Cingular's CMO Decries State of Mobile Content

Compelling Cellphone Programming Needed for Ad-Supported Model to Work

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Who: Marc Lefar, chief marketing officer, Cingular Wireless.

Why you need to know him: The way content, advertising and ultimately branded entertainment play out on the third screen is in the hands of a few men. As the head of marketing at the largest wireless service provider in the nation, Mr. Lefar is one of them. In an interview with Madison & Vine at the recent CTIA Wireless 2006 conference in Las Vegas, he answered questions about marketing on the mobile phone and discussed what he considers the sorry state of mobile content and how the cellphone can help the movie business and, ultimately, help itself.
Marc Lefar says movie studios and sports teams would benefit the most from working with wireless carriers.

Credentials: Before joining Cingular, Mr. Lefar served as VP-marketing at GTE Wireless. After GTE's merger with Verizon, Mr. Lefar became VP-wireless Internet, data services and E-enablement, leading the development and launch of Verizon's first national Internet service. Mr. Lefar later joined Cable & Wireless Global as chief marketing officer. He also served as senior advisor to WWC Capital, an investment banking group in Washington. He began his career at Procter & Gamble Co., initially in finance then brand management, working with the Jif, Duncan Hines and Crisco brands. He's a native of New Jersey.

There is a lot of discussion about advertising appearing on mobile phones. When will we start to see that happen? "There will be, over time, some forms of advertising. But I believe that's quite a ways off. Right now we're in this phase where we've got to get basic adoption of the video content on a phone. And remember that people are still paying for this each month. They have to pay a premium subscription. To get to a point where an advertising model fully subsidizes that and reduces that cost to nothing, you've got to have an awful lot of eyeballs and to do that you've got to have very valuable content."

How would you describe the content that exists on cellphones today? "The content that exists out there today, with the exception of our HBO launch, is pretty pedestrian. [Cingular is offering HBO Mobile content for $4.99 a month and HBO Family Mobile content for $2.99 a month.] It's repurposed linear programming from broadcast. It's not really compelling video, although we're starting to see some stuff coming from unique producers -- folks really focused on mobile production. Once you get a significant take rate you can envision an effectiveness of getting some advertising embedded. But customers will not accept it unless they get something in return. Then I believe that becomes a subsidized pricing model and that's going to take time to evolve."

What types of marketing opportunities aren't advertisers taking advantage of when it comes to mobile? "Mobile search will be a huge category and paid search and advertising-supported search is going to be big. We think you're going to see that evolve pretty quickly. We also think there are some commerce opportunities that exist. Only 10% of concerts and pro sports events are actually sold out. With the wireless phone, you can build a constituency of people who regularly go to baseball games and concerts. On a Thursday before, 24 hours before, six hours before, you can ask, 'Do you want to be on a distribution list for text messages that allows you to know that tickets are available at 50% off, 70% off' and here's what you click to buy now.”

What about branded channels on the mobile phone, such as the Jeep Channel on MobiTV? "Branded programming is where people are trying to go in broadcast television. Certain brands have that potential. But I think you have to be careful. Do you really have something that's entertaining, informational and useful that folks want to watch on a regular basis? If you don't, and it's 'I'm going to kind of do it because I could stick my brand in it,' it will fail miserably. It's all about the programming. There could be a space for it, but it's dubious the number of folks that can really do it."

So who would benefit the most from using the third-screen as a channel? "The one area that has high potential is with filmmakers and the studios. There's a huge opportunity for wireless to take entertainment that's sold in other places and distribute samples of that for free. We know we can serve it up to different groups of people who might have interest in the topic or make it broadly available. [Studios] have to spend premiums on their CPMs because they have to get their buy in a very short window to get people into the theaters in the first couple of weeks after the opening of a movie. They buy at 30-second increments. To really get the feel and flavor of a movie, you could see a trailer that might be three or four minutes long. Now there's a place where our interests are very much aligned. They can view me as an advertising-distribution vehicle and spend money with me placing their trailers. We can let customers access that for free, and there you have an advertiser-supported model. I've got a disproportionate amount of young people using these services that are going to the movies, and here they can actually be entertained by the movies they think are coolest."

Does Cingular have plans to develop an ad sales force? "There's not the real estate or desire to have an ad sales force. However, it is something we can envision happening in the future. We can add an awful lot of value. We know who the subscribers are. And your network delivering broadcast does not. The CPM of a teenage male of 19 is three to four times that of the average woman of 45. Our ability to actually increase vs. what broadcast can command for advertising revenue when this model unfolds in a couple of years is pretty significant. So we would expect to either build an ad sales force or work with other people's ad sales force on a commission basis if the advertising model unfolds."

What's the postmortem on the iTunes Rokr phone launch? "We don't call it a postmortem, we call it an after-action review. Yeah, we would have liked to have a license for more than 100 tunes for music. The Rokr form factor was a little dated. The Slvr has done phenomenally well at the $199 price point. Music is very saleable. But as a first launch, it actually has set the expectation that people would sync a phone with their laptop and take music with them and get a very high-quality music performance all in a phone."

So how will Cingular proceed with music going forward? "We think in the music category, the surface has barely been scratched. There are elements of information, community, music sharing, fresh music sampling, tagging of music for future download [that the company wants to explore]. If you hear something, you'd like to be able to ID it and tag it for future download. I think you have to provide a very open music experience that lets people move their personal music collections whether it comes from CDs, downloaded from digital music stores, and it doesn't matter which store it's coming from, or whether they heard something and/or forgot something and want to get it urgently over the air."

What will the pricing be like? "We will sell content over the air as well as side-load. Over the air will cost a premium. There's not a lot of margin on single-track songs at 99 cents. So how appealing is it at $2 or even $1.50? My personal opinion is over-the-air downloads [in] real time are never likely to be more than about 10% of wireless downloads."

Where are we when it comes to mobile commerce? "Some of the m-commerce around the real-time ability to get better deals on things like tickets, because the value of the product goes away, is a real opportunity for us. I think that digital goods for the foreseeable future will be how most people will transact. You will see financial clearing vehicles where people will want to use a phone to pass charges onto another established vehicle, a credit card issued by Visa or Pay-Pal. What I don't think you're going to have any time real soon is this magical phone waving in front of the check out line that is the complete mobile wallet. There's a simple reason for that: The customer only sees value in that when they can stop carrying their other wallet. While it can work, people aren't screaming, 'Gee, I'd like to pay for dinner tonight with my phone.'"

For what services might it be best-suited? "There will be some cash-based services likes taxis where that makes sense. Also extensions of digital music-related merchandise where you don't need to touch [the product] and feel [it] and we can actually fulfill those orders over the phone."

What are the financial benefits of providing such a service to customers? "Frankly, there's not that much margin in it for us. Unless you're willing to take the risk of the payment -- we're not in that business of risk management like the financial services are -- margins are pretty thin. If no one gets paid, how do you invest in the technology?"

What new areas of technology is Cingular looking to expand into? "We will be doing things around broadcast technologies that allow long-form programming, almost like television on your phone. Those can have sponsorship and advertising. But again because those require a full trade out of handsets in all cases to get penetration to market and have it evolve, you're talking about years to get really meaningful scale."
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