Driving MMS Demand
By Steve Wallage, Thu Oct 10 00:00:00 GMT 2002

Aggressive pricing is pushing MMS forward but the content and applications need to follow to create meaningful 2003 revenues.


MMS is suddenly very hot. According to EMC, 46 commercial MMS offerings were in operation by October 1 in Europe and Asia. The 'role model', Japanese operator J-Phone, launched its Sha-mail service based on terminals which have built-in cameras, over a year ago. It now has four million subscribers. More then half of new subscribers now opt for Sha-mail.

In Hong Kong, more than 50% of CSL's customers buying MMS-enabled handsets are using the service. This might not sound too impressive but compare this with figures from UK retailer Carphone Warehouse, which recently reported that less than 1% of customers buying GPRS handsets signed up for GPRS services.

In Europe, TIM in Italy has sold more than 250,000 MMS-enabled handset. During July and August, when it ran a promotion offering free MMS messages, more than one million were sent.

Operators are desperately keen to show that the MMS model 'works', and therefore that the mobile data and 3G models work. For some, this has meant a real drive to create a market this year and have a 'MMS Xmas'. This has been particularly true in the UK market with widespread media advertising, and large handset subsidies. Users taking a yearly MMS contract can already buy MMS-enabled handsets for under 250. Orange has expressed hopes that it will be able to offer its cheapest pre-paid MMS handset at around 150 by Christmas. Other operators have tried to move away from such large subsidies. For example, although TIM will sell six MMS handsets by Xmas, the cheapest will still be around 500.

The real driver for MMS will be creating compelling applications.

Content

Most early MMS users will not have built-in cameras, and will need strong content availability to encourage the usage of MMS. There are some promising signs that operators have put thought into this area. For example, O2 launched MMS with content partners such as Arsenal and Bayer Leverkusen football clubs, Hallmark, Ringtones Online and Warner Bros.

Content partners need to be incentivized, and Orange has suggested that it will offer up to 80% of revenues to content providers. The European i-mode model of around 85% to content providers, can set a strong precedent in encouraging operators not to be too greedy.

Of the one million messages sent on the TIM network in July and August, only 10% were person to person - in fact, early indicators suggest that users do not see MMS as a replacement for SMS, which is far more clearly positioned for such communication. Application to person messages comprised 80% of the total, and 10% were Internet downloads.

To drive the development of MMS applications, Italian operator WIND, for example, has launched a competition among software developers. The final winners will be announced at the SMAU telecoms conference and exhibition in October.

The competition has attracted over 300 entrants. WIND has selected a shortlist of 20 finalists, which provide a good indication of the sort of MMS applications that are and will be developed. Of the twenty, seven are games, two are viral postcards, two are traffic and weather information, and two are community applications. A key theme of entrants is around entertainment and information, although within these categories there is a very wide array of applications.

Two key concerns for operators will be DRM (digital rights management) and control of the value chain. DRM can be a minefield and the boundaries of responsibility are often unclear for example, if an operator breaches copyright by transmitting images from a third party, are they responsible?

The operators are also concerned that the real winners from MMS content could be third party providers, and potentially virtual operators and portals. The operators are still very well-placed to retain a strong position in the market, but need to show far better understanding of the needs of the non-voice market.

Consumer Applications

The WIND developer competition illustrates some of the directions of the MMS content market. As the market evolves from simple images, new games and information services using MMS will become widely available. Applications will vary by country, not just because of cultural differences but to reflect differences in tariffs. For example, in markets where bundled monthly services allow a high number of MMS per month (such as the UK), then interactive applications can be more attractive.

Two other key drivers will be advertisers and the sex industry. Many advertisers have become wary of the mobile advertising market given the wider downturn in advertising and its unproven nature, but MMS is immediately attractive. Although the advertising industry can wait until there is wider take up of MMS, it is keen to try new approaches such as interactive games and sponsorship using MMS.

For the sex industry, MMS offers fairly obvious attractions. Indeed, some of the entrants into the WIND developer competition, came from this part of the market.

Business Applications

Although, there is no doubt that MMS will be driven by the youth market and typical; early adopters, there have been some indications that business markets could be targetted. Examples include sending maps to salespeople, images for the medical profession, stock trading charts for investors, and sending photos for field engineers. One UK housing estate agency is evaluating equipping all its field personnel with MMS handsets equipped with cameras. This would enable them to instantly send pictures of houses back to their offices, and also to send images to suitably equipped customers. The business case and payback for such applications are often intangible, but such MMS users can clearly save time and offer a differentiated service.

In Summary

Person to person communications markets need a mass market to develop. As the old joke went, its no use being the only person with a fax machine. This typically translates into at least 25% of the market.

MMS does not need a mass market to work for the operators. The TIM statistics show only 10% of messages were person to person.

There are signs that MMS is already having a healthy effect on the handset upgrade market. Scandinavian retailers reported over the summer that they could have sold twice as many MMS handsets if stocks were available. UK retailer Carphone Warehouse recently reported that 56% of mobile handsets sold by the firm in September were priced over 160, compared with around 27% in April. Although price hikes and color screens also impacted the figures, Carphone Warehouse suggested the demand for MMS was also a major factor.

The idea of a MMS Xmas in 2002 is still a bit premature. However, 2003 is now looking like the time when MMS can make a serious impact, providing such issues as content, interoperability and handset availability and prices are resolved. Content developers and partners are working hard to overcome the first issue. The second issue will be resolved in 2003 with operator agreements and an acceleration of the standards work. The third issue is also being overcome, with Nokia suggesting 50% of its handsets will be MMS-enabled by the end of 2002.

At the recent conference of investment analysts Schroder Salomon Smith Barney (SSSB), of the mobile operators only Mobistar believed they would have to wait until 2004 for the revenue impact from MMS. This was attributed to the banning of handset subsidies in Belgium, and thus high initial prices deterring early adopters.

MMS can be a 2003 phenomenon.

Steve Wallage works and writes for the451. Steve has more than 13 years of experience as a technology analyst specializing in telecommunications.