RIM's (Latest) Critical Mistake

NEW YORK ( TheStreet) -- Earlier this week, journalists attending Research in Motion's ( RIMM) annual developer conference 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 at least a one-year delay. The product shows good promise, but it's way too early to draw any conclusions given that the product was simply not 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 workers focusing 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. In particular, there are two hurdles:

1. For RIM, it's probably not enough to be equal to Apple, Google and Microsoft -- 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 mistake in launching BlackBerry 10. Remember that RIM made at least three critical mistakes in the past four years:

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

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

3. Another mistake with the PlayBook launch was that it left a hole open for surfing the web through the "Bridge" connection with the BlackBerry without the carriers being able to control or charge for this 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 not screwed this up.

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


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

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 the thing you don't want to do in this situation, assuming you actually want 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 stick any SIM card into it. He said no.

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

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

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

Companies such as Apple, Google and Microsoft can get away with forcing consumers into buying SIM-locked devices now because they have staying power. People know that those three companies will be around forever, pumping billions of dollars into further development. RIM doesn't have that luxury right now.

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

Consumer Experience

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

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

You buy a GSM unlocked, carrier-neutral, no-contract Android Nexus by going 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 for unlimited 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 plus either $45 or $30. Not two years of pain.

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

What is the bottom line here? If RIM is to be successful in luring over users to BlackBerry 10, they have to copy Google's approach in terms of selling their signature smartphone directly to the consumer in a SIM-unlocked, contract-free, carrier-neutral manner. Not on two-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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