iPhone sparks counter measures from Verizon, RealNetworks and MTV

Handset-to-handset fighting

  • alert
  • submit to reddit

The next step in data security

Whenever a single monolithic company has launched against the globe spanning iTunes, Apple has been able to move the goalposts and push further and further towards a monopolistic market share of online music, but this week a genuine challenge has emerged, one that we are certain will dent the success of Apple, and we suspect that it will be reflected in the company’s share price before too long.

The move, to bring RealNetwork’s Rhapsody to Verizon handsets, with the support of Viacom’s MTV, was attributable almost entirely to Apple’s launch of the iPhone with an exclusive relationship with AT&T. In short Verizon HAD to do something, and this is that something. Rhapsody becomes the music service behind Verizon’s VCast Music service, while MTV’s URGE music service will be merged into Rhapsody, which will become Rhapsody America, and be run by the current General Manager of MTV Network's URGE, Michael Bloom.

Existing user names for URGE will work straight off in Rhapsody. Viacom’s MTV Networks will put in some of its own cash, but also back a $230 million five year note for the venture, giving it a 49% stake, and leaving RealNetworks which will also contribute some cash, with 51%.

It’s a fairly compelling picture and is the first major step towards consolidation of online and cellular music services which will polarize the world. When kids watch MTV they will be pointed towards it, when people subscribe to cellular handsets through Verizon they will be reminded of it, and it drops ARPU right into the palm of the hands of Verizon Wireless.

The simple truth is that we all predicted that Apple iTunes would be eaten alive by little bites from the cellular industry, over a long period of time, and Apple with its typical foresight said let’s take the game to them and launched its own phone on its own terms. But that just meant that serious players are now taking Apple more seriously, sooner, and there are multiple advantages here that are not initially obvious.

First off this pitches Apple’s MP3 and Flash memory enemies, Samsung and LG Electronics, which make many of the first line Verizon handsets, directly against Apple. Samsung is probably the only company in the world that can get its hands on flash memory to store songs more cheaply than even Apple, which two years ago bought up around 30% of global NAND Flash production for its iPods.

Verizon Wireless has no love of Apple and is still smarting after it had to pay Broadcom through the nose to import handsets for its new EV DO rev A network which will also do the job of competing head on with the touchscreen interface of the iPhone. This was because of an indiscretion by supplier Qualcomm, which the court believes used power saving patents that belonged to Broadcom. Verizon will now do whatever it has to, to make these new devices successful.

Secondly Verizon will deliver all of this on handsets which are CDMA enabled, so instead of the waning powers of GSM, the technology that Apple aimed its first iPhone at, Verizon will have the latest, hottest phones from the CDMA community to deliver the service on. Apple is already up against the subscription based Rhapsody service through RealNetworks’ partners, including Best Buy, SanDisk and TiVo. SanDisk is the second biggest retailer of MP3 players in the US, and they could all become further integrated into the service and the new brand.

But with news services around Europe all pre-announcing new Apple partners this week, which include T-Mobile in Germany, Orange in France and O2 in the UK, it is pretty clear that 45 per cent owner of Verizon Wireless, Vodafone is NOT among them.

My friend's enemy

We had always thought that Vodafone would not align itself with the enemies of Verizon, and that also it likes to cut profitable and easy to work deals, and would not accept the kind of terms that Apple was rumored to be insisting upon. There will be some immediate betting that the 232 million customers that use Vodafone's service, the largest outside of China, could be tempted to become part of this "get iPhone" initiative.

Back in January 2006 Vodafone, launched its own interactive music service in conjunction with Sony NetServices called Vodafone Radio DJ. The service streams music to both 3G mobile phones and PCs for a flat monthly subscription, identical as a business model to Rhapsody. But the service is really a radio service with little control over what you listen to.

So Vodafone may well come to believe that the new US initiative could seriously damage the iPhone, and iTunes, and then it might shutter this service or add to it and join the push to build Rhapsody America into perhaps Rhapsody Global, assuming that it can sign overseas versions of its content deals. But even if Vodafone does not come on board, the global distribution of MTV, which can recommend the service, will have huge appeal to other operators, because MTV Networks operates on 135 television networks, and can be seen from 171 websites and reaches 496 million people around the world.

With that kind of support, this deal can internationalize to the benefit of all the partners. This pretty much leaves online and cellular music controlled by a handful of services lead by iTunes. Musicnet powers many of the smaller music services around the world including many that are Microsoft compatible such as the Zune device and can work with its new PlayReady DRM system.

But Musicnet will have lost at least one customer since until now it numbers MTV’s URGE among its clients; Nokia can still provide several millions songs through its purchase of Loudeye over a year ago, and Sony’s Connect collection is still operating, such as through Vodafone. If I’ve forgotten anybody, it's because they are, as of now, forgettable and that perhaps includes Wal-Mart, Amazon, eMusic and Napster, because without the support of a cellular operator, most services are doomed, if not to closure, then to irrelevance, over time.

Finally there is the issue of video. Verizon is just one customer for MediaFLO mobile TV, and it has launched in some markets already under the VCast TV brand. It already had a VCast cellular streaming business that is relatively successful. This will now line up against Apple iTunes on a Video iPod as a source of portable video, but can increasingly target deals with MTV and its parent Viacom, majority owner of the Paramount studio.

The cellular music war in the US is sure to spill over into the rest of the world during the remainder of this year, and that can only mean one thing, that the Apple franchise will begin to erode in percentage terms, but that the market for music on handsets will go through the roof over the coming 18 months to two years.

Copyright © 2007, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

Choosing a cloud hosting partner with confidence

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
JINGS! Microsoft Bing called Scots indyref RIGHT!
Redmond sporran metrics get one in the ten ring
Driving with an Apple Watch could land you with a £100 FINE
Bad news for tech-addicted fanbois behind the wheel
Murdoch to Europe: Inflict MORE PAIN on Google, please
'Platform for piracy' must be punished, or it'll kill us in FIVE YEARS
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Found inside ISIS terror chap's laptop: CELINE DION tunes
REPORT: Stash of terrorist material found in Syria Dell box
Sony says year's losses will be FOUR TIMES DEEPER than thought
Losses of more than $2 BILLION loom over troubled Japanese corp
prev story


Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Beginner's guide to SSL certificates
De-mystify the technology involved and give you the information you need to make the best decision when considering your online security options.