Exclusivity - The option to take when it’s the only one you have

First, it is important to state the obvious. Virtually no manufacturer of any consumer product - especially one needing every possible sale that they can get - would ever purposely limit their own distribution. Certainly there are examples of deliberate channel compression, but only in instances where a manufacturer is coming from a strong position, and is doing so for market positioning (i.e. going upscale in the marketplace).

So, why do we see Nokia today announcing a new flagship product that will only be available in the US through AT&T? As noted above, this type of decision isn’t made with the understanding that is is the best strategy, rather it is made when it is the only option at hand.

Today, we see the wireless market dominated by two phone models - the iPhone and the Samsung Galaxy S. Both of these products are sold in essentially the same configuration across all major wireless operators. Meanwhile, less popular models (meaning virtually every other phone) are usually only available through a single carrier - or only available in greatly customized form across two or more channels.

Why is this the case? Because for any retailer of any product, exclusive is ALWAYS better. With an exclusive product, you don’t have to deal with pesky issues like price comparisons. And the issue is even more pronounced for a wireless operator, who risks losing a customer for years if they aren’t offering the phone that consumers desire at the time that they want it. While wireless operators would undoubtedly prefer a cable company model - one cable box option, take it or leave it - the nature of the wireless phone makes that a non feasible strategy. (When was the last time you met a Scientific Atlanta fanboy?)

The Galaxy S and iPhone are devices that have enough consumer preference to mean that a significant number of consumers could defect if that particular model is unavailable. This puts the manufacturer in a relative position of strength to get widespread, undifferentiated distribution.

But since no other phone has this kind of cachet, an operator is making a bet that there might be just enough interest to gain a few additional subscribers at the cost of rival operators to make taking on another device a good risk. But only as an exclusive, where they are the only destination for that phone. If that device were available among multiple carriers, the moderate interest would dilute demand too much to make adding the SKU a good risk. And the potential for that phone not being available on their network to drive substantial numbers of subscribers away is virtually nil. In short, the carrier is in the relative position of strength, and can demand the more desired exclusivity.

Today, only a very few products besides the iPhone and Galaxy S enjoy cross carrier availability - the HTC One and Moto X being the prime examples. However, with neither of these devices tearing up the charts, it is more than likely that this is the last hurrah for these devices as cross carrier products. Expect to see following generations either released as exclusives, or at best, only available in heavily carrier customized form.

When you see a phone released as a carrier exclusive, don’t think that this is the case because the manufacturer believes that it is the best option, understand that it was likely the only option.