Leap Wireless International executives seem to think their Muve Music service will be a key differentiator for their Cricket brand going forward. President and CEO Doug Hutcheson talked about it a bit in last week’s first-quarter conference call, and at the Jefferies conference today in New York, CFO Walter Berger reiterated there will be nothing else like it on the market.
Sure, there are plenty of music services out there, but this is not a streamed product, Berger said, and it’s based on technology Leap itself developed. That alone doesn’t mean it’s going to be a smash success, but Muve does seem to be a differentiator in the prepaid space, and while it might not fly with a postpaid audience, it’s spot-on for Cricket’s.
Turns out, Cricket customers are a little bit crazier for their music than maybe your run-of-the-mill wireless customer. Back in 2007, the company noticed that within a few quarters of launching its basic ringback tone service, it was generating more revenue for the music industry from ringback tones than most U.S. wireless carriers, even though it’s working from a much smaller base. (Note: A lot of Cricket customers don’t have computers or credits cards, so iTunes isn’t really an option.)
Cricket then proceeded to meet with its equipment providers and went to work with the music industry. Its library now includes artists from the 55 record labels of the four major music companies: Universal Music Group, Warner Music Group, Sony Music Entertainment and EMI Music, and they’re adding independents, the first being aggregator IODA.
Going to the trouble of inking deals with all these artists/music companies wouldn’t make sense if Leap/Cricket didn’t expect a good payoff. One thing that helped get the music companies on board is all the music stays on the phone. “We wanted to keep it on the phone, that was our goal,” explains Greg Lund of Cricket’s Corporate Communications. There is a computer interface so you can manage your music, but that’s the extent of it – no moving music around. Such a model might not appeal too much to the postpaid crowd, but it no doubt pleases those who create and distribute music.
Of course, Cricket’s customers can come and go as they please since they’re not on contracts, but if they leave for a month (like when gas prices skyrocket), Cricket will save their music and give them access to it the next month when they reactivate. Lund says they’re still determining how long they’re going to let customers remain inactive before they cancel their music for good.
The Muve service is still relatively new, having just recently been introduced in all of Cricket’s markets. Already, Leap reports having 50,000 Muve customers and expects to hit 100,000 “soon.” Right now, it’s only available with the Samsung Suede feature phone, but more feature phones and Android devices are expected later this year. At $55/month for unlimited talk, text, Web and unlimited music downloads – the current version using a 4 GB SD card by SanDisk holds 3,000 songs – it sounds like a pretty good deal. Plus, new price plans are in the works.
Leap/Cricket, along with MetroPCS, often have been thought of as “bottom feeders,” as Bernstein Research analysts said in a research note released today,but they’re emerging as the new middle market. Nearly all of the industry’s subscriber growth is now coming from the prepaid segment. Prepaid and reseller net adds accounted for an all-time high of 91 percent of the industry’s total net additions in the first quarter, according to Bernstein. In fact, the analysts figure that excluding “connected devices” – laptop cards, MiFi devices and others – it’s likely that the postpaid industry actually lost traditional subscribers in Q1 for the first time ever.
At the very bottom, the low-end prepaid subscribers are trading down to USF-assisted SafeLink (TracFone) and Assurance Wireless (Sprint) plans for low-income people who qualify, Bernstein says. At the high end are AT&T and Verizon Wireless, with Sprint (postpaid) and T-Mobile USA getting caught in the middle.
Leap may benefit even more if AT&T’s acquisition of T-Mobile goes through, but executives there aren’t really commenting too much about that yet. In the meantime, there’s potential for Muve to give it some uptick. The service has received some knocks for speed and hardware, but generally, reviews have been pretty good. It was nominated by CNET for a Best of CES 2011 award in the software, services and apps category (Unifi by RealNetworks won). Later this year, it will roll out to more big-box retailers thanks to an MVNO agreement with Sprint.
Given Cricket’s customer demographics, it will appeal to a lot of ethnic groups and music tastes, whether it be Latin, hip hop or whatever the kids are listening to these days. If Cricket gets more customers buying smartphones with Muve later this year, it’s a sound strategy.
Muve customers won’t be listening to the Beatles, but Kid Rock’slatest “Born Free” title is there. Now, I would not usually say that’s a fair trade, but it turns out that Kid Rock is performing with Sheryl Crow at, coincidentally, the Cricket Wireless Amphitheatre in Chula Vista, Calif., on Aug. 2. So, there you have it.