Making Money from Content

Verizon just made an announcement that they’re going to be offering free Skype-to-Skype phone calling on its 3G phones starting March, 2010. Even my lame Curve 8330 will be able to make those calls. Similarly, AT&T/iPhone has backed down in its argument against Google Voice and they’ve even opened up the platform for the SlingPlayer to stream video over the device.

Are we living in a topsy turvy world? Carriers are willingly allowing applications go after their core revenue model (phone minutes) or eat up their bandwidth (streaming video). For years, in the age of the “anybody can do anything” Internet, carriers have done an excellent job controlling their network: what goes on it, how people use it, and how they charge for it. With the proliferation of smart phones with direct Internet access that can use VoIP services, access to calling plans that undermines the carriers’ pricing (even free) is just an application download away.

In an app-enabled mobile world how long can carriers hold onto their old pricing mechanism for consumers? They can only block Google Voice and Skype for so long. You remember the old adage, the customer is always right? Well, in this new mobile world, the customer is calling the shots. And if you want to keep them, you better revise your revenue model.
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News just came out today from the Mobile World Congress in Barcelona that 24 mobile carriers from around the world are going to unite together to produce an international application store called the “Wholesale Applications Community.” It’s an obvious reaction to Apple’s iTunes application store which has a stringent review policy before any application will appear in its online store. For example, Apple has strict rules about pornography and profanity in its applications, but we’ve seen them relax those rules in certain cases.

Can this idea really work? Can 24 carriers along with three device manufacturers operate more smoothly than just a single device manufacturer?

My answer: Good luck.

I’m sure when the announcement was made there were cheers all around. Execs were slapping each other high five and saying to each other, “Watch out Steve Jobs.” And then as soon as everything calmed down, they all said to themselves, “Oh shit.”

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I can’t make heads or tails of this, but the cost of mobile applications varies widely between different mobile platforms, or sometimes not at all. There’s no consistency. It’s all over the map. For simplicity, I’ve decided only to compare iPhone vs. BlackBerry applications.

Let me show you some examples:

BlackBerry app more expensive than iPhone app

iPhone/iPod

BlackBerry

iPhone app more expensive that BlackBerry app

iPhone/iPod

BlackBerry

iPhone and BlackBerry app priced exactly the same

iPhone/iPod

BlackBerry

While both BlackBerry and iTunes have many free apps, only iTunes seems to have inventory of $.99 apps. With BlackBerry, after free, the applications cost $2.99 and up. Most wouldn’t think much between $1 and $3, but that is THREE TIMES AS MUCH.

A few top selling $.99 iPhone applications

In this sample I only looked at games, not productivity applications. When you get into that space the price varies even more widely, especially when you start comparing Windows Mobile applications which back in the day could cost hundreds of dollars on Handango. Now productivity applications have come down to a more reasonable arena of about $29, but it’s still violently more expensive than other applications. I’m just confused as to why the pricing of the mobile applications have no rhyme or reason to them. I don’t track the gaming market that closely, but I can say that when a game is released on the three major platforms (XBOX 360, PS3, Wii) it’s priced the same. So why isn’t it the same for mobile platforms?

Possible explanations for the complete inconsistency in mobile application pricing:

• Who cares? It’s usually less than $5.
• Nobody is deciding between an iPhone or a BlackBerry app. They’re deciding whether they’re going to get the app at all, so they never compare prices on other platforms.
• The cost of applications is never a deciding factor when purchasing a mobile device.
• Pricing for mobile applications is far from settled. We’re all still in a “figuring it out phase.”

Got some other explanation? Let me know.