Thursday, February 08, 2007

Amp'd Mobile A Phone Company, And Also Mobile Media Company

Peter Adderton has a knack for figuring out what young mobile phone users want.

He broke into the wireless business in his native Australia in 2000, founding prepaid cell phone provider Boost Mobile. A year later, he expanded Boost Mobile into the U.S.

Then Adderton founded Amp'd Mobile. Started in late 2005, Amp'd targets young mobile phone users, mainly men ages 18 to 35.

Amp'd has raised more than $250 million from investors including Intel (NasdaqGS:INTC - News), Qualcomm (NasdaqGS:QCOM - News), MTV and Universal Music Group .

Amp'd seems to be doing a better job than rivals of selling games, music and video downloads, analysts say.

Adderton talks about the startup's strategy in an interview with IBD.

IBD: How has Amp'd evolved?

Adderton: The strategy of being a mobile media company hasn't changed. One of the things we realized is that we needed to be a great phone company as well. We want to be this mobile media content company with really cool stuff, but we also need to focus on having a great network, great phones and great prices. You have to do the basics right.

IBD: Amp'd had about 150,000 customers at the end of 2006. How many does it need to have a sustainable business?

Adderton: Between 700,000 and a million subscribers.

IBD: Amp'd produces some of its own mobile content with in-house studios and by using camera crews. Is that costly?

Adderton: When you look at the money you would have to pay to content companies, it's not that much more expensive to produce our own. Original content makes up only 5% of the content available on our deck (screen menu), but gets 30% of subscriber usage.

Big media companies had taken the approach of trying to squeeze existing programs into a mobile format. That doesn't work. The mobile medium is so much different.

IBD: Amp'd plans to expand into Japan in March by making its content available on KDDI's phones. How much have you learned from Japanese and Korean wireless firms about selling data services?

Adderton: As much as Japan and Korea have done a phenomenal job, Amp'd has the highest data revenue per subscriber and data usage of any carrier in the world. We spend a lot of time in Japan and Korea looking at what's been successful. But those markets are very different from the U.S.

Up until two years ago, America was happy with a clamshell phone that made voice calls. But America has a big appetite (for wireless entertainment).

IBD: Market research firms say many wireless users have purchased the latest third-generation cells phones yet don't access entertainment services. Why?

Adderton: It's not the technology. It's the fact that people who control the content aren't media companies. They don't have experience doing it.

If you're a young person, would you allow Verizon or Cingular executives to program your TV or control your
TiVo? They have to make everyone happy (with content options, because of their large subscriber base).

The fundamental principle is that if mobile content isn't good, people won't watch it.

IBD: Some say fees for wireless entertainment are too high. Would unlimited usage, flat-rate pricing plans make wireless data services more popular?

Adderton: We're finding that if you have really good content, people will pay for it. Our (monthly) ARPU (average revenue per user) is over $100. More than $30 of that is from data. If you have content that people want, they will pay for it. The only carrier that streams live games of any sport is Amp'd, through the NBA (National Basketball Association).

We (also) stream live motor sports. And we have live (concert) events. That's huge for us.

IBD: With its new iPhone, is Apple targeting the same kind of young wireless user as Amp'd?

Adderton: We're in the 3G business. (Amp'd rents capacity on Verizon's high-speed EV-DO network). Apple is in the 2G business (the iPhone doesn't work over high-speed data networks). If you don't have a 3G service with a multimedia phone, that's like having a computer with dial-up Internet access. It doesn't make sense. I think Apple will find the wireless business very difficult.

IBD: What's Amp'd up to in bringing advertising to mobile phones?

Adderton: It's not true that advertising on the handset is intrusive. The generation that we target gets bombarded with ads on MySpace, on YouTube, and every place else -- on TV, radio, the Internet -- wherever they get content.

We're pioneering something with Procter & Gamble (NYSE:PG - News), with their Herbal Essence products. That test is going well. We have two or three other things we're working on that we'll announce soon.

IBD: Some pundits say that making search easier on mobile phones is the key to making the wireless Web interesting for the average users.

Adderton: Absolutely. We have a new mobile search function we're going to launch soon. Search must be much better on wireless devices for people to find multiple levels of content.

IBD: MTV was one of your early investors. Among big media firms, which sees big potential in wireless entertainment?

Adderton: Well, Vivendi Universal and Viacom (NYSE:VIA - News) (MTV's owner) are both shareholders in Amp'd.I think they get it.

Copyright 2007 Investor's Business Daily, Inc.

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