Mobidec '03: Plenty of Room at the Bottom
Last week the major wireless players in Japan converged in Tokyo’s trendy Aoyama district to discuss future mobile content development strategies, and we were there see DoCoMo’s director for i-mode Takeshi Natsuno and KDDI’s contents general manager Makoto Takahashi keynote speeches. We also sat down to chat with infoPLANT’s V.P and Chief Development Officer, Susumu Taniuchi, about their new camera-phone based marketing research business. With so much potential and controversy surrounding the ketai cams we were impressed to see how a traditional business model can evolve by adopting these new tools and technologies.
While it’s always worthwhile to hear what the ‘Big Dogs’ are saying – the unsanitized highlights are laid out below without fear or favour – in keeping with WWJ’s tradition of digging deep for the up and comers this program is no exception. infoPLANT’s Taniuchi-san told us the secret to their success.. “traditional research companies don’t have speed like us.. we are aggressive and young, so we can do..” Also interesting were his comments on their future plans for 3G, and the overseas expansion to “export the infoPLANT business model.. especially to the rest of Asia..” Claiming a worlds first deployment of integrating the camera-phone function to provide media rich market research, their story was perhaps one of the best kept (read: not well reported otherwise) secrets of Mobidec 2003.
The message we took away from this event was there is still ‘Plenty of Room at the Bottom’ for developers to catch the mobile money gravy train.
Prefacing his speech with a disclaimer that he didn’t have any breaking news, Natsuno went into typical propaganda mode, outlining the “unbelievable” growth of i-mode, calling the foreigners in Europe and the United States “okureteru” which in Japanese can suggest “being behind in the sense of being slow and stupid,” as well as suggesting that these markets faced too many competitive pressures with the infrastructure for a contents market not in place yet for significant i-mode-type growth. Tsk, Tsk, if only the Europeans had some sort of oligopoly, how much easier it would be to get handset makers to do what you wanted to do with them….
And Natsuno also dished out other observations on those poor behind-the-times foreigners who haven’t bought the ticket for the i-mode ride yet. I got a strong sense that Natsuno is gradually rewriting the history of i-mode in his speeches, each year getting smugger about what a consummately planned business model it was.
Back in February 2001, when i-mode subscribers had just surpassed 19 million, Natsuno castigated handset makers such as Sony and Panasonic for not understanding how to build the i-mode market. We remember him telling semiconductor executives here how , after originally touting the service to business customers (FOMA, anyone?) DoCoMo had wisely decided to market it to the lowest common denominator the Ganguro, teen-aged girls with very dark tans, died blonde hair and heavy makeup that frequent the Shibuya entertainment district in Tokyo, to kick-start the service.
As the history of the service is gradually rewritten down the years, under DoCoMo’s stewardship-the kind of stewardship that launched the original disastrous FOMA handsets into a quarter-built network-Natsuno has mellowed in his attitude toward keitai makers, and ignoring the series of recalls DoCoMo has suffered down the years, talked of a smooth transition from the 503, 4 and most recent 505 era.
But the main point of his speech was that there is still plenty of room at the bottom for i-mode contents developers in Japan, despite the continuing science of i-mode’s overseas ventures. In fact, he pointed out that amid Japan’s saturated market, 48 percent of Japan’s 39 million i-mode subscribers do not pay for content. He also admitted that far from being the spearhead of a bright new applications frontier, FOMA user applications are still at 504 model levels. FOMA is now destined to start really developing its customer base and services next spring, he said, possibly when 505-level users are looking to replace their handsets and prepared to accept FOMA’s as yet undefined plus-alpha attractions.
Last week WWJ pointed out that something has to give with packets and payment systems for 3G to succeed in terms of getting users to really start making use of the speeds and bandwidths available, along with the issue of contents production itself. A day after Natsuno left the podium with the message that FOMA packet rates are now less than one sixth of PDC, KDDI’s Takahashi pointed out that his company’s packet rates are now a third of the cost of i-mode’s and one of the first things KDDI is going to do to get BREW (Binary Runtime Environment for Wireless) usage up is to roll out a special bargain discount campaign ahead of next month’s 1x-EvDO network launch.
The core message behind Takahashi’s speech however, was that there seems to be a potential crunch ahead for everyone. Packet rates have to plunge as speeds and applications kick in because ARPU news is not good and, despite BREW’s much touted higher downloading speeds, costs have to come down to develop the new applications to differentiate 1xEVDO.
Meanwhile. CDMA 2000 1X data revenue per subscriber over the year to March 2003 dropped from 3,470 yen to 2,290 yen while voice ARPU had declined from 6,950 yen to 6,530 yen, even as KDDI increased its number of subscribers to 9.1 million. While calling ARPU figures “on target,” he called it logical to say that as packet prices lower, traffic goes up. It seems that in terms of lowering packet prices, as we predicted in last week’s Viewpoint, here too there seems to be plenty of room at the bottom.
— Paul Kallender