Wednesday, May 27, 2009

The Kindle wireless subscription model for Sprint

"ARPU" is the average amount of revenue a company, wire carrier especially, collects from each user per month, and it's been a metric used to measure the financial performance of such a carrier.

  Nielsen Wire has an interesting morsel or two for Kindle watchers in its report that telecoms are experiencing a lift from ad hoc subscription models such as the one used for the Kindle.
' [The Kindle]...also represents the first example of the long-predicted ad hoc subscription model for Sprint, which provides the wireless access for Kindle as subsidized by Amazon.  Sales of the Kindle drove a majority of Sprint’s 394,000 wholesale additions in Q1.

But because Kindle is included in Sprint’s overall subscriber numbers, the carrier will see pressure on its average revenue per user (ARPU) numbers going forward if ad hoc subscriptions become a significant business.  We estimate that Kindle may only represent $2 ARPU compared to approximately $56 for a postpaid Sprint subscriber, however. '
GigaOM expands on this, quoting Nielsen's Roger Entner:
' "...There are two segments left for penetration: people who don’t have money and the ones that you cannot persuade to have a wireless phone.”

' So, for growth, carriers have to turn to machines and build the cost of the wireless subscription into the price of the service or content ... As the paradigm shifts and networks change, perhaps analysts worried about the health of a carrier should start focusing on the profitability per gigabyte of data transferred instead of ARPU. '
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