The Value, Use, and Protection of Mobile Technology

Take a look at the people in the subway, at college students, or even at businessmen at a Starbucks of a major city. Many will be carrying iPhones or smartphones, on which they will read, listen to music, watch videos, play games, and, generally, stay connected with the outside world. Mobile entertainment is now an integral part of daily life. Indeed, despite the current economic crisis, the mobile industry seems restless in its growth. Motorola’s Droid, via Verizon, was released in November of last year, in an attempt to gain a large foothold of the smartphone market. Recently, Sprint released the HTC EVO 4G as a powerful competitor–and it ran at speeds never before seen on a mobile device in the U.S. In the meantime, mobile broadband capacity continues to grow, which produces added mobile applications and revenue streams.

Mobile gear and mobile applications have been in existence for quite some time. Mobile applications, in particular, were originally used back in the 1990’s for replicating data processing functions of desktop computers, giving businessmen and travelers the convenience of managing their schedules on-the-go. As the development of new technology allowed a higher processing power for cellular devices, increasingly diverse and intricate applications were used for tasks beyond personal scheduling.

Soon, cell phones became powerful enough to provide entertainment in remote places[1]. The technology opened up a universe of new possibilities. For example, it created educational value by teaching exam materials with dedicated software and added content by providing quick access to dictionaries, and local maps.The iPhone certainly led the way, by building new platforms for distributing music but also by reshaping the entire mobile industry. Users were now able to create a personalized mobile device with software produced by third-party developers (whereas before they were limited to the applications provided in each respective device). Then, in July 2008, the launching of Apple’s Appstore brought forth a new business model, with incentives that favored developers. More competition followed, and a vast library of diversified applications became available for users—many of them attracted by new entertainment experiences and utilities[2].

Today, Apple Inc. claims that there are over 150,000 applications available for the iPhone, iPod Touch and the soon-to-be-released iPad[3]. According to a report from Chetan Sharma Consulting, the overall global subscriptions base for mobile applications is expected to exceed 5 billion by the end of 2010. The number of available mobile application stores has increased from eight to thirty-eight between 2008 and 2009, when the total number of apps downloaded stood at, approximately, 7 billion (Asian countries contributed 37% of this total). Overall revenue was over $4.1 billion in 2009, a number that is expected to increase to $17.5 billion by 2012, with more than 50 billion downloads. As Digital Music News points out, this “easily trumps” an IFPI-published projection for CD sales of $13.8 billion[4].

It should be recognized that there is a growing number of applications related to the music business (see, for instance, Peon, T.; “iPhone Applications Open Doors for Mobile Music, www.thembj.org, Nov.2009). Music industry executives, of course, are determined to monetize that demand.The growth of smartphone usage ensures safer investments for application developers, and creates diverse options for distributing a new type of product by artists and labels—producing a win-win scenario for both parties. A good example is the iPhone app toolkit, a service provided by iLike, which allows artists and bands to create their own applications using a free, open-source platform[5].

As mobile applications have become a lucrative business and continue to improve in design and user-experience, a main concern is the rising competition between handset makers. Recently, Apple sued HTC, the developer of the Google Nexus One smartphone, for a patent infringement. HTC has said it plans to “fully defend itself” from the allegations[6]. Apple cites a long list of patent infringements, including one for a touch screen device (patent #7,479,949), list scrolling and scaling on a touch-screen display (patent #7,469,381), and 18 other violations[7]. Whether the case will be settled in a matter of months or years is debatable. Regardless, conflicts in intellectual property are becoming increasingly prevalent. Today, in fact, the legal protection of applications yields a “competitive advantage” and is standard practice in business[8] —unless, that is, the lawsuit becomes too expensive and time-consuming for the inequity that is being addressed.

The mobile ecosystem, moreover, has been fragmented into operating systems and applications that run on the same platform[9]. But market domination, combined with an aggressive effort to defend intellectual property rights, might stifle innovation. Throughout history, of course, scholars have discussed the demerits of monopoly over competition, and its negative effect on creativity and innovation. The economic rationale of intellectual property is that legal protection provides a mechanism for compensating creators, encourages more artistic expression and technology, and brings about competition between authors and inventors. Here, we should consider the value in “delivering services and applications” for a “wider base of customers”[10]. Indeed: 150,000 available applications at the Apple Appstore sounds impressive, but it might be much more meaningful and better for society if all those applications were compatible with other mobile devices.

There is a large unmet demand for more iTune-like applications. Recently, at this year’s Mobile World Congress, Sony Ericsson’s eStore announced another mobile appstore starting at 30,000 apps. This was good news, and momentum was added when Wholesale Applications Community confirmed that twenty-four mobile operators around the globe would combine their efforts to build an open platform for all mobile apps. Clearly,
individual developers, including those inside the music industry, understood that the production of mobile applications could bring an unprecedented opportunity to generate new revenues.

Mobile applications have also become marketing and promotional tools for businesses. Future profitability might depend on strategic plans that recognize the value and uses of mobile technology, its intellectual property component, and its lifestyle implications. This industry is yet in an infant stage; it will certainly grow and offer much opportunity as it moves forward. In the meantime, the younger generations will be keen to discover more ways to connect with other individuals—as well as with artists and entertainers. Social identity is likely going to be established through individualized mobile devices that include access to content and services in remote places.

By Beom (Ben) Hong

References

[1] Go Test Go. “Cell Phone Applications” http://www.gotestgo.com/cell_phone_applications.html
[2] Page 3, Chetan Sharma Consulting, “Sizing up the Global Mobile Apps Market”
[3] http://www.apple.com/ipad/app-store/
[4] Digital Music News, “The App Eclipse, Bigger than CDs, Bigger Than Downloads.” http://www.digitalmusicnews.com/stories/031810apps
[5] Wired.com, “The Album is Dead, Long Live the App” http://www.wired.com/epicenter/2009/08/the-album-is-dead-long-live-the-app/
[6] http://digitalmusicnews.com/stories/031910friday
[7] Engadget, “Apple vs. HTC: a Patent Breakdown” http://www.engadget.com/2010/03/02/apple-vs-htc-a-patent-breakdown/
[8] ipCapital Group, “Mobile Device Applications and IP” http://www.ipcapitalgroup.com/?file=Mobile_Device_Applications_and_IP
[9] Jennifer L. Schenker. Businessweek.com, “Mobile Industry Strikes Back at Google and Apple” http://www.businessweek.com/globalbiz/blog/europeinsight/archives/2010/02/mobile_industry.html
[10] Jennifer L. Schenker.

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