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Mobiles step up to entertainment

CEO of Vodafone responds to tensions

The top boss of the world’s biggest-selling cell-phone carrier said here Tuesday that the mobile industry has not been as welcoming as it could be to entertainment companies in pursuit of a potential $76 billion mobile entertainment biz.

“As an industry, we have to become easier to do business with,” said Arun Sarin, CEO of Vodafone, which has 200 million global customers and annual revenues of £29.3 billion ($56.8 billion) and owns 45% of U.S. telco Verizon Wireless.

He was responding to a question at the 3GSM mobile phone conference about whether tensions between big entertainment and big telco have eased since last year’s conference. Back then, Peter Bazalgette, chief creative officer of “Big Brother” producer Endemol, likened doing business with cellular carriers to “making love with a porcupine.”

At the time, entertainment companies including Disney and MTV were upset that carriers such as Vodafone, Orange and Verizon were being stingy in sharing revenue on downloaded music, videos, photos and other mobile content. They also complained that phones were difficult for consumers to use, end-user pricing was too expensive or too confusing and content was difficult to find.These problems were in turn stalling consumer takeup. Despite forecasts that mobile entertainment could hit $76 billion by 2011, only a small percentage of the mobile population taps mobile entertainment.

Sarin said Vodafone has already changed its tune over the last year. For instance, it has increasingly opened up its closed “portal” or deck of entertainment, called Vodafone live!, striking deals with Internet companies including eBay, Google, Yahoo! and MySpace to allow search and other open Internet experiences. That in theory could help users find tunes, games and videos on the Net in a manner less controlled by the carriers.

The Vodafone boss acknowledged there still is room for improvement in the working relationship between entertainment and telecoms.

Some carriers like 3UK have moved away from confusing “per-megabyte” charges and have started providing content bundled into flat rate price packages. That’s expected to help attract users and create a larger revenue pie.

Disney’s Sunil Gundiera, head of mobile for Europe, Middle East and Africa, said operators have to make more progress in that direction. “The main thing is attracting the customer to the platform. If they get surprised at the end of the month with a huge bill, we’re not going to get anywhere. I believe the answer is the move to flat-rate pricing,” said Gundiera. Gundiera said he also expects a lot of content to reach phones in a manner that bypasses mobile networks. “Sideloading” of videos and music from personal collections or from content loaded onto PCs from Internet sites such as Disney’s recently revamped site will play a big role in content distribution, he said.

Sideloading is the model that is expected to help drive sales of Apple’s iPhone, as users cram songs onto it from Apple’s iTunes Web site, for instance.

Many pundits believe advertising-funded content could lower end-user prices and stimulate user interest in mobile entertainment. Sarin said Vodafone will aggressively pursue advertising as an important new revenue source. Vodafone, he said, “needs to move fast and occupy this space, before somebody else occupies this space.”

He also called for cellular carriers to draw up standards that make it easier for advertisers to develop ads that work across different carriers’ networks, because advertising will not take off “if we go to Procter & Gamble and say Vodafone does it one way and Orange another.”

To that end, industry org GSM Assn. announced that they have formed the Mobile Advertising Forum to help iron out standards across networks and handsets.

Mobile advertising also is catching the attention of the media industry. Stephen Nuttall, director of business development for Brit satcaster BSkyB, called mobile advertising “a very interesting opportunity” and said ads should run not just on mobiles but also across the Internet, where BSkyB is a provider.

The satcaster has 8.4 million satellite TV subscribers and provides mobile TV services both through carriers and directly to consumers through the mobile Internet.

More digital advertising could help give it a boost; earlier this month it reported a 3% second-quarter drop in profits from $260 million to $252 million.

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