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ECommerceTimes.com

M-Commerce Market on the Move, Part 1

By Andrew K. Burger
Jan 31, 2007 4:00 AM PT

As more phones and other small-form handheld devices get "smarter," so does the potential for people to use them more often, and for many varied and different purposes. The number of mobile cell phone subscribers worldwide surpassed 1 billion in 2006, and technological innovation continues apace as time to market for new products continues to shrink.

M-Commerce Market on the Move, Part 1

Telecom providers continue looking for ways to add premium data and value-added products and services to their networks.

Sprint-Nextel is moving forward with building the first nationwide WiMax broadband wireless network and the IEEE is on track to ratify its 802.11n broadband wireless networking standards in January 2008.

Apple and Intel, among others, have already announced that 802.11n equipment will be incorporated into their 2007 product lines.

Red Hot Technology

All these technological advances are further heating up the mobile telecoms and multimedia origination and distribution markets. Small-form OS, application software, memory and storage standards improvements continue to come from companies such as Adobe, Opera, Research In Motion and Symbian.

As with light and heat, they are attracting a bigger and broader cross-section of media, Internet technology and telecoms companies to the space -- increasingly powerful mobile handsets and devices come equipped with Internet access, GPS, digital cameras, streaming audio and video, and other capabilities.

The mobile entertainment market is opening wide while, at the same time, it offers artists more avenues to reach their audiences directly.

Mobile Music and Entertainment

In this increasingly competitive environment, mobile telecom providers must change the way they do business and cast a wider net in their search for value-added data and multimedia products and services.

Entertainment was the content of choice in the early days of television, and so it is today in the mobile telecoms and mobile, or m-commerce, space.

Juniper Research, in its "Mobile Entertainment Markets: Opportunities & Forecasts, 2006-2011" report, estimates that the global market for mobile entertainment products and services totaled US$17.3 billion in 2006 and will grow at a 35 percent cumulative annual growth rate, reaching $47 billion in 2009 and $76.9 billion in 2011.

While mobile music and infotainment -- mostly ringtones and wallpapers -- account for the largest portion of the mobile entertainment market today, Juniper senior consultant and report author Bruce Gibson forecasts that mobile TV will be the fastest growing product sector.

Mobile gambling, despite the recent crackdown in the United States, will be another fast-growing market segment, as will mobile gaming, particularly in the casual gamer niche.

Embracing Digital Technology

Grammy nominated jazz trumpeter, composer and budding Internet music entrepreneur Dave Douglas' recent Webcast and digital recording of a six-night, twelve-set performance at New York City's Jazz Standard is indicative of the new ways artists are marketing and selling their music using new digital distribution technologies.

When asked what prompted him to go independent and embrace digital technology, Douglas told the E-Commerce Times, "Quite honestly, I got tired of having to wait around for someone else's decision about what I could or could not do. And I think that the changes in technology have made that process obsolete.

"Everything is changing, and while of course there are still remnants of the old system in place, the relationship of artists to listeners is now closer than ever -- I can reach a large audience directly. And it's just getting started. As a music artist, it is incredibly exciting to be a part of that wave," he added.

The Next Wave

The Independent Online Distribution Alliance (IODA) is a leading independent digital music distributor and developer of digital distribution technology. Representing and distributing musical content for more than 3,500 labels and with more than 700,000 tracks in its catalog, "We are sort of a 'fifth major,'" Tim Mitchell, IODA's vice-president of marketing, told the E-Commerce Times.

Mitchell recounted how IODA started out in the mobile music market and how it has changed since.

"When we got started in the mobile market about two years ago, the focus was most certainly on ring tones, and primarily the 'monophonic' and 'polyphonic' varieties. ... 'True tones,' or 'master tones,' were just starting out, and certainly, the very top of the Billboard charts was all that was really selling," he said.

"There were a handful of companies that controlled access to the 'carrier decks,' or standard menus on phones where the majority of these tracks were sold," Mitchell continued. "These middle men are always referred to as 'aggregators,' but they are much different companies than IODA. They do not really represent the labels in a deep partnership like we do, and they certainly don't represent the labels to retailers like iTunes, Napster, Rhapsody or any online retailer.

"If anything, they are more like vendors to the carriers, and for a long time we viewed them as barriers or gatekeepers that simply added an additional layer -- while also taking a significant cut of the revenue.

"Our ability to work more closely with these partners on a marketing level -- and also to go around them when we see fit -- has been a big change that has helped us and our labels tremendously in the last year. The business is maturing now, and companies like us are focusing on content while companies who want to service the carrier are focusing on platforms and software.

"We think that this is a positive trend, and when we work with carriers directly, our labels and the music is better represented, and we also make our platform partners happy because we can integrate with them on the technology level well and keep their costs down."

With IODA's technological and commercial success allowing it to expand, Mitchell and IODA see its greater size as an asset. "That has created a lot of opportunities. We have the technology and marketing focus that the carriers are looking for, as they are often under-resourced and look to us for ideas and 'the next big thing,'" said Mitchell.

The Big Apple

Apple made a huge splash at the latest MacWorld Expo with the introduction of its iPhone, combining mobile voice communications and Internet data services with the iPod and iTunes digital music technology.

Not making as much of a splash, but significant nonetheless, was Apple's introduction of Apple iTV, its streaming Internet TV and video software and service, particularly given the meteoric rise of social networking and the potential for it to go mobile.

Taken together, the new product introductions will lead Apple and other PC software industry leaders, including Microsoft, to offer both fixed and wireless voice and data network services, as well as content across voice, data and multimedia channels.

"It's a natural move for Apple and one that's been widely anticipated for a long time. ... They've brought together digital music, mobile telephony and computing, and packaged them in one handheld device," Myk Willis, CTO and co-founder of mVisible Technologies, told the E-Commerce Times.

"Mobile operators are trying to be content providers but there are so many other more efficient and effective players in the Internet space. There's nothing groundbreaking [in the iPhone] and there are other devices out there that do the same thing. Apple has combined and applied its design and styling capabilities to its computing technology and will benefit from the cult of Apple -- their loyal user base -- which is really going to help," Willis noted.

That said, Willis believes that Apple will have to change some of its ways if it's committed in its current strategic direction. "I love them as a brand and I think they have an excellent understanding of human-technology interaction -- what people want and need from technology," he said. "But Apple's a very proprietary company. They have benefited and used the underdog status and image exceedingly well, but there's a hard limit and only so long until they play that out."

An Important Year

"The number of digital music-enabled mobile phones sold each month eclipses the total user base of iPods," Willis pointed out, adding, "There's been a lot of focus on TV and streaming video to mobile devices, but 2006 was an important year in terms of the ability to distribute digital music content to mobile devices via telecoms networks.

"We're interested in seeing DRM (digital rights management) disappear, and we're interested in device manufacturers selling unlocked -- and therefore not crippled -- phones direct to consumers, and we're interested in realistic billing options emerging for mobile content," in which the carrier doesn't take 50 percent of all transaction revenue, he said.

"I might add that this is one area in which Apple is certainly not innovating with the iPhone. Apple's control-freak tendencies line up pretty well with the history of the mobile industry," Willis claimed, adding that Apple will deliver a mobile device in a locked operating environment, tied artificially to a single mobile operator, which is not going to encourage other vendors to develop add-on products or services.

The former Cingular Wireless, now part of AT&T, isn't putting all its possible digital music eggs in one basket, however. It also has distribution agreements with Yahoo, Napster and eMusic. Subscribers pay about $10 to $15 a month to download unlimited music to their phones.

M-Commerce on the Move, Part 2


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