Now that the broadband era is upon us, the technology and telecommunications industries are shifting their focus beyond access, to the high-value applications and content that will capitalize on these fast access networks, according to iSuppli Corp. To compete, technology companies must have an understanding of the trends and growth patterns in the end markets for multimedia, as well as the motivations and limitations of media companies.

"Over the last three years, broadband has become ubiquitous, both in the wired and wireless worlds," said Mark Kirstein, vice president of multimedia content and services at iSuppli."Worldwide broadband subscribers have reached 248 million, while the number of 3G wireless subscribers will pass 1 billion at the end of 2006."

The implications of this are huge, as virtually all technology markets are being driven by media distribution in an underlying fashion. Examples include:

• Portable Media Player (PMP/MP3) shipments will grow by more than 30 percent in 2006, jumping well beyond 160 million units.
• Music-player enabled mobile phones now are driving competitive positioning in the wireless handset market. Music phone shipments will exceed 300 million units in 2006. Full track music delivered to these handsets will drive the mobile music market across all categories to more than $15 billion by 2010.
• The ranks of Internet Protocol Television (IPTV) subscribers grew dramatically in 2006. However, the real excitement is just beginning, as subscribers rise to more than 65 million by 2010. The growth of IPTV will contribute to a telecom operator revenue stream of about $18 billion by 2009. At the other end of the value chain, sales of semiconductors for IPTV across all categories will grow to $7.8 billion by 2009.
• Mobile video is on the verge of moving beyond the early development stage and will undergo wide deployment during the next two years. By 2010, iSuppli expects mobile video will attract more than 100 million subscribers. By 2010, more than 300 million handsets will ship with mobile TV chips.
• Media home networking is creeping into a growing number of homes, as a variety of consumer electronics devices adopt Internet connections. Across the combined markets for video game consoles, set-top boxes, DVD players and televisions, iSuppli projects more than 180 million Internet-enabled consumer devices will ship in 2010.
• The number of digital pay television subscribers is expanding rapidly throughout the world. Direct-to-home satellite TV services are finding new markets in Asia—particularly China and India. Cable television subscribers are continuing a migration to digital technology, while IPTV is debuting worldwide. Collectively, the number of digital pay TV subscribers will grow to nearly 276 million by 2010 (not including mobile TV), providing new platforms for interactive TV services and Video on Demand (VoD).

While these markets are among the highest-profile segments directly driven by multimedia distribution, many other areas will benefit as well.

Mobile gaming revenue grew by nearly 80 percent in 2005. Revenue from VoD services delivered via cable, IPTV and broadband will approach $2 billion in 2006. Demand for Digital Video Recorders (DVRs) is booming, with subscribers more than doubling in 2006 compared to 2005.

While the explosive demand for digital media is driving operator and equipment revenue, a number of challenges and barriers are constraining even faster market development. Among the most significant barriers is the limited interoperability among consumer-electronics products. Consumers want access to all their content in a broad range of devices, distribution networks and services.

Companies across the digital multimedia value chain stand to benefit enormously if the industry can deliver on consumers' expectation of: Any Content, Any Device, Any Time.

DRM dilemma

igital Rights Management (DRM) represents a major portion of the interoperability problem.

It is true that DRM is making rapid progress in the marketplace, with nearly 500 million DRM-protected devices shipped in 2006. However, the market presently is rife with what could be called "bad DRM."

DRM is the convergence point for companies spanning the entire digital media value chain. It’s the locus where the agendas of media companies, operators, Internet portals, equipment manufacturers, semiconductor suppliers and other technology companies collide. Each company has its own agenda for DRM.

The variety of conflicting interests across the digital media landscape is contributing to the proliferation of narrowly licensed and proprietary DRMs. These DRMs restrict the movement of content between platforms. Companies do this in the vain hope that a consumer will pay repeatedly for the same piece of content each time he or she wants to access it on a new device.

Efforts to enable interoperability are moving at a snail’s pace -- and often are actively thwarted by companies that prefer the status quo. The result of this is that consumers are shunning DRM-protected content, and instead are resorting to "free content" on peer-to-peer sites.

iSuppli predicts this DRM problem will remain an obstacle to content interoperability and will hinder the greater growth of the digital content distribution market for several more years.

Digital media in the driver's seat

The business of digital media distribution now is driving both the high-technology industry and the telecom market. To compete, technology companies must have an understanding of the trends and growth patterns in the end markets for multimedia, as well as the motivations and limitations of media companies. Media companies need to comprehend the economics of new technologies. Operators must look both up and down the value chain to predict the market.

Finally, if they wish to remain competitive, all of these companies must never forget the new reality driving their businesses: All roads lead to digital media distribution.

About the market research

The iSuppli "Home Entertainment Multimedia Content" service looks at the dynamic markets for multimedia content (video, music and gaming) and services delivered via a high-speed network to the home entertainment system or home computer. Broadband technology, coupled with the proliferation of digital consumer electronics devices, has enabled a growing market for digital audio and video and gaming content. These markets represents an enormous opportunity, but also a threat to many existing business models and distribution chains.

This service addresses questions such as: How will the new digital content distribution models impact media companies, operators, equipment and semiconductor manufacturers? What are the market sizes and forecasts for IPTV, including subscribers, revenue and average revenue per user? How will the direction of the multimedia markets have a direct impact on electronics markets and technologies?

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