All the people who really know how to put entertainment content to work for them are back in school with all of the essentials…notebook computers, smartphones, video MP3/iPods, PSPs.

THE Insider #66 - Mobile Entertainment – Bring It On

THE Insider

THE Insider #66
Mobile Entertainment - Bring It On
by THE Insider
an industry marketing/communications expert with more than 15 years of video, storage and networking experience.

All the people who really know how to put entertainment content to work for them are back in school with all of the essentialsnotebook computers, smartphones, video MP3/iPods, PSPs.


All the people who really know how to put entertainment content to work for them are back in school with all of the essentialsnotebook computers, smartphones, video MP3/iPods, PSPs.

Working to win their hearts and minds; content owners, aggregators and manufacturers heard (and believe) what Sparky said in Bring It On"Follow me, or perish, sweater monkeys."

These everything devices have pushed the music industry into the position where they had to completely rethink their business model. They have put Hollywood and broadcasters into the awkward position of trying to maintain their present revenue streams while stumbling toward personal one-on-one entertainment.

Device manufacturers can't add features, capabilities and storage fast enough. Unfortunately all of the additions only help them maintain market position/marketshare, not improving the bottom line.

Two winners are emerging - content aggregators like Apple (sure they make a PC but face it where are the real no-sweat profits? Right !!!!) and storage producers (flash and HD).

Tellywood has a love/hate relationship with both but consumers simply chant - Bring It On!

The potential for internal and external flash and HD storage is staggering (Fig 1):

  • 46.3% of telecommunications services revenues were wireless services in '05 according to Insight. By '10 wireless will be 55.6% of the total
  • Mobile telecom revenues in Pacific Basin were $159.97 billion in '05 according to In-Stat and are projected to be $242.42 billion by '10
  • MP3 player sales were 30 million units last year and should be 194 million by '10 according to Informa
  • Growing concern for personal data security and ease of traveling with content has dramatically increased the demand for storage solutions that incorporate encryption, zero footprint, communications/content security such as those offered by Migo Software

To get an idea of what the ROW should expect to see in their phones, NPD suggests you look at what Japanese consumers buy now:

  • camera - 100%
  • barcode readers - 27%
  • GPS - 26%
  • FM radio - 22%
  • Voice recorder - 18%
  • Analog TV tuner - 18%
  • Mobile commerce, e-money - 16%

The Management Network Group (TMNG) found US consumers want similar services:

  • commercial free radio - 39%
  • music downloads - 34%
  • mobile TV - 33%
  • video clips - 21%
  • multiplayer 3D gaming - 21%

And you thought kids were just ignoring you?

The over-excited mobile content market has raised storage technology advances (Fig 2) and consolidation to a feverish pitch:

  • SanDisk acquired msystems
  • Seagate acquired Maxtor
  • Chip producers are building new lines as fast as possible
  • Small form factor HD manufacturers like Toshiba, Hitachi, Cornice and Seagate are pushing engineering & production
  • Flash producers are producing 50nm chips on 300mm wafers and have their eyes on 40nm chips
  • Advanced chips store 4GB and 8GB is on the horizon that make it easy to integrate mobile phones, MP3 players and the assorted apps in a single device
  • Micro-sized HDs are driving up the capacity and lowering the unit costs.
  • Technologies like patterned bit media (PBM) suggest we could see 2TB/sq in in 5-10 years

All of this excitement is being driven by mobile users who demands higher and higher storage capacity (Fig 3).

To listen to the HD folks at Cornice, Seagate and Hitachi they are fighting a relentless battle to win more and more of the consumers' devices even though flash/HD only compete in a small portion of the total storage arena (Fig 4).

For them though it is an important segment because the technology they develop for the .85-in and 1-in drives can have profound price/performance impact for their higher capacity drives (Fig 5).

While flash producers have a head start when it comes to zero noise, wide operating range and low power consumption; HD manufacturers have made significant advances in these and other areas:

  • whisper-quiet motors decrease noise 5-6dB and soft seeks do away with clicks, vibration noise so they can operate at 20dB or similar to a quiet living room
  • have temperature tolerances of zero - 60 degrees Celsius compared to 0-70 degrees for flash
  • non-operating shock resistance of 2000G and operating shock resistance of 1000G
  • .3 W, 3.3 V using leveraged cache
  • Security, encryption features added to drive for data protection

Targeted primarily to provide high mass storage to higher end portable devices (Fig 6), small form factor HDs represent only a portion of the present mobile storage market. The more profitable market segment is people wanting USB storage that gives them their computer access without carrying around an unsecured notebook that is a bitch to take thru airport security and is a ready target for data thieves.

Consumer demand for live and pre-recorded programs on their mobile phones has increased dramatically over the past year from 1.2 million subscribers in '05 to 3 million in '06. The demand should grow to 15 million subscribers by '09.

Informa Telecom expects this demand to increase even more dramatically as 3G mobile phone service (visit the Pacific Basin and Europe). The research firm notes that this year there will be about 134.85 million 3G subscribers worldwide and by 2010 that number will climb to797.5 million.

Mobile networks around the globe have been running TV and video trials for the past two years (Fig 7). Firms like Alcatel is partnering with telcos and wireless operators in every country to deliver video content to people who seemingly have no lives.

Telephia, the mobile measurement folks, found that earlier this year more than 5 million U.S. wireless subscribers streamed TV or played video content on their mobile devices. V CAST and MobiTV subscribers spent about $40 more than non-TV subscribers. What was interesting was that viewing time increased from 85 min a month last October to over 100 min in March.

More than 30% of the individuals surveyed expressed a strong interest in being able to quickly and easily time shift shows and place shift them to enjoy when, where they wanted. Guess that proves that at least with the 18-34 crowd they'll take convenience over HighDef any day of the week.

Of course they can see stuff on the damn small screen !!!!

Bottom line for storage?

  • people have a limitless demand for storage
  • folks want 30-100% more content every year - at the same price
  • technology must continue to deliver more storage for less
  • anything that adds cost is a show stopper
  • give 'em the capacitythey'll fill it

As Darcy said in Bring It OnRemember: they give extra points for alacrity and effulgence.

Of course we don't believe in osmosis and even with the perky cheerleaders raising the crowd's adrenalin levels there are a few issues.

You've got copyright/content protection laws that are firmly seated in the 19th century, a legal system/congress that is barely in the 20th century and audio/video content "owners" who see mobile content entertainment as a way of setting everything right again (translation more of the royalty pie).

DRM (digital rights management) - an ugly acronym that put "lewd" in "deluded" - is a concern of everyone in the value chain - content owners, aggregators, advertisers (don't forget 'em) and delivery devices. The only ones who aren't involved are the folks who count mostconsumers.

People have already shown a wide range of flexibility in how they receive and use their content: - pay per play - monthly subscription - ad supported - free content (IP-based sites) - shared (ok pirated)

People are perfectly willing to pay a fair price for entertainment they see has value. If Tellywood can't learn the cheer routines quickly they could easily be sidelined when the cheerleaders take the floor.

In this win/no win market you could make a killing selling something like Diet Prozac!!


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