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1、,Mobile EntertainmentIndustry and CultureA European Commission User-friendly Information Society(IST)Accompanying Measures project IST-2001-38846WP5 Business ModelsDeliverable D5.4.2Mobile Entertainment Business,Circulation:Partners:Main authors:File name:Status:Date:DL:,PublicLinkoepings Universite
2、t,The Interactive Institute,The Victoria University of ManchesterMark Ollila,Mikael Kronzell,Niklas Bakos,Fredrik WeisnerD542 Mobile Entertainment Business FINALFINAL VERSION29.09.200330.09.2003,-,-,-,-,-,-,-,-,-,MGAIN IST-2001-38846 Mobile Entertainment Industry and CultureWP5 Business ModelsD5.4.2
3、 Mobile Entertainment Business,Page 2 of 170Made:1.10.2003Printed:29.9.2003,COPYRIGHTThis document is property of the Commission of the European Communities,and hasbeen authored for it by the MGAIN Consortium consisting of:Teknillinen KorkeakouluThe Victoria University of ManchesterThe Interactive I
4、nstituteUniversity of Central LancashireOulun YliopistoUniversitetet i BergenTurun YliopistoTechnical Research Centre of FinlandLinkoepings UniversitetThis document may not be copied,reproduced,or modified in whole or in part for anypurpose without written permission.In addition to such written perm
5、ission to copy,reproduce,or modify this document in whole or part,an acknowledgement of theauthors of the document and all applicable portions of the copyright notice must beclearly referenced.All rights reserved.DOCUMENT HISTORY,Issue Date20.08.200322.08.200310.09.200328.10.200329.09.2003,Resp.pers
6、onOllilaKronzellKronzellOllilaKronzell,StageFirst draftSecond DraftFinal Version,Content,comments and changesInputs from PI at LiUTo CRIC for internal reviewCirculated to consortiumInputs from PI at LiUDelivered to HUT,-,-,-,MGAIN IST-2001-38846 Mobile Entertainment Industry and CultureWP5 Business
7、ModelsD5.4.2 Mobile Entertainment Business,Page 3 of 170Made:1.10.2003Printed:29.9.2003,EXECUTIVE SUMMARYThis document is the deliverable D5.4.2,Mobile Entertainment Business,and is partof the Information Society Technologies Project MGAIN Mobile EntertainmentIndustry and Culture(IST-2001-38846).The
8、 objective of MGAIN Work Package 5 isto,regarding mobile entertainment in Europe:Study key actors,value chains and business models in order to describeindustry structure and trends.Describe the European mobile entertainment market.Describe the barriers constraining and drivers facilitating market an
9、d industrydevelopment.INDUSTRYThere appears to be a conceptual confusion within the industry and a lack ofconsensus within the academic world on the definition of business and revenuemodels.In relation to mobile entertainment(ME),we define the concept of businessmodel as the position the company occ
10、upy in the ME value web described below andthe business concept they have adopted in order to create value.The revenue model isone of its components,and is the way in which a company receives its revenues.The ME value web is an overview of all the different value chains and value creatingactivities
11、taking place among companies involved with ME.The different positions,or industry sectors,that companies are able to attain within the value web are verydiverse since a range of activities have to take place in order for a ME service to beproduced,marketed and delivered.NETWORK AND DEVICE RELATED,Ne
12、twork provision,Device manufacturingTechnical Serviceprovision,Enabling HardwareTechnology,Enabling SoftwareTechnologyEnabling technology,Commercial Serviceprovision,Retail,Aggregation,Mobile operator,Portal,Consumer,Service Applicationprovision,Content provision,Service InfrastructureprovisionServi
13、ce providerSERVICE RELATEDFigure 1:The European mobile entertainment value web,MGAIN IST-2001-38846 Mobile Entertainment Industry and CultureWP5 Business ModelsD5.4.2 Mobile Entertainment Business,Page 4 of 170Made:1.10.2003Printed:29.9.2003,As the name implies,it is a web of different value chains
14、where the value chains ofproducts may look quite different and involving various industry sectors.Therefore avalue web,rather than a chain,is a more appropriate way to illustrate the valuecreating activities taking place than the traditionally sequential approach.Currently,there is an ongoing proces
15、s of vertical and horizontal integration in theEuropean ME value web,a situation which several forces have contributed to.First ofall,mobile operators,media/content companies,service providers and also devicemanufacturers aim to capitalize on the inherent economies of scale of the mobiletechnology.S
16、econdly,it is currently a way to ensure a competitive position within theME value web,as it locks up critical resources from competitors and instil trusttowards customer companies.Thirdly,the process of vertical integration has been away to deal with problems of undeveloped supply and distribution c
17、hannels.Finally,there is a strategic uncertainty among companies regarding what business strategiesthat are successful.All these forces have led to a situation where many quite differenttypes of companies are in several cases performing similar business activities.This isa sign of an immature ME val
18、ue web.Most noticeably,many different companies arecurrently becoming increasingly involved as portal providers.However,at the sametime,many companies fail to maintain a business.The three most dominant industry sectors,mobile operators,device manufacturers andmedia/content companies,are most notice
19、ably striving towards vertical integrationwithin the ME value web.We predict this development of horizontal and verticalintegration will remain in an intense phase for at least some years.As the ME valueweb becomes more mature,transaction costs will be reduced.With lower transactioncosts,we expect t
20、he vertical integration process within the value web to shift into adevelopment towards specialization.With a higher degree of specialization and hencea lower degree of economic control,strategic networks within the value web willbecome even more important to all players than they are currently.They
21、 are and willbe especially important to smaller and medium sized companies.MARKETOn the supply side,the European ME market is highly fragmented,a fact caused byseveral factors.Despite a slightly increased concentration among European mobileoperators,the total number of mobile operators is still larg
22、e,making the mobilenetwork distribution channel fragmented.The fragmentation is also caused by theexistence of different mobile device designs and a variety of mobile platforms.On thedemand side,consumers preferences for ME vary between European countries due tolanguage,culture and local taste.With
23、mobile games to be seen as the foremostexception,the general demand situation across Europe for ME services can best bedescribed as heterogeneous.As such,we suggest that the term“European ME market”can be used to describe theaggregate of demand or sales of ME services on the European continent.It sh
24、ould not,however,be used by companies to describe a single isolable object of action.Wefurther suggest that any company that seeks to supply ME services to consumers inEurope should adopt a national market strategy.Such an approach is most suitable asthis is where macro factors are uniform,the numbe
25、r of mobile operators are few andwhere language,culture and taste are rather homogenous for a given market segment.,MGAIN IST-2001-38846 Mobile Entertainment Industry and CultureWP5 Business ModelsD5.4.2 Mobile Entertainment Business,Page 5 of 170Made:1.10.2003Printed:29.9.2003,Several indications s
26、uggest that the European market size for ME services,includingrelated revenues from data transfer is in the region of 1 billion annually by mid 2003.Regarding forecasting future market size,market signals are particularly unreliable inthe early stages of the rollout of any important new technology.I
27、n addition,marketanalysts in general have a bad track record in performing reliable market predictions.Therefore,the immature European ME market is a risky subject on which to makemarket forecasts.With respect to this,companies should strive towards making theirown predictions and scenario work adap
28、ted to the individual strategic informationneeds of the company and based on reliable facts at hand.The physical infrastructure for network delivery of ME services,with GPRS arelargely in place across Europe.By the end of 2003,some 10 million European mobilesubscribers will own a ME enabled device.T
29、his equals a penetration level of 2-3%.Despite the existence of a large number of GPRS enabled phones and networks,thepenetration of mobile data services is approximately only 1%in average in WesternEurope.Penetration of ME services,other than ringtones and logos,is thereforeobviously less than 1%an
30、d potentially significantly lower.Therefore,current MErevenues seem likely to mainly derive from simpler ME services such as ringtones,logos and SMS based entertainment.It sho uld,however,be noted that some countriessuch as Italy and UK are noticeably more developed than the European average.The thr
31、ee currently most promising ME consumer segments to target with services aremale teenagers,female teenagers and males aged 20-39 years old.Within these threebroad segments,the earliest ME adopters have been explored and were,based on theresults of service preference,named the pure entertainment cons
32、umers,the socialentertainment consumers and the advanced infotainment consumers,respectively foreach age segment.These smaller groups of people all appear to be high consumers ofother forms of technology based entertainment and possess openness towards newmobile devices and services.A company intere
33、sted in serving one or all of thesesegments will have to break the market down further into smaller consumer segments,preferably on a needs-based level,which can be analysed and then targeted withappropriate ME services and promotional campaigns.The markets for mobile music,video,games,gambling,and
34、adult entertainment havebeen described.They have been studied regarding their definition,current andpredicted market size,recent and future developments,popular services and who themost promising consumers are.Common for all these markets are that their current orimmediate consumers to a large exten
35、t consist of various constellations of teenagersand males aged 20-39 years old.By mid 2003 only ringtones and games representsignificant markets,but many initiatives are taking place regarding all five markets.Forecasts made by consultancy companies state a high potential for each market.Ourconclusi
36、on is however that these optimistic expectations need to be considered withcare.Initial successes make bad extrapolations of market trends and the focus needs tobe placed on how to develop those markets.Unlike what seems to be the general belief of many actors in the ME value web,MEservices in Europ
37、e are not yet on the brink of mass market consumer adoption.Thevalue web still faces the challenge of attracting people considered as relatively easilyconvinced early adopters.Groups of consumers,differently prone to adoption,need to,-,-,-,-,-,-,-,-,-,-,-,-,-,-,-,-,-,-,-,MGAIN IST-2001-38846 Mobile
38、Entertainment Industry and CultureWP5 Business ModelsD5.4.2 Mobile Entertainment Business,Page 6 of 170Made:1.10.2003Printed:29.9.2003,be treated differently.The penetration of the mass market will therefore be anadditional and different challenge after attracting the early adopter segments.BARRIERS
39、 AND DRIVERSThere are a range of factors that currently are acting as either barriers or drivers to thedevelopment of the ME value web and market.These are summarized in Table 1.Low adoption of services,Situation within the ME value webReduction of strategic uncertaintyInnovations in marketingIndust
40、ry consolidationMobile operators financial situationcreating a demand for ME revenuesInherent advantages from operator billingDeployment of Digital RightsManagement and securityDeployment of payment servicesEfforts by trade organisations andstandardization bodies(MEF,OMA)-Low degree of product and t
41、echnologicalstandardisation-Diversity of wireless networking standards-Dominance of mobile operators-Unfair revenue sharing agreements,Driving servicesRingtones&logosGamesAdult entertainmentMMSLocation-based servicesMobile browsingDevice related driversIncreased content visibilityNew device function
42、alityImproved device performance,Consumer confusion-Ineffective marketing-Lack of compelling content-Problems with service qualityLow penetration of devices-High device prices-Low degree of perceived benefits-Problems due to behaviouralaspects of consumersLow use of networks,-Low degree of media/con
43、tent companyinvolvementDriver to market and industry development,Improved ease of useBarrier to market and industry development,-Problems with network usability-Delays in 3G launch and coverage,Table 1:Summary of drivers and barriers to market and industry developmentSeveral of the barriers stem fro
44、m the fact that the ME value web still is immature andthat the business of providing ME services is new and relatively unexplored.Necessary actors,such as many global media/content companies,have not yet in a fullscale entered the ME value web to contribute with their existing consumer relationsand
45、competence about how to compose and market consumer services.At the sametime,many actors are trying to establish their technologies as standards,a situationwhich has created a low degree of product and technological standardization and adiversity of networking standards.This situation has resulted i
46、n problems forcompanies developing and providing the mobile entertainment services since theconsumers have been divided into what is called a platform segmentation of themarket.Further on,the existing networks consumer usability needs to be improvedand there are delays in the launch and coverage of
47、the 3G networks.The mobileoperators dominant position in the value web is also considered to be a barrierbecause of their lacking knowledge about entertainment services and that they inaddition are forcing unfair and unconstructive revenue deals upon service-andcontent providers.The reasons for the
48、currently low adoption of ME services are to a large extentexplained by the above described situation in the value web.Most noticeably,mobileentertainment service providers do not receive the proper incentives and capabilitiesto develop high quality content.The mobile operators are taking on the unf
49、amiliarrole of marketing entertainment services,and together with their and the devicemanufacturers focus on technology,this has resulted in vague information to theconsumers about what ME can accomplish.Therefore,consumer adoption has been,MGAIN IST-2001-38846 Mobile Entertainment Industry and Cult
50、ureWP5 Business ModelsD5.4.2 Mobile Entertainment Business,Page 7 of 170Made:1.10.2003Printed:29.9.2003,impeded by the market development barriers of consumer confusion,ineffectivemarketing,a lack of compelling content and problems with service quality.Thesebarriers have resulted in a situation wher
