Amp'd Mobile is the latest gaijin to set its sights on Japan's sophisticated cellular market. Is the upstart up to the task?
Each week, wireless service provider Amp'd Mobile features a five-minute cartoon series called Lil' Bush. In it, the main character and his foul-mouthed, wise-cracking sidekick, Lil' Cheney, embark on such adventures as picking fights with Lil' John Kerry and taking class field trips to Iraq. It's not your typical mobile-phone company fare.
Then again, Amp'd isn't your typical mobile-phone company. That was made plain on Oct. 31, when Amp'd Mobile, a U.S.-based provider of wireless service to young professionals and early adopters, announced it would make an audacious play for the Japanese market. Amp'd will make its content available to 20 million wireless subscribers of Japanese operator KDDI beginning in March.
The deal is raising eyebrows for a few reasons. First, Amp'd is attempting to export mobile content into Japan, long considered one of the world's most advanced wireless societies. In the past, it was Japanese companies such as NTT DoCoMo that exported their wireless-content expertise to the rest of the world. In June, Amp'd reached a deal to make mobile games from Japanese studio Square Enix available in the U.S. "Japan, in the mobile world, has been very innovative, so, for a while, exporting mobile content to Japan was like selling coal to Newcastle," says Ken Hyers, an analyst with consultancy ABI Research.
But that's changing. Long lagging behind their Japanese counterparts in wireless, U.S. carriers have upgraded their networks, so they too can deliver cool music, video, and other nonvoice data. And various U.S. companies, like Amp'd, whose investors include media heavyweights MTV Networks (VIA) and Universal Music Group, have begun producing world-class mobile content. And, it turns out, some of the world's other markets, including Japan, are hungry for it.
Japan's wireless market is in flux. In October, Japan implemented so-called number portability rules that let wireless subscribers keep their phone numbers when switching carriers. The result: an ebb and flow of subscribers so strong that carrier Softbank reportedly had to stop accepting new customers for a spell.
Competition among Japanese carriers NTT DoCoMo, KDDI, and Softbank, a broadband heavyweight with connections to Yahoo! (YHOO), is already cutthroat. But now it's intensifying (see BusinessWeek.com, 3/17/06, "Softbank-Vodafone Deal Rings True").
Having acquired the wireless business from Vodafone (VOD) earlier this year, Softbank CEO Masayoshi Son has vowed to attract customers with lower prices, a greater variety of new handsets, and better content from partners such as Yahoo. The company is also actively looking to strike more content distribution deals similar to the one between Amp'd and KDDI, says Andrew Cole, president of consultancy CSMG-Adventis.
For Softbank as well as its rivals like KDDI, differentiation through content has become key to survival. "Suddenly, the market has opened up to third parties," says Cole. And Amp'd could be only one of many U.S. mobile-content companies to take advantage of that. Already, in June, Warner Music Group (WMG) took a minority stake in Japan's FrontMedia, a mobile-radio firm that will now use Warner's content, for example.
U.S. content providers may be uniquely positioned to succeed in Japan because "Japanese content is localized, there's not a lot of Western content," says Stone. "No one brings the total Western experience." Amp'd creates 20% of the content it makes available to users in its own studios. It also offers a lot of exclusive content from investors such as MTV.
In effect, Amp'd may end up being the first U.S. carrier that also acts as a mobile content aggregator, essentially eliminating the role of middleman between the creators of content and the carriers that put that content on phones. That would bring it into competition with the likes of InfoSpace Mobile and Hands-On Mobile as well as large content creators such as Electronics Arts (ERTS) and American Greetings. With video and music becoming available on more handsets and networks worldwide, the mobile-content business is booming.
Ramping Up Stateside
In Japan, mobile-content sales rose 21% in the past year, according to the Japanese Ministry of Internal Affairs of Communication. According to Japanese government reports, more Japanese access the Web via cell phones than through PCs.
One sign that other U.S. wireless service providers may follow Amp'd's lead: InfoSpace (INSP) recently said a carrier would not renew its ringtones content contract with InfoSpace. The carrier, which wasn't named but is believed to be Cingular, said it plans to establish direct relationships with music labels for the ringtones instead. Another player, Virgin Mobile, has been paying for creation of unique content, such as a short-text message novel available only to subscribers.
For Amp'd, the extra income will certainly come in handy as the company ramps up its service in the U.S. So far, the service, which runs over Verizon Wireless's network, has gained 50,000 subscribers, and it's aiming for 100,000 users by yearend, says Amp'd Mobile President Bill Stone. But even at $100 in average subscriber revenue a month—twice the average for most other carriers—it still might take several years for Amp'd to recoup investments. The content aggregation business could provide nice supplemental revenue to keep Amp'd going. Its international forays are also bound to enrich content Amp'd makes available to its U.S. subscribers. Perhaps it will find the next Pokémon, says Hyers.
Following ESPN Mobile's decision to stop providing service at the end of the year, the talk has been that mobile virtual network operators (MVNOs) like Amp'd—using other carriers' networks and marketing to specific market segments—are doomed to failure (see BusinessWeek.com, 10/30/06, "ESPN's Cell-Phone Fumble"). Thanks in part to its search for new revenue streams, Amp'd could prove different. As MVNO subscribers rise from 7% of all U.S. cell-phone users today to a percentage in the low teens by 2012, "Amp'd has a good possibility of making it," says Hyers.
And Amp'd isn't stopping at selling content to Japan. Back in August, the company announced a similar deal with Canada's Telus, which will start offering Amp'd's brand and content in early 2007. And Amp'd plans to announce it's entering more international markets by yearend, Stone says. To that end, on Oct. 30, Amp'd announced a slew of executive appointments. Its new chief operating officer, Sue Swenson, had served as chief operating officer of Deutsche Telekom's (DT) U.S. wireless unit T-Mobile and president and COO of carrier Leap Wireless International (LEAP). "It's about taking Amp'd to the next level," Stone says. Or at least on an adventurous field trip.