Wireless industry ready to deliver multimedia future

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It is now five years since wireless operators worked themselves into a bidding frenzy that resulted in them paying billions of dollars, pounds and euros for third-generation radio spectrum licences they hoped would allow them to launch a multimedia revolution on the humble mobile phone.

The plan was simple: load up the extra bandwidth with television, video, music, games and all manner of other wonderful content and their grateful customers would drive up their revenues when they paid in their droves to buy it.

By and large, however, the paying public – in Europe and North America at least – has remained resolutely unmoved by the data revolution, sticking doggedly to using their cellphones for making calls and sending texts.

Nonetheless the wireless industry has never been more innovative and creative than it is at present, and the wealth of new services – allied to sparkling new handsets and an ever-broadening distribution pipe – coming on stream suggests that a bright dawn may soon be on the horizon.

FT Digital Business has identified five companies that exemplify the new optimism and promise a multimedia future.

MOBILE TV – TU MEDIA

It is not uncommon to find people giggling on the subway in Seoul, writes Anna Fifield. Or cheering, or even doing a bit of a dance in their seats. In the most wired country on the planet – it has the highest broadband penetration, at about 75 per cent – South Koreans have quickly taken to watching television on their mobile phones.

“I mostly watch sports and movies when I’m on the bus or the subway,” says Kim Won-sun, one of the 270,000 Koreans who has been using satellite digital media broadcasting– or S-DMB – since SK Telecom launched its commercial service in May.

“It’s a great way of killing time,” says Mr Kim, adding that although his friends are envious of his phone, they’re not quite jealous enough to shell out the $700 that one of the TV-enabled handsets costs.

But SK Telecom, the biggest mobile operator, is hoping that more and more Koreans will buy into the service, as it steps up investment in 3G and content services in an attempt to find new revenue streams in a saturated market.

Lim Kyu-kwan, chief operating officer of TU Media, SK Telecom’s DMB subsidiary, is confident of reaching 370,000 customers by the end of the year and 1.2m customers next year.

The attractions of S-DMB are obvious, Mr Lim says: “The customer can enjoy watching TV anytime, anywhere, so they have powerful content at a reasonable price.”

Joining the service costs Won20,000 (about $20) and the monthly fee is Won13,000, or about the same as a new release CD.

TU’s satellite DMB service offers 11 video and 26 audio channels. In addition to two news channels, music videos, sports, games and cartoons, TU has established its own station, Channel Blue, which shows hit shows such as Desperate Housewives and The Apprentice.

It attracts about 10 per cent audience share but the most popular channels in this soap opera-mad country are the drama stations, where soppy Korean programmes such as Lovers in Prague score 20 per cent ratings.

SK Telecom has a lot riding on the service. It invested more than $300m in its S-DMB project, setting up a broadcasting centre and installing 800 booster pillars around the country. But the service won’t break even until it has 4.5m customers, “so we still have a long way to go”, Mr Lim says. The price of the phones is one impediment to success. “Samsung Electronics and LG have released phones but they are very expensive,” he says. “We face a limitation in promoting our services through these high prices.”

GAMING – IDEAWORKS 3D

Feeding, educating, providing guidance – it might sound like the toil of a parent, but for fans of The Sims, it could be all in an evening’s entertainment on the detailed, “open-ended” simulation game, writes Kate Mackenzie.

Playing God gets addictive, but most players have to leave their Sims behind when they go to work each morning in the real world. From late November, however, players will be able to take their characters, which can be carefully developed and nurtured, with them anywhere, and attend to their virtual charges whenever they have a spare minute.

The launch of Sims 2 Mobile, developed by Ideaworks 3d for Electronic Arts’ manically popular franchise, is being closely watched by many in the fledgling mobile games industry, which has so far been dominated by simple built-in puzzle games or versions of action console games.

On route to becoming the biggest selling PC games ever, Sims titles have become as popular with women as they are with men – a rare thing in the gaming world and well-suited to the mobile phone market as, unlike most PC and console games, both genders are fairly evenly represented.

“For a long time the games that came out were aimed at people who play console games – a lot of action and adventure. In the past year or so people have realised there’s more than that,” says Stuart Dredge, games analyst at Informa, a media research company.

Although it makes up less than one-fifth of the total games industry, mobile games is the fastest-growing segment and Informa estimates it will more than quadruple in value to $11bn in two years.

But the industry still faces a few hurdles. “There’s a big issue in that still a lot of people aren’t aware that you can get them. There’s still some technical problems – you can try and download and not succeed,” says Mr Dredge.

Another reason for the high hopes for The Sims 2 Mobile is the increasing focus on what Mr Dredge calls the “casual gamer” who is not a dedicated player but might spend a few minutes on games while commuting.

“It has true crossover appeal – it appeals to hardcore or dedicated gamers and casual gamers,” says Thor Gunnarsson, an executive director at Ideaworks3d.

SHOPPING – REPORO

The immediacy of shopping on your mobile phone handset – anywhere and anytime – has often been heralded as a potential “killer application” for the mobile internet, writes Maija Palmer. People already buy ringtones and logos through their phones, and in some parts of Europe they can buy train tickets or cans of soft drink from vending machines.

UK-based Reporo is hoping to extend mobile shopping to a far bigger variety of items, from wine to white goods. Mobile shopping, says Richard Watney, managing director, should eventually become just like shopping over the internet.

The Reporo service launched in January is still very modest – it has about 10,000 users and generates up to £5,000 ($8,675) in revenue a month.

However, Mr Watney is expecting explosive growth – he hopes to double customer numbers by Christmas and expects to have 100,000 to 150,000 users by the end of next year.

Growth will be fuelled by the rapid adoption of mobile phones with internet capabilities – some analysts estimate as many 40m internet-enabled handsets in the UK by Christmas.

Though it will take people some time to get used to buying over the medium, Mr Watney expects the adoption rate to be faster than that of the internet, as people are already used to the concept of online “shopping baskets” and so on.

“The teenage community is very comfortable with texting and using their mobiles to buy ringtones. As they mature into more grown-up shoppers, they will migrate to services like these easily,” Mr Watney says.

Reporo users can currently purchase goods from about 25 retailers including CD:Wow, Boots Flowers, Oddbins and Currys. Amusingly, the current product mix – flowers, lingerie from Figleaves.com, computer games – appears tailored to the early-adopter market: men who like gadgets and are perhaps prone to forgetting their wives’ birthdays.

A typical Reporo customer makes two to three purchases a month – most commonly books and CDs – with an average value of about £15. However, transaction sizes are getting bigger. Recently, a customer bought a £600 cooker from Currys through the mobile site, Reporo’s biggest single transaction to date.

To use Reporo, customers register their details – including credit card number – on the site and download a free Java-based software application to the phone. They are given a four-digit pin which is used to authorise any transactions. Credit card details are stored only on Reporo’s servers – not on the phones themselves – to ensure security.

Reporo is signing up retailers at the rate of about one a week. Many, however, are still waiting for the market to grow before committing.

“We have a number of major brands who are interested, but want to see us reach the level of 50,000 customers before they begin to take this seriously,” Mr Watney says.

ADULT ENTERTAINMENT – CHERRY MEDIA

Sex sells, even on cellphones, writes Ian Limbach. Mobile adult entertainment – such as erotic video clips, “moantones” and sex chat – is booming and annual sales will double to $2.1 bn by 2009, according to analysts at Juniper Research.

Barcelona-based Cherry Media was a pioneer in this business and remains one of the few companies focused exclusively on delivering adult content to mobile phones. There are now a dozen such providers, but they tend to peddle a wide variety of content or have little mobile experience.

Cherry Media launched as a mobile portal in late 2003, when mobile internet was painfully slow. “As a company run mostly by women, we knew how to create a flirty, titillating portal. It’s more about psychology than naked flesh. So we added stories and other text to create a deeper experience while the images downloaded,” says Julia Dimambro, the company’s founder.

But in mid 2004, just as Cherry Media geared up to sell its content to mobile operators, Vodafone blocked access to all “over-18” content, requiring customers to verify their age by phoning or walking into a store. Other UK carriers followed suite and mobile adult entertainment was no longer anonymous. “We thought it was the end of the industry,” recollects Ms Dimambro.

In fact, Vodafone’s move led to a healthier business. “It turned out to be nothing but a benefit to us. Vodafone created the first regulated channel and this weeded out the market.

“There is a tremendous commercial opportunity but it needs to be done responsibly, with everyone playing by the book. Operators, billing partners and content providers have now come together to ensure the environment is a safe place to be,” she explains.

And business has gone well for Cherry Media. “We were solvent in just four months and have never borrowed money since,” says Ms Dimambro. “We saw about a 70 per cent revenue growth in our first year, due tothe market being quite hostile to adult content.

“The revenue growth this year to date is rapidly approaching 250 per cent and we are certain that it will surpass the 300 mark before Christmas,” she says.

GAMBLING – CHINA GLORIA LOTTERIES

Lotteries are a national pastime in China. The Tang Dynasty used a form of lottery to fund the building of the Great Wall of China, and, while the government’s overall policy on gambling is still worryingly unclear for many telecommunications carriers, there are signs that Beijing is looking update the lottery market to help pay for projects such as the 2008 Olympics, writes Andrew Gellatly.

Using simple SMS and WAP protocols, technology businesses in China have begun to work with the national and local lottery licensees to offer lotteries on mobiles and the growth potential is enormous.

At the end of 2004, China was the world’s ninth largest market as lottery sales reached Rmb38bn with Rmb22.6bn from a welfare lottery and Rmb15.4 bn from sports lotteries.

Revenues have grown in excess of 50 per cent per year for the past five years and the government is hoping that mobile phone sales will help sustain the existing rapid growth rates – a notoriously difficult task in the lottery business.

According to JinLing Li, business development director of Beijing-based China Gloria Lottery Entertainment & Culture: “The number of lottery consumers and per capita lottery sales in China still lags behind other developed countries.

“In 2004 each person spent only $3.71 on lottery compared with $100 in the major lottery markets.”

China Gloria has begun working with the national Sports Lottery Administration to launch regional sports lotteries, tickets for which can only be bought through mobile phones.

Since May 2003 China mobile’s GoTone users have been able to buy Guangdong sports lottery tickets and check results and via their WAP service on the Guangdong Fengcai WAP site. Users pay a monthly subscription of Rmb3 with a maximum monthly spend of Rmb50.

From September 2005, all China Unicom and China Mobile customers have also been able to check lottery numbers and announcements through the SMS system.

“Mobile lottery betting suddenly becomes a viable option for the man on the street without a credit card but who probably does have a mobile phone,” says Simon Miller a British gaming consultant with long experience in the Chinese sports bettingmarket.

The results are encouraging. At present, 80 per cent of China’s 450m mobile users are using SMS or WAP services and in 2004 Chinese mobile users spent Rmb4.4bn on added-value mobile services.

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