The rise and rise of the humble telephone

alexander-graham-bell-telephone

There is no way that Alexander Graham Bell could have predicted that his humble invention, the telephone, would grow to become the most important and significant device used by virtually every human on earth. In recent years they have grown a portfolio of powers and capabilities which, if one were to actually stop and think about it for a second, are staggering. Not only do they give you the ability to communicate from any point to any other point and access to nearly the sum of all human knowledge, they also have some amazing party tricks. Like anywhere I am on the face of planet earth I can use my phone to record events as a movie (in full colour and with sound) and within just a few seconds I can make that movie available to the whole world’s population. Yet most people most of the time just use them to speak and text to friends and relatives.

And there seems to be no limit to man’s ingenuity with what these devices will do. Just now GPS is being added to more and more phones. So everything that they do can be location specific. Every photograph and video can be tagged with its exact location. And searches and requests can be tailored to only give information of specific relevance to that location. Like where is the nearest sushi bar and give me directions to get there. GPS can be incorporated into games in countless ways so expect to see some great innovation from our industry here.

At the moment telephones seem to be polarising into two sorts of devices with a third imminent. The first is the small, maximum portability and convenience, voice and text centric “standard” phone. The thing that most of us carry. The engineers still cram in features like cameras and MP3, but they cannot compromise the size of the package. The second kind of device comes when you throw away the size limitation (within reason) in order to incorporate a whole raft of features, mainly geared towards the internet. These are called smartphones and are currently a hotbed area of technology growth. In fact I have never in my life seen any area of technology develop at such a pace.

The imminent device is a little larger still, with even greater capabilities. Something like netbook meets iPhone. With a gesture interface and the potential to do everything. The manufacturers need the will to start making these and consumers need to adapt to them, but the potential utility of such tablet like devices is such that their introduction must now be inevitable.

For the moment, however, it is smartphones that interest us. Suddenly, out of nowhere, there is a plethora of devices that make good business models for game developers. And they are developing at a frightening pace where something six months old can easily be obsolete. The driver for this forced, hotbed evolution is the commercial and technology war between some of the world’s best and brightest companies. We have Google against Apple against Microsoft against Nokia against RIM.

If I were in the market right now I would want a Google Android device. The combination of features and benefits puts it at the top of the heap. Unfortunately Google, for all their technical brilliance, are very bad at marketing. So Apple, who are absolutely brilliant at marketing, continue to outperform with their inferior iPhone. But such is the intensity of this war that Apple are playing catch up with a downloadable upgrade for existing iPhone users that brings in 100 (yes 100) new features. Interestingly for us this includes subscription based services. Which means that the World of Warcraft killer that everyone has been waiting for could very well be a mobile phone game.

For such a new device on the market the smartphone is exceeding the wildest prediction with its success (much as the netbook also is). Apple AppStore now has 25,000 different downloadable applications and has had 800 million downloads. And just to remind you the AppStore didn’t even exist on July 9th 2008!! And another reminder, this blog saw it coming a long time in advance. And whilst Apple have the fastest growing smartphone standard they still only have about 10% of the market, which puts them behind Nokia, RIM and Microsoft.

Android has more potential in that it is already better and it is open source (unlike the proprietary Apple) so could very well be taken up by the big Chinese, Korean and Taiwanese handset manufacturers. The potential is out there to put far more handsets into users pockets than Apple can possible compete with. The only caveat, as I pointed out earlier, is Google’s historically inept marketing. Android is currently running fifth in the market but will ramp up quickly as handsets come out, especially the Vodafone Magic.

Then there is Microsoft. So far they have been rubbish in this area from a gaming perspective. Playing catch up and never even trying to establish any sort of technology or marketing lead. But they have the potential to steamroller over everyone. The Zune is a great bit of kit but, relatively, it is a commercial failure. What gives Microsoft the capacity to come out of their corner fighting is Xbox Live, a mobile version of this would give AppStore more than a run for the money. And if I know this then so does Microsoft. Meanwhile they are still third overall in the smartphone market with 12.5% of handsets, so they have something to build on.

Nokia were the first into this space with Symbian and they have a lot of experience of powering a market with rapid technology change. They have driven off and defeated old mobile technology competitors like Sony Ericsson and Motorola. And they are big. Nokia has over 128,000 employees who turnover over 50 billion Euros a year making 5 billion a year in profit. All from telecomms. Yet they failed spectacularly with nGage V1 and nGage V2 is not setting the world on fire. But don’t, whatever you do, write them off yet. They will fight back big style, they have no option if they want to survive. So expect a lot of big announcements from Keilaniemi. Their market share of smartphones is sliding rapidly but they are still the number one with 47%, which is more than twice that of their nearest competitor.

Now for Sony. Some people think that I don’t like Sony. They are wrong I have, and still do, consistently buy Sony devices. In fact as recently as a couple of weeks ago I made my latest Sony acquisition. But as an observer and analyst I am duty bound to say it how it is when it comes to Sony. And Sir Howard Stringer has publicly said a lot of the same things that I have. Which brings us to the total disaster that is Sony and smartphones. Sony should be the market leaders here. Uniquely they had all the elements in place. The PSP, the Sony Ericsson phone brand, everything that is Playstation and world class content and manufacturing. But they have failed abysmally and excruciatingly. They are nowhere and there are no signs of them doing anything serious about getting anywhere, despite constant rumours of a PSP phone. The disaster that is Sony smartphones is synonymous of the disaster that is Sony.

Also in Japan we have Nintendo who are riding a bubble of success with their Wii and DS, which use old and cheap technology in clever ways to appeal to massive audiences. But they are being left too far behind. The DS is a creaky old fashioned device when you hold it up against an Android or a iPhone and the consumers of the world can see this. Nintendo have a huge amount of catching up to do and at the speed the market is moving at they need to do it very soon. They could rapidly become has beens if they don’t.

So it doesn’t take a genius to realise that all these companies and standards won’t succeed. That there will be winners and losers. And these companies are run by some very smart people. Which means that I can see some pre-emptive consolidation. Why spend a fortune going to war with someone when you can very easily just buy them or merge with them? The stakes are so immense and the technology so fast moving that this makes a huge amount of sense. So here are a couple for you to think about.

Apple (highly profitable) should buy Sony (currently making massive losses). This is such a brilliant fit at so many levels that you wonder why it hasn’t already happened. Apple would bring their software and sexy design to Sony products. And in return Apple would become a world class consumer electronics company overnight. The only fly in the ointment is that Apple is such a one man company and Steve Jobs is currently ill. But still this is the consolidation that I would like to see. It would shake the whole world of consumer electronics down to the foundations. And the Playstation brand would grow wings again.

The second buyout should be Nintendo buying RIM. Once again a perfect fit. RIM have great technology but are way behind when it comes to the consumer side. Nintendo have the consumer side bolted and could use RIM technology to leapfrog right into the middle of the smartphone fray. This would make so much sense for both companies. Just send me the normal percentage for the idea when you do it.

So we are at or near the beginning of two revolutions. Smartphones and netbooks. Each, on its own, is far bigger than the home console revolution was. If you are involved in the gaming industry these are the places to put your money and energy. But the entry costs are so low that you need to differentiate your software offerings even more. Which makes marketing yet more important and critical on the road to success.

4 comments ↓

#1 Bruce on 03.23.09 at 8:14 am

Just saw the latest T Mobile UK deal: http://www.t-mobile.co.uk/shop/mobile-phones/phones/pay-monthly/t-mobile/g1-black/overview/

Free Android G1 phone
Free unlimited mobile internet
1000 minutes talk/2000 texts per month mix and match (£200 worth)

All for £31.50/month on an 18 month contract. By the end of which your G1 will be thoroughly obsolete!

#2 Brian Woods on 03.28.09 at 8:52 am

I don’t think Nintendo cares to be any more than it is. It’s incredibly difficult to just buy a company in a completely different industry. Not to mention how you would get them to adhere to Japanese-style business practices after the purchase.

#3 Nemmie on 04.08.09 at 4:17 pm

Alexander Graham Bell did not invent the telephone, he worked in the patents office and stole the idea from the real inventor when he could not afford to patent it.

Just for future reference :)

#4 Ed Hird on 10.11.10 at 4:40 am

Alexander Graham Bell had a remarkable impact in so many ways. I commend to you the article “Alexander Graham Bell: Inventing the Future”: http://bit.ly/9VpXV8

online poker
SuperSignupBonus