Features
Above the Fray
Follow the Money
Market Research
Big Ideas
Technoptions
Developer Insights
Q & A
Opinions

Archives
Calendar of Events
ASP Directory
Other Cahners Pubs

Submit a Release
Meet our Staff
Contact Us
Advertise
Magazine Subscription

Airborne: The TV Network Of Wireless?


January 7, 2002

Over the holidays, Americans spent an estimated $8.35 billion at the box office - a pretty clear indication that even when times are tough in the macro economic picture, consumers still want their entertainment. That's what privately held Airborne Entertainment Inc.-which has deals with nearly every major North American carrier-is banking on. Airborne's philosophy? Sure, third-generation technology is important and one must be prepared for what's to come, but if the applications and content aren't there today, it's going to be harder to get there tomorrow.

Airborne connects content providers with wireless carriers through its Runway platform using the consumer brand PocketBoxOffice. The two founders of the company, Airborne CEO Garner Bornstein and President Andy Nulman, recently talked with Wireless Internet Magazine about their business model. Bornstein was the founder and CEO of Generation Net, a business-oriented Web development firm that merged with North American Media Engines in 1999. Nulman was a driving force behind Just For Laughs, the world's largest comedy festival, and has worked with the likes of Tim Allen, Jerry Seinfeld, Ray Ramano and Jim Carey. He also has produced more than 150 TV shows.

Following is an edited transcript of the interview.

Wireless Internet Magazine: Tell us how your platform works.

Bornstein: We see the evolution of mobile entertainment--and that's all we do, we are a mobile entertainment company, we do nothing else--and the value chain we see as being very similar to that of TV, where you have actual producers of mobile entertainment. You will have the wireless carriers who distribute it to their customers and between these two constituencies, there will be a role for a company, such as Airborne, as a network, the same way ABC is a network between creators of shows like Survivor and the other shows they carry, and the cable companies they sell through to get to the consumer. Airborne Entertainment is a network, which works between the producers of content, which would be the developers of WAP games, SMS games, Brew, J2ME games, ring tone developers, etcetera--anything that comes to some mobile entertainment and major brands. We developed the Monsters Inc. game in conjunction with the Monsters movie for WAP. It's actually one of the top used applications on the wireless Web out there right now, and we also work with media companies ... We're talking with MSN, so these are the companies we deal with in the development and re-purposing, creation of content. On the other side, we have deals in place with virtually every wireless carrier in North America, all of these are revenue-generating deals. What we do is we package all of the content we bring together under a brand we call PocketBoxOffice, that's our mother ship for all the mobile entertainment we currently provide to the subscribers of the wireless carriers in North America. PocketBoxOffice currently has over 80 programs and 13 different categorized channels, and I would venture to say that at this stage of the game, that the content under PocketBoxOffice is by far the most prolific of any other company in North America doing what we're doing, and the number of carrier relationships we have is also much greater than any other company in this space. We do have relationships with pretty much every carrier.

We don't just sit in the middle and take it and distribute it and pass it off. We provide a very useful value add given the lack of standards, both in the network infrastructures of the carriers of North America and also in the billing systems. What we do is we bring all the content together. We, through our platform, which we have developed internally called Runway--which has been developed very extensively with a very qualified team over a little over eight, nine year software development-that platform manages all of the devices that currently exist in North America, whether they are the various brands of cell phones, PDAs, whether they're Palms or Pocket PC versions, Handsprings, the Blackberry pager and other forms of pagers, and also in-vehicle systems, like OnStar and Wingcast from Ford. Our platform manages our content and provides it in the most optimal fashion for the user, depending on which device they have, and that is all taken care of pretty much on an automated basis by our platform.

WIM: So your platform doesn't care if it's CDPD, GSM, CDMA or another technology?

Bornstein: Not at all. When a request comes in, when a user starts playing a game or using any type of content, we look at a few things. We look at the user, and we look at what sort of device he has. If it's a color device, the content will be in color. If it's black and white, it will be gray scale. If it doesn't support graphics, it will be delivered in text. If it's SMS, it will obviously be SMS, so we really optimize it for the device, and we even look at the screen size to make sure that the game is played in the screen size of the phone, so the platform takes care of all of that.

Airborne Entertainment CEO Garner Bornstein (left) and President Andy Nulman (right) bring strong backgrounds in the entertainment industry to the company.

We also look at the carrier he is with and what type of network--whether it's GSM, TDMA, CDMA, CDPD, GPRS, 1XRTT--we will know that and we will deliver the content in the appropriate form and using the appropriate protocol for that network protocol. In addition, when it comes to payment, we will look at the carrier and the marketing strategies and how that customer has paid for our content, because we do not intend to provide our content for free. We are not working within the Web paradigm; we're working within the paradigm that our content is valuable. We put a lot of time and dollars into creating it, and the consumer will pay to use it. If it's one of our carriers that has a subscription model, then we will look for that customer's request, whether they have subscribed for the month, whether they are still active, and we will allow them to play for as long as they want.

If it's a carrier that has per-event based billing, we will look and say, OK, you have to pay 25 cents to pay this game. If it's a carrier with an airtime model, where they don't charge at all - rather, they just collect airtime, we will look at that as well, so we manage the whole process of the technology, the devices, the networks, the billing models, and we take care of everything so a content provider that deals with us who wants to reach the North American population has one thing to do, and that is to create a compelling mobile entertainment experience. We will then take it and deal with all of the technology issues, the billing issues, the creation of dollar flow, and we will take that and bring it to the various carriers. We provide a tremendous value-add, even more so than the middle man in the networks and television [industry] because they don't have the complexities in business models that you have in wireless, nor do they have the complexity in terms of lack of standards, of networks and the multitude of devices, so we make sense out of the disorganization.

WIM: Does Runway recognize whether a customer is subscription-based or event-based?

Bornstein: Yes, we can do it on a carrier-by-carrier basis, so if we know that our global deal with AT&T, for example, is based on subscription, all we have to do is look at that to see that it's coming from AT&T and know that it's a subscription customer and we shouldn't be charging him 25 cents to 10 cents whatever it is. But ... the platform is flexible enough to look down to the individual level to see whether he has opted to be a monthly subscriber or whether he's chosen to be a pay-per-use customer, so even if a carrier has multiple options in terms of how they bill, we could do it at the subscriber level.

WIM: How long did it take to delveop Runway?

Bornstein: Probably eight and a half, nine years. It would take eight people one year to do it. I think we had a team of four to start, and then six, and now we have eight.

WIM: How does the billing work? Do you put your content on the carrier's bill?

Bornstein: The billing works in multiple fashions. The platform supports all of that. We know enough about wireless carriers and telcos to know that a startup of 23 people is not going to go tell them how they want to market their product. [Billing] on the phone bills is the easiest, the least obtrusive way, and we have [deals] working now where before a subscriber goes into one of our games, before they play it says: "25 cents for three games. Is that OK?' If that's OK, they click OK on their phone and they get a bill on their phone bill for 25 cents.

WIM: Are they always asked before they start playing?

Bornstein: Oh, yes. On pay-per-use you have to ask obviously because you can't just automatically start doing it. At least at this stage, we always say, 'This is the cost,' and we ask that they actually confirm that they have received it. We have other carriers who are offering it on a subscription basis and it's billed to the phone bill, so they pay $1.99 or $2 a month, and that is an ongoing charge until they decide they want to stop, and then they have unlimited access to a whole variety of games under that package. We also have carriers who just have an airtime philosophy, and there's no additional charge, they just want us to supply games that create a lot of airtime usage and we get paid X cents per minute of usage. That's the simplest, and we just get a check and obviously the bill is in terms of airtime. Some of the carriers are looking at [a system] where money is put into a stored value account by a credit card or a check and that account creates virtual dollars that they can use, that are deducted when they play certain games, so the bill doesn't actually go on the phone bill, it's handled through a third party. Then there's also the per-charge SMS, which goes on the bills. There are ring tones billed through 1-900s, so you call the 1-900 number, you enter your cell phone number, you enter the code of the ring tone you want, and that's billed as a 1-900 bill and downloaded to your phone. There are a variety of methods of billing, and we work with all of them. We are as flexible as possible with our carriers, so there's nothing they want to do that we can't do.

WIM: How willing are they to share in the revenue?

Bornstein: For us, every single carrier relationship we have right now we have a business deal in place which revenue shares. We have no deals in place where they say we want your content free, and we're going to generate lots of minutes and we're not ready to pay you anything. If a carrier had that position with us, we would not deal with them because that's not equitable. We have revenue share depending on the type of application and the form of the billing that go up to 80 percent in our favor. Again, the types of situations where one might be 80 percent and another one might be 50-50 is a question of is the revenue we're talking about incremental revenue. So if we're offering a game that costs $2 a month to play it unlimited and the carrier is still getting all of their airtime, then the carrier will share the bulk of that $2 with us because they're getting their airtime covered. We're not taking anything out of the revenue that they used to build their infrastructure, but in some cases, for example with one carrier where we have a big SMS deal being launched, where they're charging a certain per SMS fee, and we get a share of that. Our share of that is very small, it's about 15 percent, but that's because it's not incremental dollar; that SMS charge covers the cost of delivering the SMS, too, so it's only reasonable that the carrier would get the larger part of that because they have all the costs associated. Every one of these deals is different depending on who is sort of paying the freight of the actual telecommunication aspect of it.

WIM: Are there any billing models that generate more revenue for you than others?

Bornstein: I personally like the airtime rev sharing model because it doesn't force the customer to make a decision and to decide whether to subscribe, and quite frankly, I think it's good for carriers, too, because they get more revenue from that. Our applications generate millions of minutes a month of usage. As you translate that into dollars with carriers, that's a lot of money, so if we can eliminate the barrier of a consumer having to make an additional point of purchase, and make a decision as to whether they want to subscribe or pay 25 cents, if you can eliminate that and just fit into the general model of people knowing they're being charged per minute when they use their cell phone, I think there's a lot more revenue to be generated by the carrier for that, and also by us.

WIM: What are your most popular services?

Bornstein: Games. The Monsters [Inc.] game was huge. Buzztime is one of the more popular time-based trivia applications. That's very, very big and very popular and addictive. Our Eternal Hero game, which we just launched, is coming out to rave reviews and tons of usage. It's a role-playing game with hundreds of levels that you can play in five minutes if you want because all of our content is geared to the short-attention span user. We want someone to be able to experience our content when they're standing in line for a movie or getting onto a bus-five minutes at a time. Or, if they have more time on their hands, if they have 20 minutes we want to be able to take them and continue the experience, but it also has to work based on small amounts of time. That game, you can play it in five minutes. We have one user who spent 35 hours playing that game--and paying for it.

WIM: How do you expect to become profitable?

Bornstein: We will be profitable by March 2003. We have very tight budgets and we are sticking to them and, in fact ,beating them. We will be profitable because we are only going to be doing business deals and using our infrastructure to support business deals that generate revenue for us, and we will be a very profitable company because of the high ratio of visibility and usage of our applications compared to development dollars. For example, with our carrier relationships right now, if we come out with a killer WAP game, it's in the hands of virtually every customer who's got a WAP-enabled cell phone. That's in the millions; that's at 5, 6 million right now, and growing. SMS is even more, a one-way SMS application can reach 40 million users in North America now. The cost to develop a great SMS application can be very little; it's the creativity of it. It's not like TV or movie production-there are no hundred million dollar budgets in creating these applications. And it's not like console games and PC games where titles are now costing $5 million. We can create very, very successful, compelling applications for in the tens of thousands of dollars or even less and have access to millions and millions of people. So that ratio alone enables us to become a very profitable company.

WIM: You recently got $6.3 million in venture capital. What drove these investors to your business model?

Nulman: I think what really has made a difference in our company is that when we talk about Airborne, we talk about three legs that we stand on. We're not a company that's a platform company and that has positioned itself as the all-inclusive platform. We're very platform agnostic. The other thing is we have a very strong business component. Our senior vice president of business development has 25 years of experience in the industry and he was able to get us into this incredible distribution that really nobody else has had in the business. We have a strong technology. Perhaps the biggest difference is we are not just a bunch of engineers or software developers who said, 'Let's get into the wireless entertainment space.' We have a very strong entertainment background, I guess starting with me, with my background in event and television production. But we have people here who understand what it is to develop content for an end user, because at the end of the day ... the U in ARPU is user, and if you don't appeal to that user, you're history. We have a very strong management team; Garner with the Internet and at the business level; myself in the entertainment space; Brian Milton in the telecom space. Dennis McFern is our CTO who has years of mission-critical software development behind him, again over two decades of that. So when investors look at a team that has this proven track record in their past business and this very multi-faceted approach in the current business and understands that they have to appeal to a consumer and the entertainment element but will be able to back it up technologically and business-wise, that's what was important to them. There are the content deals that we made, the carrier deals that we made and the strength of the management team.

WIM: Which companies do you consider your nearest competitors?

Nulman: I don't want to sound like an egomaniac here, but there's nobody in the business who really comes at it the way we do. You see the companies that are game developers. We see our business, at least as it pertains to the consumer, as the entertainment business. Games are a big part of it, but games are not going to be everything as the mobile entertainment space advances. We see ourselves as a network. We are there to create the package that appeals to the consumer and do it through our carrier partners. I don't think there's a company in the world right now who really sees it the same way that we do. Certainly, not a company in North America, and when you see what's happened to certain companies ... games developers - it's one thing to develop a game but it's another thing to have the carrier deals and distribution, the way to make sure the content is delivered. That, as I mentioned before, is our strength and that's what we bring to the table, so in terms of competition, we don't see these people necessarily as competition. Eventually, we see companies like this as people to work hand in hand with to develop the industry.

Bornstein: I think what we have to realize is we're at the very early stages of a potentially very lucrative industry for everybody,and I don't think we're at the stage where we really think about or worry about competitors. We talk very regularly with other people in our space to certain degrees, and our challenge is not so much fighting amongst ourselves and trying to get a bigger share of the pie. It's to sort of heat up the oven so we can all end up eating.

I think competition will heat up later on in the evolution of this business, but right now the challenge is to build an industry and work together to get the technological solutions in place, to get the dollars flowing, to get the carriers of the mindset that they gave a lot more money to make by following the i-mode model and sharing revenue and creating an environment which is conducive to creativity so the great applications get out there, so the consumers want to continue doing this. Essentially we just feel that there's a lot more to gain right now from building an industry before we start competing with each other.

WIM: How much are you able to collect data on your users?

Nulman: Obviously, I come from the TV industry and the live event industry where having those numbers was very important, so I'm a bit of a numbers junkie. But being able to get your numbers day to day, your hits, your minutes, where your unique users are, where they're coming from, what programs they're going to--it allows us to play games, internal games, and see what works and what doesn't, like if we move a menu position, does that have an effect? You'll be able to see that the next day. If you go ahead and put some internal promotions together, will that have an effect on your traffic?

We have hundreds of thousands of users in North America that are generating millions of minutes a month with our content, but perhaps the most impressive statistic of all: We have a registration process. The registration process allows our users to go ahead and be persistent in their use of games. In other words, if you pick up where you left off, you're able to save your scores. You're able to participate in leader boards. You're able to save content, you're able to send content to a predetermined list of your friends who you want to send stuff to, all directly from your phone. But you have to register on our Web site to get that done. Without any promotion, without any external marketing, without even a press release-- it's just there as an option button at the end of each one of our programs--we've already signed up--and this is in less than two months--30,000 people. That means 30,000 people have taken the time to register, and when you see games like Eternal Hero and you look at the leader boards, they all have their own specific nicknames, and they're having a blast with our stuff that they have taken it upon themselves to become that connected to what we're doing.

Bornstein: To elaborate a bit more on what Andy said in terms of the registration and bringing all of our programming together-- I was just on an interview earlier this morning, and the question was, what's different between us and a portal, like Yahoo!. The difference is that Yahoo! is just a collection of all sorts of ... whatever--all put together in a directory, and there's nothing that ties it all together, other than the fact they're listed on Yahoo! What we do is we tie it all together, through the My PBO registration. If you play games, you have central score keeping. The billing is all tied together. We can cross-promote one off another. It's a network more than just a collection of links to wireless sites.

Nulman: That's really the goal here. Anybody can throw up a portal where you can say just toss in stuff and we'll go ahead and distribute it. What we do and one of the key services we provide is we are a filter. What we do is we say only the best stuff is getting out there, and that's the type of trust we can build with our carrier partners and the type of trust we can build with the end user. When you come, the Pocket Box Office program says something, the same way an HBO program will be different from something you'd get from your local TV station. [WIM]