Change is the order of the day in the m-commerce market. New smartphones and other handheld digital devices are hitting the marketplace in a torrent, as media convergence accelerates the drive toward “quad play” devices and network services. The telecom and media industries are undergoing a fundamental restructuring, with new market entrants that are focused on bridging the gap between content origination and network distribution as the primary agents of change.
Part 1 of this three-part series discusses how advances in the delivery of multimedia content to mobile devices are spurring a revolution in digital audio and video distribution and rights management.
Part 2 outlines the revolution taking place among telecom, cable, computing and media companies as they battle for a share of the fast-growing mobile voice, data and multimedia markets.
Device Profusion
It is no easy task to keep up with the explosion in the number of mobile handsets and handheld devices in the marketplace, as well as agreements with carriers and technology-integration issues among carriers, platforms, partners and suppliers.
“The device list is really too numerous to count and too fluid to track. Fortunately for us, we don’t really have to keep track of devices as it is really the job of the carriers, platform providers, and mobile content providers to track devices and develop to those specs,” Tim Mitchell, vice-president of marketing at IODA (International Online Distribution Alliance), told the E-Commerce Times.
“It gets pretty insane. For example, I’ve heard that Vodafone tries to support almost all the handsets it can and therefore requires almost 100 file formats. This doesn’t mean that the encoding and delivery from our side is a walk in the park, and it’s not unusual for us to have to deliver seven or eight formats per track to some partners,” he said.
Network Operators
“As far as networks go, I think it makes sense to separate ring tone channels from full-track, as I feel the products offerings are quite distinct,” Mitchell continued.
“With regards to ring tones, we have access to all carriers in the U.S. via some direct carrier relationships and mostly ‘mobile aggregator’ relationships with companies like m-Qube (Verisign), Moderati, Infospace, and Zingy,” he added.
For full-track distribution in the U.S., IODA has direct carrier relationships with Sprint and Verizon, as well as MVNOs (mobile virtual network operators) including Boost, Ampd, and Helio.
IODA on Jan. 22 announced that it is expanding into Europe with the opening of IODA UK, which will serve as its European base of operations.
The move came about as a result of IODA’s acquisition of European digital music distributor Uploader. Two days later, it announced a partnership with France’s Harmonia Mundi, a leading label and distributor of classical, world and jazz recordings throughout Europe. Soon it will be launching its service in Canada, having signed agreements with the country’s three largest carriers.
“Europe is getting going now, and we will soon have access to all of the biggest carriers in Europe — 3, O2, Orange, SFR, and Vodafone, and many of the smaller players for full-track. We now have a center of European operations with our recent acquisition of Uploader, and Europe is our next area of focus,” Mitchell reported.
While ring tones have been the first major commercial success in the m-ommerce market, they are the thin end of a wedge. “We are much more focused on full-track in both markets, as we see this as a much bigger opportunity for independent music, and the revenue numbers are certainly supporting this strategy,” he noted.
IODA, mVisible and a growing list of smaller and larger market participants — Apple and Microsoft included — also have their long-range sights set on the mobile TV and video market.
“IODA is experimenting with video on Sprint and soon on a couple of major U.S. MVNOs (mobile virtual network operators), as well as some European operators, as well. We view this as a new market, and it will be interesting to see how well it does for independent content — we certainly are hopeful,” Mitchell commented.
Exciting Times
“These are exciting times. On a daily basis, there’s opportunity everywhere you look. Probably our biggest challenge is maintaining focus. There are a dozen different things that we could be doing that nobody else is doing,” mVisible’s co-founder and CTO Myk Willis told the E-Commerce Times.
For all the promise and potential rewards, there are any number of challenges still to be met and kinks to be worked out in the m-commerce market space. Digital distribution rights management continues to be a contentious and divisive force, and DRM technology is awkward and cumbersome.
Major telecom providers continue to resist and restrict opening up their networks to content from third-party distributors and aggregators, although this is changing.
“In general, the ‘access to carrier’ issue is starting to become less of an issue as we grow and our ability to work with carriers is proven. And now, the real challenge is to drive marketing efforts that will not only help our partners surface relevant content, but also drive demand through the mobile channel for foreign and/or lesser-known artists. If we can accomplish this, even on a small scale, we believe it will be a big win for independents, the operators and their customers,” Mitchell commented.
Telecoms operators are also locked into their 3G and evolving 4G cellular investments, which are increasingly being challenged by Internet-based wireless technology.
Then there is the need to sort out, standardize and roll out new digital wireless voice, data and multimedia network access and distribution technologies, as well as m-commerce payment and settlement standards.
Creative Disruption
“Lack of standards is the biggest obstacle, and in the U.S. the lack of network speed is a big issue. WiMAX (Worldwide Interoperability for Microwave Access), VoWLAN (Voice over WLAN) and other technologies that combine mobile networks with WLAN-based broadband networks could have a huge impact,” Mitchell said.
“For one thing, they might release some of the huge margins — 40 percent to 50 percent — that the carriers hold onto, and for another, they may enable higher quality content and better streaming experiences. From our perspective, standards are a good thing, as then innovation on the content side can really take off, and we are already seeing a lot of phones with WiFi capability — I just got one myself.”
“Digital computing and telecommunications are really proving to be democratizing and disruptive technologies … Distribution has become essentially free,” mVisible’s Willis stated. “The flip side is that I think there are a lot of people who aren’t going to make it through.
“Telecom has always been a world where the big service providers have been able to control absolutely everything. They’re now being pushed and pulled and forced to play in the Internet space, which, in stark contrast, has been a relatively wide open field. That said, there’s still a lot of life still left in traditional telecom space. Ironically, however, it’s in their very basic features, for the most part,” Willis noted.
A Market in Transition
“We’re still very much in a transitional phase. There are all types of technological applications thrashing around,” Willis continued. “The technological capabilities have outrun end user comfort levels and the ability to design suitable user interfaces. It’s not just a matter of replicating a PC in a small form factor. People don’t necessarily want to use their cell-mobile phone for their music player or as a PC. I believe that it’s a UI issue and that it will eventually be resolved.”
In the Juniper Research report, senior consultant and report author Bruce Gibson lists user experience and confidence, network and handset limitations, pricing, digital rights, optimization and localization of content, and complex delivery chains as constraints on mobile entertainment market growth.
Yet, the potential remains and appears ready to be realized. There are tremendous revenue opportunities for all value chain participants in mobile entertainment over the next few years.
Busy lifestyles in both developed and developing markets means that consumers will have to grab entertainment and relaxation as and when they can.
“Growing disposable incomes, next generation mobile technology and the metamorphosis of the mobile handset into a multifunction communications and entertainment device will enable them to achieve this in a way hitherto thought impossible,” Gibson wrote in his report for Juniper Research.
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