Reporting by Timo Argillander

Nokia, Microsoft alliance titled as the third ecosystem

Not surprisingly, the hottest topic at the event was Nokia’s partnership with Microsoft. The partnership was welcomed with a positive tone, as the alliance is seen to establish “a third ecosystem” that will compete with Apple and Android platforms.

Nokia made no significant product announcements in Barcelona, but Stephen Elop finally spelled out the company’s vision. Nokia will aim at bringing “the next billion” people online and thus invest in presence on all markets globally. Elop also reminded, that their Symbian-based Series 30 and 40 platforms are shipping in high volumes and those platforms will be further invested in.

Microsoft’s Steve Ballmer presented several new features for the Windows Phone 7 platform (note that Microsoft rebranded Windows Mobile as Windows phone recently). New mobile version of Internet Explorer 9 was also announced. Now that Android implementations are more or less imitated versions of iPhone/iOS, Windows Phone seems quite innovative at least what comes to user experience.

Operators in search for growth as subscriber penetration is saturating

Mobile World Congress is organised by operator association GSMA and an essential part of the event is to discuss operator business. During the last decade operator average revenue per user (“ARPU”) has steadily decreased, but fast growth in user numbers has guaranteed an overall revenue growth.

Now the user base is about to be saturated but the ARPU continues its decline. As Japanese operator Softbank’s CEO Masayoshi Son summarised: in the next five years mobile user base will be 1,5-fold but ARPU will decrease to two-thirds of today’s level. This would lead to revenues freezing to today’s level.

Operators generally see two solutions here. One is to invest in growth in mobile data use and the other is to find new services to create new revenue streams.

Investing in data traffic growth is an obvious choice for the operators. Some operators, such as Softbank, make more than a half of their revenues out of mobile data. On the other hand a fast growth in mobile data use brings needs for investing in network capacity. Operators have started to build the first next-generation networks (the technology is called Long-Term Evolution, LTE).

Mobile video will be a key growth driver in mobile data. Cisco CEO John Chambers said that in 2015, 66 % of mobile data traffic will be video. Operators are somewhat reluctant to talk about mobile video as video streaming would easily lead to network congestion. This must be the reason that mobile video was discussed amazingly little at Barcelona.

Operators also look into expanding to cloud computing services. Healthcare is mentioned as one potential segment for operators’ cloud services.

Mobile apps phenomenon creates buzz, nearly hype

Mobile apps created a lot of buzz and almost hype at the event. In any case mobile app sales and downloads are increasing at a high pace. App sales are expected to reach 15 billion dollars this year.

For content owners apps provide a new way to monetise their contents. For operators apps drive data subscriptions without creating so much traffic as e.g. videos create. Operators also wish to get a share of app sales revenues. For this purpose a group of major operators are working on Wholesale Applications Community (WAC) initiative, which aims at providing operators standardised platform to implement application stores. There are however no clear signs that people would be turning to operators for their app purchases as there are good app stores already on the market.

From content owners’ point of view apps business is a volume business. And in order to reach high volumes, the price tag for an app is seldom more than 0,99 euros or dollars. This way consumers have already learned that most apps are available at that price. Content owners can try to earn more by launching add-ons for their apps. For example Rovio, the creator of best-selling Angry Birds game, has launched add-on parts for the game.

Rovio CEO Mikael Hed spoke summarised in his presentation that to make an app successful requires simply two things: developing apps that bring value to the consumer and getting a maximum visibility for the app.

In addition to selling the apps for consumers there are two alternative or complementing business models: in-app advertising and in-app e-commerce. For paid apps there will also emerge subscription based pricing models.

Today four out of five app downloads are for free.

Apple is running the leading app store and has set their provision to 30% of all purchases. There has been a justification for this as Apple has coped with the single most difficult part in apps business, namely billing. However there is a growing discontent over Apple’s pricing. Ilja Laurs, CEO of mobile app store company GetJar estimated that Apple can continue with that provision level still three to five years from now.

It should be noticed that despite of the successes in apps business so far the apps model will not necessarily be the dominant one for mobile content and services. Development of technologies such as HTML5 may strengthen the role of services based on mobile browsers.

Mobile publishing developing fast

E-books have turned into reality and mobile platforms – especially tablets – play an essential role as reading devices. In the US, e-books accounted for 9,5 % of all book sales in 2010. In addition to electronic versions of printed books, a market for “enhanced” books is emerging.

Today, consumers’ main criteria for e-book reading are reading comfort and similarity to paper. Thus the first e-reading devices, such as Amazon Kindle, earned some success in the US. When e-reader concept arrived to Europe, tablet devices were already coming to market. For this reason e-readers play a role mostly in the US.

So far e-books have had the most impact on consumer books. Pearson’s Juan Lopez-Valcarcel sees that the next big potential is in educational books.

Despite the growing figures e-publishing is still in trial phase for publishers. Time Inc’s Nate Simmons admitted that in their e-publishing activities they do not yet have in place same kind of user and visitor metrics as they have in their internet publications.

Yahoo presented their new Livestand service concept. Livestand is a tablet device app that functions as a “digital newsstand”, a platform where consumers can buy magazines and other content. The idea would be to make consumers life easier as there is no need to download a specific app for every magazine. And concept would appeal to publisher as it provides a single platform that works on several tablet systems. Interesting question is, whether there will be middlemen like Yahoo in e-publishing business or will the consumers turn directly to publishers. Livestand resembles another iPad app, Flipboard.

And then there were tablets and other gear

Barcelona event is always a scene for a multitude of product launches. Detailed reports are already found on the net, but here are a few picks:

One year ago nobody talked about tablets but now several equipment vendors showed these hand-held touch-screen devices. There were Samsung’s Galaxy Tab 10.1, HP’s Touchpad, LG’s Optimus, Blackberry’s Playbook and many others.

LG showcased a touch-screen phone with 3D stereoscopic video camera and autostereoscopic 3D display where you can watch stereoscopic picture without special spectacles. 3D picture worked really nicely. It is difficult to say, whether there is consumer demand for such device.

Among Sony Ericsson’s new launches was Xperia Neo entertainment phone and Xperia Play game device. Neo connects to a TV set with HDMI cable and can be controlled with TV remote. Xperia Play can be described as “Playstation Phone”. Now Sony Ericsson finally takes the benefit of Sony’s legacy in games consoles.