Smartphone App Explosion Defies Economic Downturn

April 13, 2009 – Media companies and TV networks may be under economic pressure to scale back traditional projects, but they’re doing anything but when it comes to exploiting consumer demand for applications on the iPhone.
 

With evidence mounting that the smartphone platform represents a key growth area for brands, TV networks and content creators, programmers small and large are pouring ever more money into developing apps for the white-hot iPhone business and for other smartphone storefronts as well. Apple’s most recent financials placed fourth quarter iPhone sales at 4.3 million, an 88 percent rise over the year-ago period. For all of 2008, the company sold nearly 14 million phones.

Consumer response to the launch of the iPhone apps store last year has been a vivid demonstration that the long-anticipated market for interactivity and advanced apps that augment the entertainment experience and add convenience to people’s lives really exists. Apple, reporting more than 800 million downloads of apps so far, has discovered what it takes to bring that market alive – a compelling form factor in combination with mobility on a high-speed network.

“Digital platforms, especially smartphones, are a great way to launch new brands and products,” says Jon Vlassopulos, CEO of digital agency Moderati, which has created iPhone apps for A%26E Television Networks and the brand Zippo. “There is a need more than ever to deliver branded experiences to consumers to help them break through all the media noise and get content and information that matters to them in easy, digestible bites.”

Content makers like the iPhone because of the promise of new revenue streams. Programmers get 70 percent of the revenue from downloads with Apple keeping the rest. But the market goes well beyond the iPhone.

Blackberry wants a piece of the action and launched its app store in early April, while Google’s Android Market app store has been running for a few months. Next up, look for Nokia, Palm and Microsoft to introduce apps for their smartphones. Programmers are gravitating to any venue posting positive numbers during the recession.

Many TV networks such as VH1, ABC News and TNT have already introduced iPhone apps. More are to come from networks, movie studios, Web shows, independent publishers and individuals who see dollar signs when they look at the iPhone. For example, in early April, A%26E launched its first iPhone app for History Channel, the Web series “DadLabs” started distributing its show via an iPhone app in addition to existing Web channels, and Paramount Digital planned to debut an app for the 1986 movie “Top Gun.”

“The Apple iPhone app environment provides a place where viewers and consumers of our content can access a more immersive level of engagement with our brands, be it through gaming, interactivity or deeper exploration of historical topics,” says Steve Ronson, executive vice president of enterprises at A%26E. He says the network group is actively developing free and paid iPhone apps across its brands.

The new apps build on A%26E’s already successful launch earlier this year of the free
Paranormal State EMF Reader for the A%26E series “Paranormal State.” After a February rollout, the app has now generated more than 80,000 downloads.

“We plan to roll out a number of apps over the summer, timed with series premieres and expect our first paid apps to roll out in the fourth quarter,” Ronson says. “These apps will provide a multi-media experience to users and will feature video clips, images and text, allowing us to bring context and entertainment to the subject matter.”

Now A%26E is moving beyond the iPhone. “We are speaking with other mobile platforms about developing apps and hope to announce some initiatives later this year,” Ronson says.

Other media companies like NBC Universal and MTV Networks say they too are working to capitalize on this iPhone-stoked demand for mobile video, apps and features. They’re doing this both by optimizing Web sites for cell phone viewing and by developing new offerings for the iPhone app store and for those from Blackberry and Google Android.

“People spend more time on the Internet on the iPhone, and because of that more people are watching video, doing their banking, checking weather,” says Greg Clayman, executive vice president of digital distribution for MTV Networks. “Across the board mobile usage is rising and with it mobile video usage is rising.”

That’s spurred MTV networks to tweak its Web sites to be iPhone- and smartphone-friendly, he says. MTV also plans to launch more apps like the “SpongeBob Tickler” for $1.99 on iPhones, which is an animated version of the popular character that users can shake, poke or tickle, Clayman says.

The iPhone also can expand the reach of a show, which is why the independent parenting advice Web show “DadLabs” introduced its iPhone app. “We are able to reach our audience when they are away from their computer or TV as well as introduce our content to an entirely new set of dads,” says Clay Nichols, chief creative director of “DadLabs.”

Paramount Digital Entertainment is also keen on the iPhone app opportunity. The digital division of the movie studio has already launched apps for movies “Ironman,” “Saturday Night Fever,” “School of Rock,” “Days of Thunder” and “Shooter” on the iPhone. Next up will be an app for “Top Gun.”

“[We] expect additional releases and future development to continue as the platform matures,” says Matt Chandler, vice president of interactive development at Paramount Pictures. “iPhone/iTouch is still not quite a year old and has done a remarkable job.” He says Paramount decided to target the iPhone market “because the platform’s developer-friendly approach allowed us to publish our own titles and establish a presence in the market and with consumers that Paramount makes great games.”

It’s also a proving ground of sorts for the relatively young Paramount unit, because the iPhone offers a venue to build out the production processes for Paramount digital properties, Chandler says.

Of course, just because anyone can make an iPhone app doesn’t mean everyone should. “It has to be the right kind of app that people are going to want to/need to use on the go, not just a mobile version of my Web site, but something tied to an action that helps to simply my life when on the go and away from computers,” says Wadooah Wali, spokesperson for Demand Media, which produces the health-centric site Livestrong.com

For Demand Media its Livestrong.com iPhone app has offered a way to help grow the site’s audience, she says. “Some folks found our TheDailyPlate feature on Livestrong.com for the first time ever via the app store,” she says. “The more they engaged and loved it, the more they wanted to learn about it. Basically, the iPhone app is helping drive conversions from app lovers to actual site users and vice versa.”

Viewer loyalty is valuable, but apps can also generate additional revenue that feeds the bottom line. Not all apps have a price tag attached, but many do, usually in the range of $.99 or $1.99. Any incremental revenue helps, especially in tough economic times, Wali says.

Cisco Systems is forecasting mobile traffic will by a factor of 66 in the next five years, and the primary driver will be video, according to Will Richmond, analyst with VideoNuze. Video on cell phones is projected to account for 64 percent of all traffic to mobile phones in 2013. And smartphones, like the iPhone, new Blackberries and the Google Android, will drive this growth.

In addition, the iPhone will likely drive purchases of competitors’ smartphones too, says Craig Vaughan, a senior executive in business development at talent agency Creative Artists Agency. “If I’m a handset maker I need an appropriately priced handset in the market around $150 to $200 that has features like the iPhone, a screen for video and a fast connection,” he says.

Salil Dalvi, senior vice president of mobile platform development for NBC Universal, is betting on that growth. “Google, Apple, Blackberry are all pushing the quality of these devices,” he says. “These guys are out there advocating for the adoption of those services, of the devices. Our job is to produce programming where consumers are. We are focusing on Smartphone users with more video, more rich graphics, more things you can only see on a flat screen because the usage is coming from those phones that are well served for programming,” he says.

Remember too that smartphones give programmers a direct-to-consumer connection, MTV’s Clayman says. “The iPhone was one of the first open platforms that allowed you to create apps and get them directly to consumers through the storefront,” he notes. “That model also exists for Blackberry and Palm. So if I can take an app and develop for three to four main platforms and Android, that’s pretty cool. And you are only bounded by your creativity.”

Paramount will likely broaden beyond the iPhone and is currently considering adding its apps to Android, Palm and Nokia’s stores. Chandler says Paramount is also watching app development efforts from carriers themselves.

An iPhone app can also serve a business-to-business function for a TV network. Showtime introduced an iPhone application in April for voting members of the Academy of Television Arts and Sciences to check out eligible shows like “Weeds,” “Dexter” and “United States of Tara” on their iPhone or iPod Touch. The effort builds on Showtime’s landmark campaign last year, when it loaded up its shows online for voter consideration, making landfills around the world a bit smaller. The network has saved tens of thousands of dollars by ditching DVD screeners, though Showtime still supplies actual DVDs if voters request them, Showtime says.

Small businesses like the app business too. Tennessee-based Magellan Press introduced the travel app LocalEats, and it’s been one of the top ten paid travel apps on the iPhone. It spotlights top independent restaurants across the country, says Pat Embry, editorial director of Where the Locals Eat/Magellan Press.

The restaurant Full Moon BBQ in Alabaster, Ala. is considering developing an iPhone app that will place orders and list menu items. Then there’s the app Parent ICE developed by a stay-at-home mom. It lists emergency contacts for a child along with medications, conditions and allergies.

Ultimately, the development work is underway because most iPhone users seem to love their phones. Doug Walker, an Apple fan in the Bay Area counts these apps on his iPhone: Evernote, Facebook, Google, Netflix, USA Today, AP, Skype, Amazon, Craigslist, Boxee, BART, Last.FM, AOL Radio, ABC News, Target, TV.com, WordPress, YellowPages, NY Times, Flickr. “Remember, the biggest thing that the iPhone has going for it over any other platform that I have seen is the user experience. Anytime you can make the experience better for your prospective customer, it’s all good,” he said.