Extracting 3G Profit Lessons from Japan
Extracting 3G Profit Lessons from Japan

Extracting 3G Profit Lessons from Japan

Extracting 3G Profit Lessons from Japan

“The single biggest benefit that was discovered in Japan was that youneed to be fair in sharing the revenues with the content developer. It is not fair to say to a Disney or a CNN, ‘Give me half your money, and then I will put you on my network.’ DoCoMo approached this with the rough idea they would like to keep 10% and give the content developer 90%,” says Tomi Ahonen, a long-time industry watcher, prolific mobinet author, and ex-Nokia consultant. He points to Japan’s stark contrast with Europe, where operators took a 50/50 or 60/40 approach. “Under these terms, [European operators are] very unlikely to attract a large community of developers.” He also has a pretty good ideas as to what EU and the US must do in 2004 to establish successful 3G services.

As industry watchers, your humble WWJ scribes never cease to be surprised at how mobile markets outside Japan miss the boat when it comes to extracting success factors from NTT DoCoMo’s i-mode, KDDI’s EZweb, and Vodafone Live.Today’s program guest, Tomi Ahonen, makes the point clearly and concisely: the No. 1 lesson to be learned from Japan is give the content provider a fair shake.

Doing so will offer a significant incentive to content owners and developers to join the platform – and assume the development risk in exchange for the lion’s share of the content fee. Meanwhile, the carrier sets up a decent billing system, promotes the hell out of the service, gathers the coolest handsets available, and rakes in the profits when data traffic goes ballistic. It really does work and it really is that straight forward (obviously, there are a lot of additional details, but we’re speaking conceptually here).

We’ve been doing a lot of thinking lately as to why network operators outside Japan have failed to copy this success formula – they are by no means dim and in fact have spent considerable time and budget since ’99 visiting Tokyo, poking and prodding Japan mobinet players for answers; they know why it works here. So why haven’t they replicated the same outside Japan?

Well, at least to some extent, they have. France’s Bouygues Telecom reported this month they had over 500,000 i-mode users (who’ve exchanged more than 15 million emails); Bouygues has some interesting new handsets (NEC N341i and Mitsubishi M341i), Java, and location-based services. The company has been quoted saying that content partners have earned over 10 million Euro infees; 86% of French i-mode email users are “very satisfied” with the service(and 77% are at least “satisfied” with the terminals). Hmmmm… Looks just like i-mode in Japan!

But the other baby i-modes, as well as mobinet services at other carriers,have yet to achieve the same level of success as in Japan, and Ahonen’s comments today may just be a good starting point for strategists and planners at those operators. Hand over most of the content fees to the content developers, and they will move heaven and earth to create content, applications, and services that work well on the tiny screen and that mobile users will want to use. This will spark a virtuous circle as the cool content attracts more subscribers – who in turn make entering the content business more lucrative for content owners.

Sadly, many carriers outside Japan are still addicted to excessive SMS revenues, the “premium” content model, and claiming narrow-minded ownership of the customer relationship — as well as too much of the content revenue.

— The Editors.