May 10, 2005

What Operators Can Learn From The Recording Industry: Support The Ecosystem

Originally posted by Mike Masnick from, reBlogged by ts

It seems like many mobile operators are trying to become media moguls for all the wrong reasons, but that doesn’t mean they can’t learn a thing or two from the way the entertainment industry works. The biggest problem is still that the mobile operators believe they know best what any user would want to do with mobile data, and therefore keep their gardens walled up tight. There are a few exceptions, but they’re still somewhat difficult to find when many operators seem allergic to any openness.

However, this is clearly an area where the operators can learn from the music industry they’re so obsessed with these days. While the recording industry still does control musicians quite a bit, it uses a system to encourage more rapid development of artists. Russell Buckley is suggesting that operators would do much better by copying that setup. He suggests the operators should invest in new development by giving “advance” money, which can be recouped on future revenue.

While such a solution may be more costly upfront, it does make a lot of sense. With the current model, so much risk is put on the small developers that it’s tough to get too much innovative development happening. While operators would obviously protest that this plan only moves the risk to them, that’s not quite true. Since the operator can spread money across a wide variety of developers, it actually diversifies the risk, encouraging more development. Just a few big successes can easily pay for any of the failures. The diversification of the risk actually lessens the risk in some sense, while encouraging more development, which is more likely to create the “break through” applications that will drive data usage. It seems like a win-win situation for everyone, if only the operators could ever lower down their guard.

[Mike raises some interesting points; however, some of what he’s discussing is already being taken care of by publishers and aggregators in the ecosystem, who have raised capital to fund interesting content and applications, and in some cases by the operators themselves. My own company has directly benefited from operator advances and subsidy of content, as have many others in the biz. -ts]