Off the mark

Blackberry has been losing market share globally. Can it stay on course in India?

There was a time when it was the must-have gadget for corporate executives around the world. Rising professionals and big businessmen alike didn’t leave home without their Blackberry devices and checked their email obsessively, everywhere — in movie theatres, at airports and during meetings and family dinners. The Crackberry was so addictive, it was apparently even cited in divorce cases. 

But that was then. The Blackberry’s fall from grace has been as dramatic as its rise a decade earlier. The iPhone and various Android devices have overtaken it as the smartest phone around and Blackberry’s attempts to reach out to non-corporate customers by being cool and hip have flopped miserably. Blackberry’s share of the global smartphone market is down to 6.9% from 13% a year ago (see: Distress call).

Its Canadian maker Research in Motion (RIM) admitted that sales of Blackberry devices dropped by 21% in Q4FY12 compared with the previous three months and the company reported a net loss of $125 million. RIM’s share has tumbled to $11 currently on the Toronto Stock Exchange from an all-time high of $150 in June 2008.  

RIM is now taking corrective steps: in the past several months, it’s shunted out key people (including a co-founder of the company), accepted the possibility of a sale and, perhaps most significantly, announced a return to its roots. It’s focusing once again on corporate customers and the enterprise segment.

Not in India, though. Here, too, there has been a change in focus — but one that calls for an increase in attention to the consumer space, not a stepping back. In the coming years, RIM India wants the consumer and enterprise segments to contribute equally to the company’s bottomline.

Granted, RIM in India is better placed than it is in developed markets like the US, UK and Canada, but Blackberry still accounts for just 15% of the smartphone market in India, behind Nokia and Samsung. For a company that had the first-mover advantage in the world’s fastest-growing telecom market, surely the numbers should have rung louder? Will the new strategy make a difference or will RIM lose the battle in India, too, as it already has across the globe?

First, the good news

RIM’s entry into India in 2004 was a textbook new market launch for the company: it began as an enterprise service provider that had a single, game-changing USP — “secure push email”. Tying up with Bharti Tele-Ventures, Blackberry partnered exclusively with Airtel for the first couple of years before adding other mobile operators.

It was evident right from the start that this was a device for corporate bigwigs: not only was email on mobiles unheard-of until then, the handsets were priced upward of ₹19,000, placing them beyond the budget of most regular mobile subscribers in the market. 

It wasn’t until five years later that RIM reached out to the consumer market, making Blackberry devices available off the shelf in 2009. Now, Blackberry handsets can be owned for less than half the introductory price and the target consumer is everyone, right from teenagers to people in smaller towns and cities and executives. “As demand for push mail increased over time, we expanded to the consumer segment,” says Sunil Dutt, managing director, RIM India. “In hindsight, one can always say we should have done better, but we are happy with the progress RIM has made in India.”

There are now over 1.6 million Blackberry subscribers in India, compared with just 114,000 in May 2008. And compared with a 3% market share in 2008, the company now accounts for 15% of the major smartphone brands sold in India, according to CyberMedia Research. In CY2011 smartphone sales in India touched 11.2 million units, up 87% y-o-y.

Blackberry’s share, though, is just a fraction of what Nokia (38%) and Samsung (28%) command. Moreover, it’s grown its share very slowly, especially compared with the Android-based Samsung. Between CY10 and CY11, while RIM moved up from 13% to 15% market share, Samsung snatched the No. 2 slot from it by growing its share from a meagre 5% to a good 28% (see: A slippery slope).

Still, Abhishek Chauhan, senior consultant of the ICT practice at Frost & Sullivan, lauds RIM’s achievements in India. “India is one market where we cannot say RIM missed the bus. They started in enterprise, became the leader in the space and then moved on to the consumer segment. Moreover, their priority was always value rather than volumes.”

Too little, too late

Consumers in developed markets are clearly over their Crackberry addiction. In Q1CY12, Android and Apple platforms accounted for 80.5% of the US smartphone market, whereas RIM’s share had dropped from 38% in Q4CY09 to 11.6%. That’s not the case with emerging markets like India, Indonesia and Saudi Arabia, where Blackberry is adding new subscribers almost everyday.

Although the company doesn’t give sales break-up by region, sales outside the US, UK and Canada accounted for 68% of RIM’s total revenue in Q4, up from 61% in Q3. But will RIM be able to extend its high-growth trajectory to the consumer space? There are some doubts.

For starters, rival handset manufacturers say RIM was painfully slow in expanding its footprint in India and didn’t do enough to market itself — and that’s going to affect Blackberry’s future growth as well. There’s some truth in that. During RIM’s initial exclusive tie-up with Airtel, other networks couldn’t offer Blackberry services. When that ended in 2006, it signed up Hutchison Essar (now Vodafone India) and RCom.

By the time it finished tying up with BSNL and Aircel (RIM now has nine carrier partners), it was already 2008 and the following year, Nokia and Samsung had started rolling out their smartphones. “RIM clearly underestimated the importance of direct marketing in a nation of over 1.1 billion people,” says a competitor. Certainly, Blackberry didn’t do any major advertising on its own — just some print campaigns — relying instead on the service provider to promote the product.

It’s only after 2009 that the company started talking to consumers about the features of Blackberry, especially the game-changing Blackberry Messenger (BBM). With the result, the message that Blackberry isn’t only for corporate executives on the go hasn’t trickled down yet. 

Sticking with service providers for so many years has also restricted Blackberry’s reach. It now has three national distributors and is present across 5,500 multi-brand retail points, but that’s still pitiful compared with Nokia’s 200,000 retail points and Samsung’s 100,000-plus. Routing complaints through service providers also slowed after-sales service. That’s now being speeded up, Dutt says. “We are changing it to become direct-to-customer, so that turnaround time is reduced,” he adds. 

There’s another strike against RIM — the lack of affordable phones. Gartner principal research analyst Anshul Gupta says RIM has done well in the recent past after it introduced the 8520 (a business phone priced at ₹8,500). But overall, RIM’s devices are more expensive than what’s available in the market — and while enterprise clients may not quibble over handset prices, it can be a deal-breaker in the consumer market.

Rival Samsung, for instance, has smartphones starting at ₹5,000, while lesser known brands such as Spice and Fly offer handsets with even lower price tags. Moreover, Frost & Sullivan’s Chauhan points out that future growth in the smartphones segment is expected from low-cost handsets. “Around 50% of overall smartphone shipments in 2017 are expected to be under ₹5,000.”

If that is indeed the case, RIM looks set to lose out. Dutt says that currently Blackberry devices start at ₹8,000-9,000 and new launches won’t be below that level. “Lower price segments have larger volumes,” he accepts. “Our competition plays in that segment. We are never going to be in the ₹5,000-6,000 segment, so the numbers are not comparable.”

Trying hard

As if it’s not bad enough that Blackberry will face increasing competition from low-priced handsets, it also has to contend with similarly priced but more feature-rich handsets from rival manufacturers. It doesn’t help that touchscreen phones are immensely popular at the moment and that’s a pain point for RIM. Blackberry touchscreen phones have all been disasters, with the only exception being the premium-priced Torch model. “Local apps, touch and affordable devices have been a challenge for RIM and it has been slow to address these issues,” agrees Gartner’s Gupta.

RIM is working on increasing its appeal in the consumer market. It’s working with service providers to launch affordable tariff plans to make the Blackberry more attractive to consumers. While initially, RIM didn’t have much say in tariffs given that it was tied to one partner, as more operators came on board, competition to attract more subscribers made them amenable to reducing rates. Compared with ₹1,000-plus entry-level tariff plans a few years ago, most operators now offer Blackberry plans at around ₹300 or so, with BBM thrown in for free. 

Then, in March, RIM announced a 26% cut in prices of most models and followed that up last month with the launch of the Blackberry 9220 in India, priced at ₹10,990. The handset comes loaded with the new 7.1 OS that allows users to take advantage of a 3G connection via Wi-Fi. It also has a dedicated BBM button and FM radio and offers free apps worth ₹2,500, all of which have been included to appeal to younger customers. The device doesn’t have independent 3G, though, which most analysts consider a fatal flaw in a newly-launched smartphone. 

The stumbling block, especially for the consumer market, has been apps — or the lack of them. RIM didn’t license its operating system to app developers, which meant it didn’t get third-party apps that are the driving force behind the Google and Apple app stores. Consequently, RIM’s App World has just over 70,000 apps, compared with 400,000 Android and over 500,000 offered at Apple’s app store.

RIM, however, doesn’t buy that argument. “It’s not the quantity of applications but their quality and the number of downloads that matter,” declares Sunil Lalwani, director of enterprise sales, RIM India. With BBM apps alone accounting for 20% of the daily downloads, RIM feels this will whet consumers’ appetite for more downloads. “We have segmented the enterprise market into large, mid and SME categories. We have 30,000 developers in India to create customised apps for corporate clients and there is huge demand for them,” he adds. 

Indeed, enterprise has been RIM’s forte and it serves 90% of the Fortune 500 companies globally, with 80% of these having an installed base of 500 or more devices. Now, the company is making a push toward mid-level and smaller enterprises, positioning itself as a productivity tool. This is the next big market for the company. It is now customising solutions for companies based on their requirements as RIM believes one size doesn’t fit all. Dutt is clear about RIM’s enterprise strategy. “There are corporate customers who don’t want to do capex. So we help them manage all devices on their networks. A whole bunch of solutions is being offered to ensure that the enterprise segment remains excited,” he says. 

 growing popularity of “bring your own device” (BYOD) is also proving to be both an opportunity and a challenge. The consumer and enterprise segments are converging as people prefer to use their personal devices — be it a laptop, tablet or mobile phone — for official work as well. Earlier, while RIM could sell devices in bulk to enterprises, high levels of attrition meant the handset was useless after an employee left.

Now, organisations are encouraging (sometimes, even reimbursing in part) their employees to buy their own device and the information technology departments install the necessary official applications needed for their use. RIM has created a number of enterprise solutions that help corporates manage security and other issues when dealing with employees’ personal devices. While it’s hopeful of cashing in on this opportunity given corporates’ familiarity with RIM, there’s also a danger with BYOD: Android and Apple phones are muscling into the enterprise segment, which has traditionally been Blackberry territory.

Meanwhile, RIM is also trying to strengthen its foothold in the tablet PC market. The Playbook was panned severely by critics and users when it was launched in September 2010. But in a special year-end offer last winter, RIM slashed prices by nearly half and while the company refuses to divulge sales figures, Lalwani claims RIM is out of stock on one Playbook model due to huge demand from enterprises. “However, I would say the tablet market is still nascent in India and will take some time to grow,” he adds. 

Certainly, making a dent in the tablet market won’t be easy. According to CyberMedia, nine vendors launched 16 new models just in March and April this year. “The market will very likely be driven by the success of adoption amongst first-time users such as students and frontline executives, particularly in the services sector,” says Tarun Pathak, analyst, telecom practice, CyberMedia Research. “This trend is likely to pick up as OEMs partner with telecom service providers to offer special data tariff plans and tie-up with content providers and app developers to introduce attractive, new flavours of tablets for the Indian consumer,” he adds. 

Lessons from a rival

Blackberry lost out to Apple and Android internationally because of its criminally slow reaction levels. It stuck to the status quo and refused to innovate, even when Apple’s sleek design and Android’s vibrant app community were taking their products ahead by leaps and bounds. 

Perhaps RIM needs to take a cue from Nokia, which is also losing out to Android and Apple, but is constantly adapting to changes needed. While Nokia was slow in entering the low-cost and dual-SIM segments, it finally did and improved market share in India. RIM too needs to shed its ‘premium’ price tag to go mass. “RIM needs to get young customers from India and China due to their sheer size. It can take a cue from Nokia,” says Naveen Mishra, lead analyst at CyberMedia Research. It also needs to ramp up its distribution network at breakneck speed to become as ubiquitous as Nokia. 

So far, RIM in India has escaped relatively unscathed from the devastation that’s struck the international operations. It remains to be seen whether it can stay that way. Dutt is certainly confident. “We run very profitable operations in India. We don’t need to make a comeback,” he declares. “We are already focused and just need to keep racing ahead.” What RIM has to do is ensure it races ahead faster than Nokia and Samsung.