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Published: Monday, April 6, 2009 at 6:01 a.m.
Last Modified: Monday, April 6, 2009 at 5:09 a.m.
It is that trailblazer known as the phone company.
Consumers
are using their mobile phones to download tens of millions of games,
songs, ring tones and video programs. And they shell out money for
these items, even as they resist paying for similar digital goodies
online using their computers.
It is a curious equation: pay for
stuff on a tiny, low-resolution screen while getting some of the very
same games and video free on a fancy widescreen monitor.
At its
annual trade show in Las Vegas last week, the phone industry pushed new
software stores, video players, games and content. Their efforts are
based on a digital twist on Pavlov: The phone rings and we pay.
“There’s
been no expectation that anything would be free,” said David
Chamberlain, an analyst with In-Stat, a market research firm. “The
telcos have been very careful not to give stuff away.”
By contrast, he said, “a lot of people on the Internet are wondering — why did we let all this stuff go for free?”
It
may have to do with each industry’s origins. “Information wants to be
free” has long been the rallying cry for many Internet pioneers. As the
mythology goes, the designers of the Internet envisioned it as utopian
and open — two words rarely used to describe the phone experience.
One
example of the stark difference between the phone and the computer is
the concept of micropayments. Newspapers and other content producers
have examined the method — getting people to pay for content with a
nickel here and a dime there — as a possible answer to their revenue
problems on the Web.
But the phone industry has had a
micropayment system for decades. Ever since the local telephone company
charged a customer an extra 35 cents to hear a recorded weather
forecast, the phone industry has been charging for content.
Couple
that pervasive billing culture with the ability of consumers to get
what they want, whenever and wherever they want it (playing Tetris
while waiting in line at Starbucks, for example) and you have a
powerful alchemy. Piper Jaffray, a market research firm, published a
report recently saying it expected consumers to spend $13 billion on
downloads to their phones in 2012, up from $2.8 billion this year. The
report called Apple’s popular iPhone application store “a tipping point
in consumer consumption” over phones.
Apple’s payment model
strongly resembles that of the phone industry. A consumer enters his
credit card data once, and all subsequent downloads are automatically
charged to that account.
By making the process convenient, Apple
has been able to sell software applications that, accessed through a
computer, would be free. LiveStrong’s calorie-counter app, for example,
is free online but a version of it costs $2.99 in the iPhone App store.
But
to some consumers, paying on the phone feels different, and more
reasonable, than paying online. Sabrina Sanchez of Pleasanton, Calif.,
a mother of two teenage boys has found herself with mounting bills from
downloaded navigation tools and games, like a Star Wars game that turns
their iPhones into light sabers.
Ms. Sanchez said she finally started setting down rules in February when her 12-year-old racked up $25 in charges in a month.
“I don’t want him to get used to the instant gratification,” she said. “It’s like a slot machine.”
Ms.
Sanchez said she and her children were much more likely to buy things
like games on the phone than on the computer. “I have not bought a
casual game on the Net. The kids have bought a couple, but not like on
the phone.”
Content developers say consumers like the instant
gratification of downloading on the go. By contrast, PC users have to
go through a few more steps to pay for items online because, most of
the time, they must enter credit card information for each purchase.
Research
shows that the more steps a person must take to pay, the less likely he
is to buy something. Besides, people have simply become used to paying
for things on the phone.
One paid service on phones is TV shows,
sold through services like MobiTV of Emeryville, Calif., which packages
television programming for phones. About 5.5 million people in the
United States are paying $10 or more for MobiTV from AT&T, Sprint
and Alltel. “People can’t carry around a 48-inch plasma TV,” said Ray
DeRenzo, senior vice president of MobiTV.
But there are others who question how much longer consumers will be willing to pay for content on the phone.
Paul
Jacobs, the chief executive of Qualcomm, which offers a mobile TV
service called MediaFlow, said the company expected before long to
start offering broadcast channels free while charging only for premium
programming, like cable shows.
Despite the success of paid phone
applications, there are thousands of free applications available. One
company, called GetJar, offers some 20,000 services, including games
and productivity software, and has been getting 33 million downloads a
month.
Apple has plenty of free applications too; Skype, which
lets you make free calls over the Internet was downloaded one million
times in the first 48 hours after it was introduced last week.
Still,
providers of content for mobile devices remain happy about their
ability to get paid. One is Kinoma, a Palo Alto, Calif., company whose
$30 browser software lets mobile phone users surf the Web and organize
their music, among other things.
Brian Friedkin, the company’s
co-founder, said he had sold “many thousands” of downloads — though
they are features that are free on a PC.
“It’s tough to say why mobile users are more willing to pay,” he said. “But it’s great for us.”
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