Carriers Need to Get in the Game

Publisher�s Outlook

Carriers Need to Get in the Game

By Rich Tehrani, Group Editor-in-Chief, TMC  |  June 03, 2014

Carriers are losing control over core network services such as voice and text. This is in-turn making them dumb-pipe providers. While wireless is still a profitable business, the presence of companies like T-Mobile and Sprint in the U.S. makes it more difficult than ever for carriers like AT&T and Verizon (News - Alert) to keep their higher than industry-average margins.

Partnering with an app company is one way carriers can add value to their offerings. Apps like Pele King of Football, (Google Play) – which after being out for two weeks has had over 300,000 downloads ­– is incredibly addictive. What distinguishes this game from many others is the tie in to soccer, the world’s most popular sport, and Pele, the world’s most famous soccer player.

You may think no one young knows who Pele is, but Josh Blitz, CEO of Cosi Productions LLC, the company behind the game, says you would be surprised at how many kids know the great Pele. Whether or not they have heard of Pele, however, players of the game are peppered with facts about Pele’s life and get to see exclusive video content about the champion.

Blitz says the company is working to partner with carriers that are looking for an association with Pele and the World Cup. The game has all sorts of mini-contests included in it, enabling players to win things like tickets to the World Cup. This got me thinking that carriers are missing out on the app world – the most exciting part of mobile, according to some. I’m just saying, King Digital Entertainment has a market cap far north of $5 billion, and it makes just one game, Candy Crush.

Zynga (News - Alert) was early to the world of Facebook games and was fortunate enough to be able to use the social network as a free marketing vehicle, which enabled it to have an IPO where its shares were soon valued at almost $15 each. Even as of today, when the shares are at $4.35, the company’s market cap is a staggering $3.81 billion dollars.

Let’s think this through for a second. Carriers are in an all-out battle to make profit in what is obviously a pricing war, and Zynga shows us a game can get a $10 billion increase in market cap thanks to third-party marketing through a network – in this case social. Did you digest that?

Carriers are storehouses of value that may never be tapped – because they are busy being carriers and don’t think like entrepreneurs. You can’t blame them; they have massive infrastructure, towers, unions, FCC (News - Alert) regulations, and more lawyers than most companies have paper clips. But I tell you, the best way for AT&T, Verizon, Sprint, etc. to unlock value is to figure out how to get involved in the app and specifically, the gaming, market.

If we use the Pele game as an example, I could see this being a two-way relationship. On the one hand, they partner with the game, which offers all sorts of things you can win. But the carrier could throw in incentives for playing, such as a bucket of free SMS minutes, a free month of service, $10 worth of international calling, 10 percent off your next device purchase, etc. In addition, they could take an equity stake in games like this and then promote them like crazy.

Amazon is going to come out with a phone, and the company will likely subsidize the device. Content and services will be the way phone service is paid for. What will this do to carrier margins? It could be highly problematic for the service providers that aren’t chosen by Amazon.

So carriers, I am telling you: Start exploring your options. Try out this game now – if you like it, give the company call. Alternatively, pick any game vendor out there that is new and exciting, and reach out.

Yes, it stinks to be in a business that is commoditized where the smaller players have to drop prices to gain share, and the leaders have to follow suit. Alternatively, we talk often of the ecosystem Apple (News - Alert) and Google enjoy. You know what? Carriers have ecosystems too. They just don’t seem to realize they have them and haven’t figured out how to maximize the revenue they could generate. Getting more involved with gaming seems to be a logical way to explore your options.

Edited by Maurice Nagle