Melancholy Mobile Multimedia

If a market is young and hot, logic tells us that it should escalate. But that hasn’t been the case with multimedia to the mobile. Hindering growth, say some researchers, is lackluster consumer enthusiasm, high costs associated with content  and the industry’s attempt to bring uniformity

to it with open digital rights management (DRM) standards.   Attempts to bring uniformity to it with open digital rights management standards are premature at this stage, according to a new study released by ABI Research.   The firm notes that the Open Mobile Alliance (OMA), an industry group made up of mobile operators, IT companies, wireless vendors and content providers, developed an open DRM standard for multimedia content distribution to mobile platforms, and chose MPEG LA to administer licensing.

The high prices set by MPEG LA precipitated lengthy negotiations with operators, and the resulting delay created an opportunity that was seized by proprietary DRM vendors, the firm said. Mobile operators such as Sprint, Verizon, Telus Mobility and the Vodafone subsidiary SFR have all deployed services using proprietary DRM solutions, ABI said, noting that Verizon uses Microsoft DRM for its V CAST; Sprint uses Groove Mobile's proprietary solution; Vodafone, while flirting with the OMA standard, has also used DRM from Secure Digital Container (SDC).

"This is a classic example of what not to do when trying to nurture a new market," said Vamsi Sistla, ABI Research's director of broadband and multimedia research. "It is misguided to pursue an open standard solution in a brand-new market. A better time is after a few years, when the market is disjointed, the competition has changed, and companies can collaborate to benefit from economies of scale.   “Right now, operators couldn't care less about economies of scale,” he continued. “They are focusing on their ability to monetize this trend and get their solutions to the market sooner than their competitors."

Sistla believes that operators don't want to get “bogged down” with licensing and interoperability issues, or compromises in functionality. "Any emerging technology should find its way into the market by the trial and error of multiple solutions," he said. "Early in a market's development, companies whose proprietary solutions don't rely on external integration are often more successful than those that must agree with other players in the sector," he remarked, offering Apple's iPod/iTunes vertical integration and 80 percent market share as an example.

ABI Research concluded that when more operators have entered the market and the services start to become commoditized, then the time will be right for the benefits that open DRM standards may bring.   Meanwhile, In-Stat, which is owned by the same parent company as Electronic News, expects the number of mobile phones with multimedia to double in the next two years. But, the firm cautions, consumer enthusiasm – the driver for real growth – isn’t there.   The Scottsdale, Ariz.-based firm reported that in spite of the phenomenal growth of dedicated MP3 players during 2005, user interest in having this capability within their wireless phone did not change over the same period, especially here in the United States.   Unit sales for MP3-capable phones in 2003 and in 2004 exceeded dedicated MP3 player sales. However, that changed in 2005 when global MP3 player shipments outpaced phones with MP3 capability by nearly two to one, In-Stat’s research showed.   Further, while the ability to play digital music on a handset was one of the more popular multimedia applications cited by respondents in an In-Stat survey of U.S. consumers, with just 9 percent expressing any interest, it is not considered a compelling feature to many, the high-tech market research firm reported.   "Subscribers in some global markets will slowly and grudgingly adopt the limitations of the current wireless multimedia marketplace, while other markets will mirror the Japanese market where not having multimedia capability in a mobile device is the exception," said Bill Hughes, In-Stat analyst. "Wider adoption of multimedia could come from giving users a taste of the service."   In spite of the lukewarm interest by consumers, the number of phones with multimedia capability will grow dramatically because of other business factors, the firm said.    In-Stat further found that the greatest interest for multimedia viewing in the U.S. consumer survey was for receiving real-time news, weather, sports and financial information. In-Stat concluded those willing to consider paying for such services would pay an extra $20 for the phone, but believed that $15 monthly was too much to pay for service delivery.   To that end, JupiterResearch has reported that 41 percent of mobile phone users are interested in some form of video service on their handsets. Indeed, the firm expects the growing demand for video will generate $501 million in revenues by 2010, up from $62 million in 2005.   The firm noted that adoption of the technology has been slow to take hold with only 2 percent of mobile phone users claiming a subscription. However, Jupiter said, 17 percent of mobile subscribers showed interest in watching “live” television on their cell phones while 11 percent indicated interest in short video clips.   “This consumer interest bodes well for the mobile industry as vendors use different business models to try and tap into this consumer demand,” said Julie Ask, research director at the firm. “The challenge is not interest but rather finding the correct mix of premium content and price points that is lacking in today’s offerings.”   Added said David Schatsky, senior VP of research at JupiterResearch: “Longer term adoption will depend more on business models and content offerings than on the technology or devices. Our research shows that there’s a strong consumer interest in consuming mobile video. Consumers are just not interested in paying large fees for mediocre content.”