Nobody Wants the Motorola iPod iPhone

Now here’s a monumental, earth shattering surprise:

One reason for the delay could be the missing third leg of the necessary triangle, the carrier. Verizon, Sprint and other Motorola partners are planning their own digital music services, which would allow subscribers to download music directly to their phones over new broadband wireless networks. That would essentially make them direct competitors with Apple in the music-phone business. And as much as Motorola might love to tap into the iTunes magic, they still need a carrier to subsidize the cost of their expensive hardware.
Link: C-Net

Apple/Motorola iPhone (mock)I’ve written before about Apple and mobile phones, mainly to suggest that going the MVNO route is something that would suit Apple’s corporate mentality. And now there’s another argument to that idea. Basically, the Networks won’t take the iPhone because they can’t get their seven pieces of silver from someone buying The Beatles White Album in yet another format. What a European attitude to take! I’ve generally found US companies are happy to make $2 and give $1 of that to a prtner, thus grossing $1. The Europeans on the other hand generally want to make $1 and keep $1 all to themselves. Less turnover, same revenue.

The networks are in an awkward situation, and it’s all their own doing. The problem is two fold I think. Churn and Subsidy.

Forget about the geeks who’ll happily pay £200+ for a phone. They’ll buy anything with a logo. Forget the uber-geeks, they’ll manage to get those phones on long term product evaluation test, and switch over to the next one in four months time. No the problem is the networks margins are so close to the bone in pretty much every field. Handset costs are one. UK punters expect to pay about £50 for a new phone, tops, and a contract of around £30 a month. That was true when I got my first phone (a Nokia 5.1 on Orange, fact fans), it was true when I switched to the 7650, and it’s true now. What the networks need is more people on their network, to give them more income. How do you get people to switch networks. Well, the basic rule is with lower prices. spot a problem yet?

The holy grail of all networks is to stumble across a massive moneyspinner that everyone just picks up, uses, and pours money at the networks. They’ve managed this once, with SMS, and even then it was more by serendipity that they caught wave than planning. So now whenever they plan the next big thing, it’s by committee, it’s just a little bit different, and it fails. WAP and “The Mobile Internet” is the classic initial failed hype trick, but you’ve got other delights such as MMS, the incredibly competitive per mb pricing of GPRS, the ‘please don’t all use it at once in central London’ 3G phones. All of which have (to a certain extent) failed to drive bottom line figures higher than ‘ooh that’s interesting.’

So they’re relying on tricked out phones to get people interested. The camerphone has, essentially, become the default standard of phone, with a bit of Java MIDP capability. We’re seeing phoens with bigger camera, memory, capability and connectivity. But this is a double edged sword. The geeks can already bypass all the ‘must get information through us, must get applications through us’ hoops that the networks have in place to try and squeeze out of you more than the £30/month you like paying. And that knowledge is seeping down the value chain.

The next big thing ™ is the music phone. A phone with an music player, so people will happily download the same music all voer again, but this time pay the networks for it ant have it able to play outside their phone. A perfect committee plan with only number of flaws – I’ll leave those as an exercise for the reader.

But what does this mean for that upcoming Mp3 phone from Apple and Motorola? Well the first is that pretty much every other phone will take WMA and the DRM’med files available through white label music stores. Beyond that there’s every chance that phones will get a frimware upgrade to allow “Plays For Sure” to be on the device – which again integrates with the white label stores the networks are investigating. And Apple will, effectivly, be locked out of the OTA Music Market.

Unless they had their own network…