Wednesday, June 13, 2007

Pairing Content and Application Distribution

This was a post to discussion thread on the Oxford University Next Generation Mobile Forum I felt it had good applicability to the differences and similarities of mobile vs. internet and physical distribution channels.
(Select iTunes as an Application Distribution Mechanism discussion)


Ajit - good question.

I do think that content supported by apps (or more accurately, apps supported by content) increases the value of downloading the application, but so much depends on the content, the application and its practicality/benefit on mobile.

In the case of Apple, the question remains whether or not there is benefit to provide downloads of anything that does not support the sale of more Apple Store content – a basic business decision they will make. Media players, media editors, graphic/video manipulation tools, media generators - all of these applications should have great appeal to both Apple and Apple consumers, however these tools are often ill-suited for mobile. Content creation is doable on a mobile - photos & videos, but editing is very difficult on the small screen - both control manipulation and presentation/review is less than ideal. A face twisting widget may be fun, mobile song-sharing or group podcast software or services work, but something like mobile Garage Band, or Photoshop may be tough to translate to mobile. Application developers will certainly need to get creative to make it worth theirs and their customers’ time.

I'm not convinced that this model will necessarily work for other app developers, content providers, or even the carriers, as their user bases are often much more diverse, so marrying apps to content is not as simple for Apple and the number of app vendor/distribution relationships a carrier would have to have to make this profitable could be thousands and require an update to their evaluation, distribution, and relationship management processes. Apple, by keeping a media focus has a limited number of licensing/reselling agreements with media companies, but just like the carriers, they will have to update their operational/staffing infrastructure to support application vendor contracts, management, reporting etc. It can be done, but it is costly and takes time. (Ask Ingram Books, Ingram Entertainment or Ingram Computer Products Distribution).

If you look at physical world distribution, people choose where they will purchase based on several factors - convenience, price, affiliation, trust/expertise, exclusivity. The carrier or Apple may be convenient for some people, affiliation may come into play with Apple (media stuff), expertise - probably not so much – no real support for that. Companies like FeedTribe are trying to address simplified billing (think mobile PayPal), so that users can conveniently purchase content or applications on any site and not have to be tied to a walled garden distribution/payment network for app or content purchase. Specialty distributors exist everywhere – CE products, entertainment (video, DVD, games), books, software, hardware, storage, soft drinks, alcoholic beverages, etc. It seems likely the reasons for creating this diverse distribution and retail structure in the physical world and the Internet, will also apply to mobile. (Ajit – I think it was you who addressed this issue of affiliation in a post a few months back).

So while Apple may take the lead on music media content distribution and be able to drive some supporting application sales, this may not be extensible to other content/application categories. Smart application vendors and content providers will continue to do what they do – deliver their products through all the channels that customers want, as long as they can make money doing it. The risk of the walled garden approach is that the more successful the gardeners get, they have a knack for biting the hands that feed them. Margin squeezing, poor service/reporting, difficult evaluation cycles, etc. make it more expensive and/or inconvenient for the media/app suppliers to distribute through that channel. And since water flows along the path of least resistance, other tributaries are likely to present themselves over time.

The good news is that the market is so large there is room for many winners. The key will be to make it relevant, easy, and convenient for the consumer, AND keep it easy, convenient, and profitable for the content/app creators and distributors. Both the supply chain and the value chain have stakes in this game.

Liz