The first is the evolution of the handset from a dedicated device to an open platform, lead by the iPhone market launch and Googleâ€™s new Android initiative. The second is the movement of internet video into the main stream, as video sites move from driving traffic to driving monetization.
The Handset as a Platform
2007 marked the start of a transition of mobile handsets into open platforms. The iPhone initiated a new handset market dynamic. Googleâ€™s Android and a rumored Java-based OS are the next elements of a developing trend. Motorola taking 50 percent stake in UIQ, a software platform based upon Symbian OS, cements the trend.
Essentially, we are seeing the rise of a new class of mobile devices that are application-centric with voice functionality. These devices are internet browsers, music players, text messengers, and e-mail devices firstâ€¦ and they still make voice calls. Operators such as Verizon Wireless are responding to the coming explosion of this product class and have embraced it by opening their networks. New market combatants such as Intel see this as opening to penetrate wireless with a new class of products as well.
The result is that 2007 marks an inflection point in the handset market as handsets migrate towards open-platforms. Handsets are a market of over 1.1 billion units and dominated by the top five players who collectively control 82% of the market. Yet the market is far from stagnant and becoming less so. As data services emerge to drive the mobile market, they are being accompanied by new competitors and new business models. Video and multimedia are among the key weapons in the battle, as feature rich multimedia handsets approach 300 million units.
â€œ2008 will see heightened battle for control of the platforms and business models,â€ according to Frank Dickson, Chief Research officer for MultiMedia Intelligence. â€œCompanies like Nokia and Apple will pull at the operators, trying to capture more of the data, content and application revenue for themselves. Open platforms like Android will drive the mobile network to open-up like the internet. Meanwhile, mobile operators will try to maintain their position at the top of the mobile food chain as they struggle to maximize the returns on infrastructure investment and not be relegated to a mere bandwidth provider.â€
Internet Video Goes Mainstream as Advertising Monetizes Content
2007 saw NBC cancelling its long-term contract with iTunes. With NBC comprising about 40% of iTunes video sales, this would seem to be a major issue. However, the market for internet video electronic sell through is just not that big. In fact, given the broader opportunity, NBC seems to consider iTunes a rounding error as it pushes forward with advertising-driven internet business models. Clearly, the Writers Guild of America sees the potential as it hits the picket lines over long tail reoccurring revenue.
The fact remains that advertising dominates video monetization globally, and advertising is now beginning to dominate internet business models. The internet video market is embracing advertising as social networking and user generated content sites paved the way, moving from â€œland grabâ€ to monetization. Media companies, experimenting across a variety of distribution scenarios and business models, are using their internet offerings to drive discovery, engagement and community surrounding their TV network programming. They are also trying to avoid enabling any single entity, say Apple, from dominating their fortunes. Meanwhile, their familiar content monetization method, advertising, is coming to the forefront. MMI predicts US Internet video advertising will reach nearly $1.6B in 2008, grabbing a larger share of the overall $24 billion in total US internet advertising.
â€œSocial networking and user generated content sites are becoming a vital part of the media ecosystem, but are still challenged in controlling copyrighted content,â€ according to Mark Kirstein, President of MultiMedia Intelligence. â€œThese sites are now moving to the monetization stage. 2008 will see increased cooperation among the media companies and internet sites. Fingerprinting and digital watermarking are key technologies these companies are using to monetize non-linear distribution of copyrighted content.â€
Internet video is impacting the very foundation of the internet, ushering in what Cisco describes as the Exobyte Era. An exobyte is equal to five times the size of all the printed matter in the history of the world. By 2001, there will be 30 exobytes worth of network traffic on a monthly basis.
These macro trends come from MultiMedia Intelligenceâ€™s recent research:
â€œWanted: Multimedia Handsetsâ€”Consumer Desires Meet Operators ARPU Needsâ€ provides research, analysis and forecasts for multimedia handsets and handsets with multimedia specific features.
â€œAdvertising & Technology Collide: Semiconductor Companies, Technology Providers, Media Companies and Ad Agencies Partner to Move from Disruption to Monetization,â€ examines the impact of new technologies on the advertising industry, and the advertising opportunity enabling advertising.
â€œBeyond Traditional DRM: Moving to Digital Watermarking & Fingerprinting in Media Monetizationâ€ provides research, analysis and forecasts for key Fingerprinting and DWM applications and technologies.