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In a hybrid form of entertainment that merges the dramatic appeal of TV with the interactiveness  of video games, P15 Studios has conceived of an iPhone app in which live actors can be controlled in TV show-like games. Sound outlandish? Hollywood has already imagined how this technology could go wrong in the upcoming action film, Gamer. As amazing as the concept sounds, it looks like P15 Studios' idea will get its start on the small screen -- the really small screen.

The downtown Birmingham-based firm plans to use iPhone apps (fancy tech jargon for applications) to debut its first game later this year. It's a cost-effective route for the nearly one-year-old start-up to show its idea is as good as it sounds.

"It's going to prove the new business model and advertising model we have," says Doug Kinnison, co-founder of P15 Studios.

Tech start-ups across Metro Detroit are creating a chain of cottage industries in iPhone app development, which in turn generates fresh revenue streams in a battered economy, new hires in a time of record unemployment, and expanded business opportunities for the region's emerging entrepreneurial class.

"The future of computers is mobile," says Prof. Elliot Soloway, who started teaching an instantly popular iPhone applications class this earlier year at the University of Michigan. "The way we learn inside and outside of school is through mobile computing. Every kid has a cell phone these days."

Small screen, big profits

P15 Studios' long-term plan is to create video games for major playing systems, like X-Box and Wii. Kinnison sees it as a new industry with huge potential for both his partners and his region. He expects the day will soon come where his firm has to employ hundreds of people to develop just one game.

But before he can start playing in the big employment leagues, his company has to score some hits in the minors. That's iPhone territory, but the profit potential is anything but small.

Apple's App Store houses more than 25,000 apps that range in price from free to $9.99. The downward price pressure from all of the competition drives the most popular price to the standard cost of a song on iTunes - 99 cents. In May the company logged its billionth app download. To say the technology has triggered a software gold rush would be an understatement.

It takes between four and five figures to create an iPhone app, although investing six figures into properly developing and marketing one is not uncommon. Kinnison likes to give the example that he has heard of apps bringing in $60,000 a month or even $1 million within six weeks. He thinks doing the same for his firm will give it the chance to prove its product, create a few more jobs and make a tidy profit.

"It's the same as the big stuff but it's done at a micro level," Kinnison says.

New revenue streams and avenues

Vectorform isn't exactly a start-up anymore, it just operates like one at times. The Royal Oak-based firm specializes in interactive software design and development for websites and multi-touch hardware, such as iPhones.

Its latest thing is harnessing the emerging power of the iPhone app market. The company has created 10 apps within the last year, for everything from auto manufacturers at the Auto Show to its own personal releases. An average of 3-4 of its employees are building them at any given time, with the ability to scale up quickly.

Two of the apps it made on its own are top sellers at the App Store. Its SurfaceDJ is in the Top 5 Paid-For apps for music, while MeetMe is in the Top 4 for navigation. This has provided another reliable revenue stream for the firm and solid ground for a few more Metro Detroit jobs.

Some might think iPhones and their apps are a fad and will be nothing but fond memories and paperweights within a couple of years. However, the people at Vectorform argue that Apple and the 40 million iPhone users around the world are committed to the technology. Besides, they don't think the mobile computing concept is going anywhere.

"Technology is something that is always evolving," says Markus Sheldon, an account manager for Vectorform. "We want to be up on the latest and greatest technologies out there."

The apps can also be used as a marketing tool for businesses with built-in audiences. Ghostly International, the Ann Arbor-based electronic and ambient music label, created a unique one for iPhones that uses a "mood wheel" to blend different colors. The idea is to set the color that matches the user's mood and the app will match a playlist of songs from Ghostly's catalogue that users can listen to free of charge, similar to Pandora.

This paves the way for users to buy songs if they so desire. In this case, Ghostly doesn't make money off retailing the application. However, it would use it to help extend its reach to its customers and bolster its music sales. That in turn helps solidify its brand and stay connected with its fans in an increasingly viral world.

"There needs to be a purpose," Sheldon says. "There needs to be a reason for people to use it besides 'it should be fun.' "

Entrepreneurial opportunism
 
Prof. Soloway's class might have been known as the iPhone apps class, but it was actually geared toward all platforms of smart phones. The most popular by far was the iPhone because it has such a proven market, but students also could design programs for Blackberry, Palm Pre and Google Android phones. These are considered unproven landscapes because the market for them hasn't taken off yet.

But these platforms do present an intriguing opportunity for tech entrepreneurs to get a quick start in the start-up game. Some firms will spends tens of thousands of dollars to create and roll out an iPhone app, with most going to hire iPhone app programmers and other marketing personnel. But programmers with the right skills need only to invest time in developing the code and following through on a viral marketing plan.

Soloway compares this time to when programmers were creating software and computer games on their kitchen tables and basements for the early versions of Windows. Now, the profit potential is unlike anything he has seen in his 30 years of teaching computer science.

"There has never been a time when a student can write a piece of programming and collect money on it in a short amount of time," Soloway says. "In the past there was always an intermediary that needed to be paid."

Gaurav Bhatnagar can attest to this. The 25-year-old Okemos native recently co-founded his own iPhone app-based start-up - Troubadour Mobile, which operates out of Ann Arbor's student-run TechArb business incubator. Bhatnagar and his partners (all recent graduates of the University of Michigan School of Information) respect the power of web-based businesses but see apps as having almost limitless potential for people without much capital.

"In a day or two you could build a small app and make it do something cool," Bhatnagar says. "It's pretty easy."

And pretty intriguing to a generation that was practically raised on mobile communications, starting with the cordless phone and evolving to cell phones.

"The mobile computer revolution hasn't even begun yet," Soloway says. "We have no idea what mobile computers will be like in five years. We're at the tip of the iceberg."


Jon Zemke is the News Editor for metromode. His favorite (and most addictive) iPhone app is a free product developed by entrepreneurial students at the University of Michigan - DoGood.

Photos:

iPhone

Doug Kinnison, co-founder of P15 Studios

Produce your own music with Vecorforms Surface DJ

Markus Sheldon, an account manager for Vectorform

Not yet released, GO

Prof. Elliot Soloway - photo Dave Lewinski

Photographs by Detroit Photographer Marvin Shaouni Marvin Shaouni is the Managing Photographer for Metromode & Model D Contact Marvin here

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