RIM's (Latest) Critical Mistake

NEW YORK (TheStreet) -- Earlier this week, journalists attending Research in Motion's (RIMM) annual developerconference for BlackBerry had a chance to play with the latest build of BlackBerry 10, which is set to be released in the first quarter of 2013, after atleast a one-year delay. The product shows good promise, but it's waytoo early to draw any conclusions given that the product was simplynot close to finished yet.

The upside scenario for RIM is that BlackBerry 10 bests Android from Google ( GOOG), iOS from Apple ( AAPL) and Windows 8 from Microsoft ( MSFT) in terms of offering a better user interface paradigm, especially for workersfocusing on productivity.

Conceptually, in my view, Google may be ahead of Microsoft, which may in turn be ahead of Apple. But there is still room to improve the smartphone user interface.

The hurdles facing RIM in this challenge are dramatically high. Inparticular, there are two hurdles:

1. For RIM, it's probably not enough to be equal to Apple, Google andMicrosoft -- or even to deliver something that is only slightly better. The ecosystem lock-in is significant -- in particular considering the installed smartphone user bases of Apple and Google right now -- and RIM isn't offering many of the other components of the cloud services.

2. It's not just about the handheld device anymore. For example,Google has the best maps, Google Voice, Gmail, Drive, Google+,Calendar, a line of PCs (Chromebooks), Reader, a search engine,YouTube, Finance and more. Apple has iTunes, iCloud, PCs (Macs),Apple TV and media players (iPods). Microsoft has PCs, the xBox,Office, Hotmail and more. RIM has . . . a smartphone and a tablet.

With all of these odds against it, RIM cannot make a critical mistakein launching BlackBerry 10. Remember that RIM made at least threecritical mistakes in the past four years:

1. RIM launched otherwise decent devices (for its time) such as theCurve 8900, which you could only buy on two-year carrier contracts.However, the trackball (thumb navigation) had a tendency to fail afterabout a year or so, plus or minus, and after one year you no longerhad a warranty. Users were then faced with having to buy a new devicefor $500 or so in order to live out their two-year contracts. This mademany users angry, and they switched to iPhone and never looked back.

2. RIM launched the PlayBook tablet in April 2011 without nativeapplications for email, contacts, calendar and so forth. They assumedthat people would access this information through their BlackBerry.The problem here was that many users had already ditched theirBlackBerry for an iPhone or Android, and this usage scenario thereforewas simply out of touch with reality. As a result, the journalisticcorps laughed RIM out of the room and the PlayBook became a commercialfailure.

3. Another mistake with the PlayBook launch was that it left a holeopen for surfing the web through the "Bridge" connection with the BlackBerry without the carriers being able to control or charge forthis functionality. Rightly or wrongly, this upset carriers such as AT&T ( T) and Verizon ( VZ) greatly, and both companies scrapped their launch plans last minute as a result. Remember, this was January/February 2011, before the first Android 3.0 tablet had been made available, and RIM could have been a significant alternative to Android had it notscrewed this up.

With that sad trip down memory lane as a quick refresh (or coldshower), it looks like RIM is about to make critical mistake No. 4 inconjunction with the launch of BlackBerry 10.

Contracts

Consider this: RIM is about to launch a new operating system, a newecosystem. It has fallen behind dramatically as Android, iOS andWindows 7 and 8 have convinced the market that they have stayingpower.

RIM does not have that level of confidence in the market right now.With this backdrop, RIM is launching a whole new OS. What is thething you don't want to do in this situation, assuming you actuallywant people to buy this product and try it?

Force people into two-year contracts with traditional cell phone carriers, that's what.

At a press conference Tuesday, the CEO of RIM was asked if RIM would be selling BlackBerry 10 directly to consumers for cash, so that they could stickany SIM card into it. He said no.

People will be curious about BlackBerry 10, and hopefully for goodreason. It may turn out to be a path-breaking product that catapultsRIM "back into the game" just like Apple made its comeback after SteveJobs returned in 1997.

Imagine if Steve Jobs had told the consumers in 1997 that "I'm goingto launch a revolutionary new device. It's called the iMac or theiPod. If you buy it, you have to sign a two-year contract with acarrier for $90 or whatever per month."

Had Steve Jobs done that, Apple probably would never have lived to seethe iPhone, let alone the iPad, because nobody would have bought theiPod or the iMac, and Apple would have gone bankrupt in 2001 or 2002.

Companies such as Apple, Google and Microsoft can get away withforcing consumers into buying SIM-locked devices now because they havestaying power. People know that those three companies will be aroundforever, pumping billions of dollars into further development. RIMdoesn't have that luxury right now.

RIM will be asking consumers in the first quarter of 2013 to place abet on a whole new operating system. Given where RIM finds itself inthe market right now, it can't do that while relying on carrierdistribution exclusively. RIM needs to sell devices directly to theconsumer.

Consumer Experience

I know many people who are very curious about BlackBerry 10 and wouldlike to give it a shot. Hardly any of them, however, would do so ifit entailed buying a BlackBerry 10 on a carrier contract.

How do many potential BlackBerry 10 users want to buy their devicescome early 2013? The same way you buy a carrier-neutral Android Nexussmartphone directly from Google today, that's how.

You buy a GSM unlocked, carrier-neutral, no-contract Android Nexus bygoing to google.com/nexus and pay $349. Then you either trek over to Wal-Mart ( WMT) or StraightTalk directly and pick up a $45 all-you-can-eat SIM card that runs on AT&T. Alternatively, you get a $30 SIM card forunlimited data on the T-Mobile network.

The points here are twofold:

1. If you don't like the experience, all you've lost is $349 pluseither $45 or $30. Not two years of pain.

2. If you love the experience, you're a) saving at least $45 over acarrier contract and b) able to replace the hardware if it'slost/stolen/destroyed for $349 without having to sign a new contract.

What is the bottom line here? If RIM is to be successful in luringover users to BlackBerry 10, they have to copy Google's approach interms of selling their signature smartphone directly to the consumerin a SIM-unlocked, contract-free, carrier-neutral manner. Not ontwo-year contracts.

At the time of publication, the author was long GOOG, AAPL, RIMM and short MSFT.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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