Welcome to movie phones

Earlier this year, cellphone giant Nokia and Sony Pictures announced that South Africans who bought new Nokia smartphones would receive a memory card loaded with a copy of “The Da Vinci Code�—the movie, that is, not the book. The memory card had less capacity than a CD, yet the release claimed the movie could be watched in “DVD-like quality.�

The effort, which would have been dumbfounding five years ago (movies on a cell phone?!?), hardly seems remarkable these days. Consider how wireless carriers advertise their services: They put almost as much emphasis on multimedia features (music downloads! video uploads!) as they do on the ability to make phone calls. What was missing from the Nokia-Sony announcement was any mention of a wireless-network partner. Instead, the movie-on-a-memory-card strategy enables Sony Pictures to reach an audience of Nokia users without having to pay a mobile middleman.

The technique is called “sideloading,� and it’s gaining momentum. Device manufacturers are boosting the processing power and storage capacity of mobile phones to entice consumers to spend more on a handset. They’re no longer selling phones, but miniature computers that take the place of iPods, camcorders and portable video players. And they’re built to connect to a PC or the Internet without using up minutes from the owner’s monthly airtime quota.

The most vivid example of this is Apple’s iPhone, which is due next month. Just like its iPod brethren, the iPhone will be able to copy the music, TV shows and movies stored on its owner’s computer. To connect to the Internet, it will not only be able to use AT&T’s relatively slow EDGE data network, but also any free or commercial WiFi network in range. With those capabilities, iPhone owners won’t even need AT&T’s wireless network to make a call, let alone download a hit song (AT&T has, so far, refrained from offering full-song downloads through its wireless network).

But smaller players are getting into the act as well. For example, Actimagine, the Parisian company that supplied the video-compression technology behind the Nokia-Sony announcement, plans to sell movies later this year that can be sideloaded through memory cards onto cell phones.

The big winners in the trend are consumers. They buy discounted handsets from wireless phone carriers (in essence, spreading the cost of the phone over the life of their contract), but can use many of the features without contributing anything to the telco’s coffers. Similarly, sideloading is an unwelcome development for the wireless carriers, who want to sell music, video and other multimedia applications to help cover the cost of their upgraded data networks. Still, they’re adapting to it—see, for example, the free software Verizon offers to help people load the music on their Windows PC onto their music-playing phones.

The effect on the entertainment industry, though, is not so clear. The control that carriers have wielded over their networks and the devices that connect to them has been a mixed blessing for Hollywood and the record companies. Music and video bootlegging is far less common on wireless networks than the rest of the Internet; when someone downloads a song or ringtone through, say, Verizon’s network, chances are extremely good that the transaction was legitimate and the copyright owner got paid. The networks also make it easy for young consumers who don’t have credit cards to buy items on credit, by charging their purchases to the monthly mobile phone bill. And by making it less than brain-dead-simple to create and load ringtones onto a phone, the carriers turned ringtones into a multi-billion-dollar global market. In the U.S. alone, ringtone sales are projected to hit $1 billion next year, according to Jupiter Research.

On the other hand, content companies often complain that it’s too hard to sell their wares through the carriers’ networks. Most carriers charge more for music than the typical online store, and that premium is a drag on sales. IDC estimates that U.S. carriers will sell less than $155 million worth of downloadable songs this year. Apple’s iTunes store does that amount of business in about a month an a half. Nor is it easy to shop for music or video on a mobile phone, especially when the carriers aren’t promoting it. Even the items they are promoting can be a pain in the neck to order, requiring 20 or more clicks to complete the transaction.

Clearly, the emergence of sideloading makes it harder for entertainment companies to sell consumers a mobile version of the content they’ve already got on their computers. But by circumventing the carrier bottleneck, sideloading makes mobile phones more versatile entertainment devices, increasing the chance that consumers will use them for music and video. That, in turn, would boost the demand for content.

The trick for labels and studios will be coming up with products and packages that people want to plug into their expanding personal networks—content with elements suited for large and small screens, and for mobile and home use. And wireless carriers will have to learn to compete in terms of value, rather than counting on a captive audience.

Jon Healey is a Times editorial writer; he runs the BitPlayer blog. Send us your thoughts at [email protected].