Can MMS -- as predicted by many in the industry -- produce the knockout blow that will fuel greater revenues and
opportunities for all, or will it be marginalised as a stepping stone to 3G services. Terry Ernest-Jones investigates
$161.3bn in 2009, by which time it will be well-established as a day-to-day feature of the mobile mass market. Yet so far, MMS has failed to deliver on promise for many of its users and its potential to enrich mobile communications has not been realised. It has recently passed through the early adopter phase, and the MMS industry continues to wrestle with problems such as handset compatibility, digital rights management, and pricing models. However, the major opportunity, of receiving and sending multimedia messages on the move -- as easily as with SMS -- gets closer by the month.
MMS brings multimedia features such as photos, sound, video, rich text or interactive applications to mobile messaging. This can take the form of a message sent between mobile phone users ('peer-to-peer') or, of equal importance, a message sent from a third party to a user ('server-to-mobile'). An MMS message can be compared with a scaled-down PowerPoint presentation, able to contain a variety of media. By contrast, Short Messaging Service (SMS) -- which has paved the way for MMS -- only allows basic text-messaging of up to 160 characters.
Technically speaking, MMS originates from mobile messaging standards defined by the Third Generation Partnership Project (3GPP) and the WAP Forum (which has since merged into the 'Open Mobile Alliance'). It has only really been up and running for about three years. Amongst the countries where uptake is strongest are Japan, South Korea, Germany and the Nordic region. The USA is less developed, reflecting the general lower mobile handset penetration in the region. In between are countries such as the UK, displaying roughly average MMS usage levels: even by the end of the first quarter 2004, out of a total of 47.5 million subscribers to the four main UK mobile networks, 11.3 MMS active devices were registered, according to the Mobile Data Association. This gives an MMS penetration rate of 24 per cent.
MMS requires special handsets with colour screens and, usually, built-in cameras. When the first Juniper Research report on MMS appeared in 2002, there were just two MMS phone models. Now there are hundreds. They have already brought in significant revenues for the leading MMS handset suppliers such as NEC, Nokia, Samsung, Sony-Ericsson, Panasonic and LG Electronics. But for operators urgently looking for new revenue sources, and other suppliers in the value chain, MMS offers the chance to build on new consumer behaviour in messaging -- for example linking audience participation into digital TV programmes -- driving new data revenues and raising ARPU, as well as handset replacement rates.
Lifting the barriers
Whilst offering a leap in mobile phone usage and appeal, it must be emphasised that until now, MMS has also been a frustration for large numbers of users, even for basic functions such as exchanging photos between mobiles. However, many of the compatibility and interoperability obstacles that have menaced MMS will be ironed out over the next two years, allowing a freer flow of multimedia messages, approaching the level of today's SMS. A major advantage for MMS is that, following in the wake of SMS, it can slot into customers' existing mobile usage habits. The downside is that user expectations have been set to require the same standard of service, and smooth operation, as they get from SMS.
Fortunately for the MMS industry, users do however expect to pay for mobile services. (This is not by any means the case with, say, the Internet.) MMS presents a large revenue opportunity, not only in providing enhanced peer-to-peer messaging, but also content and application-based services. As yet few suppliers are making any money out of it. But MMS provides opportunities to sell a range of enabling technologies. This will not be realised until operators and all other suppliers in the industry a) understand the dynamics of the value-chain, b) adhere to industry standards for interoperability, and c) fine tune their infrastructure needed to exploit MMS.
The MMS value-chain
As MMS carries multimedia into the mobile telecommunications market, a new range of suppliers have been drawn to the mobile channel to reach a wider client base. Just as the web has linked the IT and media markets, MMS is bringing content providers and application developers in touch with mobile operators. There are several instances where these players are working in close co-operation to create a multimedia user experience, deliver attractive services, and provide end-to-end solutions that stimulate the market and create new needs.
Ease of use and intuitive interfaces are fundamental requirements for end-users -- neither of which are as yet properly addressed by the MMS industry. If, say, a young teenager is in a clothes store and wants to get the OK from his/her parent to buy an article of clothing via an MMS picture, the operation must be transparent and quick. Minutes spent overcoming the handset's technical hurdles in a busy clothes store will defeat the purpose of this and other useful applications.
From the mobile end-user's perspective, MMS involves a radical shift: in effect moving the focus of their attention from the ear to the eye. As so often with technology innovations, end-users are neglected as the key element in the value-chain, whilst the industry races ahead with 'push'. So far as MMS is concerned, the youth market is the main driver -- in fact some studies say that most MMS buying activity is seen amongst 15 to 17 year olds. Each age group needs to be taken into account -- there is a large mobile population of people aged 60+. Messages sent to them of, for example, grandchildren's birthdays, should not be ignored under the misconception that MMS is 'youth only'.
A feature of young people's lives today which is in MMS' favour is that they record the details of their lives online a lot, and both sexes have a stronger urge than in previous times to share their experiences with friends.
Taking the UK as an average, around 25 per cent of handsets are MMS-enabled. Yet most young users of MMS phones today regard it -- initially at least -- as a disappointment. Typically, initial efforts to send photos to friends fail. Tales abound of handset makers blaming operators and vice-versa when frustrated users contact help centres to overcome problems. MMS represents an investment for end-users, who buy an MMS-capable handset -- costing up to $500 plus services. The mass market will only be willing to make this investment if users can derive real value out of using MMS. There are several compelling value propositions linked to MMS at its most basic level:
* MMS handsets in themselves add kudos with their basic features of colour screens and polyphonic ringtones.
* MMS offers the possibility to enhance the popular peer-to-peer messaging with the addition of photos and sound. More importantly, pictures and sound allow the user to add personality and emotional content to the messaging experience, and share this with friends.
* MMS information and entertainment services promise unrivalled personalisation possibilities, and will enable users to access content anytime, anywhere.
Operators play a pivotal role in the value-chain. As such, they must focus closely on the end-user's needs and guide their business partners to help them develop offers that will satisfy end-users. (Presently, this is often the other way round.) This requires more than simply supplying 'jazzed-up' SMS messages; operators need to reach into new models such as T-Mobile's for the Euro 2004 football tournament. This scheme included MMS picture messages sent at intervals during each of a team's matches -- the whole package costing $4.50 per team for picture, or $10 for video, updates. (T-Mobile was contacted for this report to state the result of the programme, but declined to give figures. Instead it commented that it was "very pleased with both the level of uptake and also the technical performance of the delivery of the alert services.")
Wide range of services
To make their MMS offer complete, operators are having to provide a wide range of services, including the potential to create and store messages, and a wide choice of content and applications. In addition to these core services, operators are also continuing to add infrastructure to ensure that the value-chain functions properly. It's still early days though. For example Virgin Mobile only launched picture messaging in July 2004. The industry is still wrestling hard with how to adapt end-user billing systems to MMS messages, not to mention the task of ensuring that MMS content flows seamlessly from the original provider to the end-user. Up-stream, it is also their role to ensure that third-party providers collect revenue, as it is they who manage the end-user billing.
The rewards that operators can reap from successful implementation of MMS are huge. MMS provides a much needed boost in ARPU, as well as a justification to investments in General Packet Radio Services (GPRS) and Third Generation (3G) networks and fosters strong customer loyalty. (3G cost them around $120 billion in licences alone.) Efforts are underway to solve interoperability problems, but there is still a long way to go. "Operators have worked hard in previous months [on interoperability]," says Sandy Ryrie, messaging chief with operator O2. "We want to bring the same level of confidence to MMS as there is in SMS."
Generally today users are introduced to MMS services, whether they have specified it or not, simply by upgrading their handset. A wider range of MMS-capable devices is beginning to appear, catering to the needs of different market segments, from the prepaid youth segment to the high-end business user. For manufacturers, MMS presents a major opportunity.
Megapixel cameras are raising the quality of images, but generally cannot as yet be handled adequately by operators. Meanwhile, the handset is turning into something of a Swiss Army Knife, and some executives, such as the former technical director for Symbian, Simon East, have branched out to focus on the photo printing and image quality of MMS phones. His company Cognima aims to provide a 'single key press' for printing from phones.
Much of the effectiveness of MMS messaging today depends a) on how new a handset is and b) if the vendor has followed internationally agreed standards to ensure interworking. Meanwhile, following the classic pattern for new technology devices, the emphasis is on launching handsets with dazzling features such as video cameras, megapixel, 180 degree swivel lenses, 4x zoom 265,000 colour screens, image editing features -- in a wide variety of inventive, slick designs, and weighing from around 85gm.
elecommunications software vendors provide the all-important MMS Centre (MMSC): the server that manages all MMS message flows within an operator's network, and handles addressing, filtering, and temporary message storage. (WAP then carries the MMS message from the MMSC to the mobile.) Operators are continuing to invest significantly in infrastructure for MMS, and there is a growing industry in supplying it with companies such as LogicaCMG, Comverse, Nokia, Sema, Ericsson, Motorola and Alcatel supplying them. Managing the sheer volume of information that flows through is already a challenge, but more importantly, MMSCs need to be able to deal with a host of different formats and profiles. Content usually needs to be altered before presentation on the receiver's phone.
One of the MMSC's most useful functions today, once a message has been received, is to discover the configuration of the handset to which it is being sent, and adapt the format of the message so it can be accepted by that equipment. Even video messages can be adapted so they can be received if the recipient doesn't have video handset.
Certain infrastructure components are required to manage the store and forward functions of MMS. MMSCs have to connect into other network components, and a network must also be WAP-enabled and at least capable of handling GPRS. Apart from the MMSC, there are other infrastructure elements that must be implemented in order to offer effective MMS services:
* End-user billing adapted to the nature of MMS messages.
* Inter-operator billing adapted to the nature of MMS to deal with cross-networks messages and roaming.
* Revenue sharing mechanisms to allow the automated redistribution of revenues across the content and applications value-chain.
* Digital Rights Management solutions that can identify copyright-protected content in Peer-to-Peer messages.
* Security to ensure that valuable content is protected.
* Application and content gateways to allow third parties to link into the MMSC.
There is a further industry supplying MMSCs. TCS (TeleCommunication Systems) for instance provides messaging services for global operators. It doesn't sell MMSCs but has enabling technologies to enhance them -- such as providing a single domain for MMS.
MMSCs are not used only by large operators. For instance, in June 2004 Comverse announced its 'Compact MMSC', an entry-level solution for smaller wireless operators. Compact MMSC had been recently deployed by two operators in Asia.
MMS represents a new channel to market for information and content providers. Unlike the Internet or WAP, MMS provides a clear revenue opportunity for media suppliers, who can justify claiming a share of the traffic revenues that operators collect from end-users. As the market matures and billing structures evolve, they will be able to provide their services directly to the market, potentially using operators only as distributors, for example for a 'joke of the day' service.
A wide range of content types can prove effective over the MMS bearer, but content must be created specifically for this new channel in order to be successful -- taking into account the effect of new user behaviour as usage evolves. MMS as a distribution channel is superior to traditional channels in two ways: it offers the possibility to create finely personalised content, and can be accessed by people on the move.
MMS is also a compelling advertising channel. It enables the building of highly targeted campaigns, and the communication of clear messages directly into the hands of the intended recipient. MMS will also be an extremely effective conveyor for 'viral' marketing campaigns.
It is quite possible that the usage of MMS to supply third party content to the phone, rather than peer-to-peer messaging, will eventually steer the market. Many involved with the MMS industry believe that MMS could ultimately be driven by major events -- sporting or otherwise. Besides, it is the ideal platform for instant updates and alerts on events of special interest, which can then be forwarded to friends.
MMS enables the interaction between mobile handsets and networked servers. The varieties of ways to translate these interactions into concrete applications, that provide value to the market, are numerous. In the consumer market, MMS can support TV quizzes, polls and eventually video games. Operators will be eager to offer such applications, as they generate repetitive traffic and create customer satisfaction. Content providers and advertisers are also interested in providing such applications as marketing tools. On the business side, corporate applications like ERP or CRM systems can use MMS to develop a mobile extension and reach remote and mobile workers, providing them with a permanent link to their company and customer databases or e-mail.
Attractive and compelling content, rather than exotic handset designs and features will be the factor that ultimately drives MMS, though. SMS was the mobile success story of the 1990s, and the jury is out on whether MMS will turn out to be the success story of the present decade. Most likely the main role of MMS will be as a stepping-stone for multimedia applications and services that will drive 3G. Either way, video is next the step -- besides, it's a natural progression to what MMS does best: 'sharing the moment'.
The main focus is on consumers, who undoubtedly will drive the MMS market in the near future. There is more to MMS, though, than multimedia 'infotainment' for consumers. There is also the possibility of developing interactive mobile business communications and applications. Handset manufacturers are well aware of this, so that, for instance, the Siemens CX65 business user mobile launched in the summer if 2004 comes not only with a digital stills camera, but also video, taking clips of up to 15 seconds. Indeed, business use of MMS technologies will become a $64.1bn industry by 2009.
Terry Ernest-Jones is an Associate Consultant with Juniper Research www.juniperresearch.com