators, vendors and content companies each seek a piece of the D2C pie, Qualcomm plans to accommodate each of them. The current base BREW business model-in terms of how developers sell to operators through the BREW “marketplace”-is set so that the developer sets the wholesale price to the operator and the developer gets 80 percent of the wholesale price. What about the coming battle royale between operators and content providers?
“In terms of [big content] brands, that will be a different business model, because the brand owns the content,” Oliver said. “It’s not the same model that is used for developers and”-here Oliver paused a split second-“that has not been publicly discussed. Qualcomm’s goal is to provide a solution that allows them to decide what that split might look like and to handle it systematically from the billing standpoint.”
