Akumiitti White Paper the Future of Mobile Entertainment

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AKUMIIm WHITE PAPERThe future ofmobiLe entertainment

13 September 2001TABLE OF CONTENTS

Introduction 1Akumiitti's Market Vision 2001-2006 2The Business Model. 2ContentIs King 5Handset Manufacturer Alliances 6End User Billing 7Conclusion '" 8About Akumiitti 9

INTRODumONWHEN MOBILITY AND ENTERTAINMENT COLLIDEThere are two major elements to people's lives today, entertainment and mobile technology. Theamalgamation of the two is no longer a concept, but a revolution born to succeed. Wireless portabledevices such as PDA's, CO players, Televisions, digital cameras and video recorders has meant people canconsume their favourite forms of entertainment on the go, but no device has had greater impact andtransformed the way people live, work and interact more than the mobile handset or terminal.FASTEST GROWING SECTORThe entertainment industry has realised that mobility is another excellent opportunity to reach massmarkets and make more money. Mobile entertainment is one of the fastest growing sectors in the worldtoday, with an estimated 700 million subscribers anticipated by the year 2005, making Mobile valueadded services the profit making business of today and tomorrow.The big revenue earners are the value added content and services which appeal to the mass market, arefun to use and provide entertainment. Since the inception of the first ringtone, subscriber demands ashave subscriber numbers continued to escalate at an overwhelming pace. Where ringtones, icons andpicture messages provide the current staple mobile entertainment diet for subscribers. upcomingtechnological advances will see a greater variety of content and services available. providing increasedinteractivity and richer entertainment, a veritable plethora of fun on the runoFOUR STEPS TO SUCCESSIn an increasingly competitive market there can now be defined four essential elements that are set toshape the future industry of mobile entertainment:

1. Optimal Business Model2. Desirable Content and Services3. Handset Manufacturer Alliances4. Ability to End user Bill

Copyright Akumiitti Ltd. 2001 1


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Figure 1. Mobile Content Market

AKUMIIm's MARKET VISION2001-2006As market leader in mobile entertainment softwaresolutions, Akumiitti is involved in the most importanttrends in this sector. For us, in the period 2001-2006 thismeans we will see significant movement in subscriberdemands from simple to more sophisticated content andservices. AkumiiUi will continue to provide its state-ofthe-art Entertainment Service Center (ESC) total softwaresolution for these applications, and further develop withinits research and development department cutting-edgeconcepts for mass market appeal.

Mobile Content Markets40 % -:- - - - -- - - - -- - 35% :-- -- -- - - - -- - - - - - -" -30% , -_. - - 25% : .- -I------_ ..--.20%-;- -- ----------15% ~ . - - - - - ----1-:::1':: lfU 1 , ~ ~ i L l ~ - E ~ ~ . . . c . .0% ' l'v c

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CONllNUOUS REVENUE STREAMAkumiitti's business model was created in recagnition af the mobile entertainment industry need forprofessional partnerships af industry specialists. With technology giants worldwide now joiningcampetencies, continued growth and success would be assured for those industry players who join in avalue chain that supports a continuous revenue stream, capturing the mass market in an increasinglycompetitive climate. Akumiitti's optimal value chain makes this possible, giving members the ability taconcentrate on their care business, smoothing the whole process from cantent capyright and brandowner ta handset or terminal manufacturers and finally to subscribers in the mass market.

CLOSE CO-OPERATIONMarket research has shown that content quality; professionally created and branded are the primarypurchasing deciders for subscribers. In order ta obtain this desirable content, it is dependent upon threefundamental components; technology, device or handset and content suppliers. Akumiitti utilises andpromotes this business model as it facilitates close co-operation with these professionals resulting incontent and services that really sello

Subscribers choose content quality before anything elseAkumiitti has developed a series of programs and alliances' which facilitates the flow from contentproduction ta subscriber sales. The Mobile Industry Device Alliance involves the ongoing co-operationwith major handset manufacturers, resulting in the timely availability af new content formats utilisingnew handset features upon market release. Working with the top content providers and capyright ownersin the field, Akumiitti produces COSMO, a centralised content source for delivery, updates andmanagement for mobile operators and portals. As channel managers for this business model it means wecan also provide feedback and market analysis to content providers, Service Providers and Operators asrequired. This combined with other initiatives such as the VAR Partner Program provides for extensiveglobal reach, ensuring ongoing profitable returns ta our value chain participants.

COPYRIGHT ISSUESIn the entertainment business the key to real success is high quality content, and so accordingly, contentowners guard their copyrights and commissions vigorously. The issue of forwarding content and servicesis an area of the mobile entertainment industry under careful inspection, with the market growing sorapidly the industry cannot afford to simply rely on honesty and integrity.Professionally managed business channels such as Akumiitti's which sources content globally for COSMOis protected and copyrighted. Correspondingly ESC software addresses copyright management, providingtransaction details and reporting, a copyright database and fee payments accardingly ta our contentproviders, providing a secure environment forthem to do business.Illegal content is a threat ta the core af the industry, in order ta protect and sustain standards in thefuture, Digital Rights Management (DRM) will become an industry standard combined with newtechnologies restricting misuse af downloaded content.ALTERNATIVE BUSINESS MODELSWhere this model succeeds, many others fail. Professionally created content is the number one discerningfactor for subscribers. With this in mind it becomes imperative to create a business model that facilitatesthe product and information stream from provider ta subscriber. An alternative ta Akumiitti's business



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model was to exclude content providers, where subscribers create content like ringtones and icons,uploading it to the network operator website for the availability of other subscribers. Problems arise withpoor quality content and naming conventions, making it difficult for subscribers to locate desiredcontent. Here too, copyright issues are the responsibility of the network operator to check allcompositions and pay fees accordingly. and Service Providers may also encounter problems withscalability.Asecond alternative included the content provider but omitted the software provider. Here, operatorsimplemented their own tailor-made software solution but outsourced the contents of the service.Network operators are then often penalised with lengthy time to market and the lack of capacity to serveall subscribers, having to engage the services of many content providers to guarantee best possibleofferings for their subscribers.

VALUE (HAIN PLAYERS AND BENEmSCOPYRIGHT AND BRAND OWNERS - THE TALENT BEHIND THE CONTENTCo-operation with Akumiitti opens a totally new marketing channel for brand owners. Brand owners'content can be transformed into mobile formats, with Akumiitti providing a professionally managedrevenue source, ensuring that the correct copyright fees are paid and that the brand is used in alegitimate and commercially advantageous manner. The potential also exists for renewed interest in backcatalogues. Copyright or brand owner can be assured of a lucrative and continuous new revenue stream.CONTENT PROVIDERDue to content demand far surpassing supply. there is a constant need for content material to be sourcedand collaborated. Here the content provider acts as the go-between for content or brand owners andAkumiitti. Content Providers gain revenue by supplying desirable. professionally created content forCOSMO, which is then distributed globally through our VARs and mobile operators.AKUMIITTI - SOFTWAREjPLATFORM PROVIDER PROVIDES THE TECHNOLOGICAL FOUNDATION FOR CONTENT.First mover advantage means Akumiitti is a Arm believer in technological progress, with each newtechnology comes a new and exciting range of mobile entertainment possibilities. We look withanticipation to the progression to third generation networks. however understanding the technologyadoption cycle means that Akumiitti will continue to ensure that our ESC Entertainment Service Centersoftware continues to accommodate all popular network software. and SM S will remain integral as atechnology standard. By spreading our content over a wider range of platforms we support the industryand we can assure our handset manufacturers of compatibility and our subscribers of continuedavailability of content and services.SERVICE PROVIDER - PACKAGED UP AND READYTO GOAkumiitti provides the means for Service Providers to offer value added content and services to their ownor customer operator networks. Akumiitti supplies ESC total software solution on which these contentand services are delivered. with the option to additionally purchase COSMO content package. COSMOsupplies an extensive range of professionally created. branded. copyrighted content from our pool ofskilled providers. providing updates and centralised content management with mass market appeal forready-made distribution.



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CONTENTTODAYSubscriber demands have historically seen ringtones as the most popular content selected, closelyfollowed by logos, icons and picture messages. Statistically the biggest content sellers are those that areprofessionally created andjor branded. With this in mind it is imperative to have content providers withextensive experience and know-how, and as more markets open up internationally the need for locallyproduced demographically specific content also becomes apparent. Companies such as Akumiitti withinternational co-operatives and alliances has the advantage of being able to fill both sets of contentcriteria, professionalism and mass market appeal.SECOND WAVE ENTERTAINMENTAkumiitti envisages that the definition of content and services will grow dramatically in the future. Thesubscriber of tomorrow will have the complete package of audio and visual pleasure, further interactivityand a more comprehensive source of content and services. Reliant on the union of underlyingtechnologies and handset capabilities, the end of 2001 will see the introduction of Enhanced MessagingService or EMS. Whilst not too dissimilar from the existing Short Message Service (SMS) new subscriberbenefits include enhanced graphical display for logos and icons, colour screens, complete animation, andbetter quality ringtones.The market which currently sees ringtones as the biggest seller, will then have the possibility to employthe same audio files in a variety of ways, for example, being added to a picture and sent via Person-toPerson messaging, giving more life and character to an otherwise standard message.TECHNOLOGIESEMS will mark the smooth transition as we progress towards 3G technologies like Multi Media Messaging(MMS), GPRS and I-mode. MMS groundbreaking technology commercially available towards the end of2002, will then allow the sending of larger size data like short video clips and real audio music, thesecond step in audio file use, with improved sound definition and polyphonics, samples and loops, piecesof actual music performed by real and original artists.This new technology provides the framework for the move from simple to richer content, resulting incolour, animated screensavers, comics, picture postcards, SMS games, and chats. These forms of content,with increased subscriber involvement, create greater levels of entertainment satisfaction promotingcontinued use and consumer buy-in.The most revolutionary component of future mobile entertainment will be the imminent introduction ofVideo. Animation eventually followed by short video clips and photos will predominate subscriberdownload selections. Sent to friends on special occasions or just for fun, informational ar educationalthey will transform the way subscribers behave and present a whole new range of profitableentertainment possibilities.

HANDSET MANUFACTURER ALLIANCESCONTENTIS DEVlCE DEPENDENTConsumer decisions will continue to be based more on the services and content available incorporatingand fully utilising the features af the handset or terminal, and notjust on the handset itself. Statisticsshow that 95% of handset sales are from manufacturers who have committed to encompassing subscriberservices such as ringtones.



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The primary ability to supply subscribers of tomorrow with richer and more interactive content andservices relies on the amalgamation of underlying technologies and the device or handset.In order for the industry to be prepared, close alliances with major industry players will be imperative toprovide timely support of these content and services as they hit the market, providing a mutuallybeneficial exchange of specifications and information. Those industry players that continue to succeedwill be those that recognise the market demands of the future and start preparing today.AKUMIITTI'S MOBILE INDUSTRY DEVICE ALLIANCEIn recognition of this, Akumiitti has developed the Mobile Industry Device Alliance, working in apreferential and trusted relationship with all major handset manufacturers. By receiving new modelspecifications prior to release, we then have the advantage of ensuring our professional contentproviders can deliver new content in time to support the handset as it hits the market, fully utilising allthe features to produce richer content and provide real added and marketable value to the new handset.

Statistics show that 95% of handset sales are frommanufacturers who have committed to encompassingsubscriber services, such as ringtones.

ENO USER BILLINGThe ability to end user bill has been a fundamental issue to the many mobile operators and portalsworldwide who supply content to subscribers. The inability to do so has also meant the unfortunatedemise of a few big name companies in the process.In countries with advanced market areas such as Finland and Norway, service providers and portalsalready possess the ability for flexible end user billing, incorporated into their existing softwareplatform. The future of end user billing will be undertaken in a two-step process. First. as the mobileentertainment industry continues to rapidly expand, the potential revenue gain to all mobile operatorsand portals is clearly obvious. As mobile entertainment becomes an industry standard for these serviceproviders, so to will their networks ability to automatically incorporate end user billing or alternativelywork in conjunction with software such as ESe.The second step will see multiple service providers utilising the same network for business, where oneacts as a bill clearing service, not only gaining revenue returns from their own content offerings tosuppliers but also from subsequent service providers.Flexible end user billing models will eventually be an industry standard, whereby all subscribers can becharged premium prices for services.



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CONCLUSIONMabile entertainment af tomorrow will be dependent upon the eritical components, a good businessmodel, desirable content, handset manufacturer alliances and the ability ta end user bill. Together theseform the framework and the blueprint af success for the mobile entertai nment industry.Today's SMS based content provides simple but effective entertainment services; ringtones, logos,pictures, proving both popular and significantly profitable. In the future subscribers will have thecomplete package af audio and visual mobile entertainment. The effective business model actively fulfilsthe supply, demand flow from content provider ta subscriber, proving invaluable for facilitating acontinuous revenue stream ta all industry players.Strong commitment and support af the value chain will also mean creating alliances with both Handsetmanufacturers and content providers. This managed channel results in the ability ta supply mass marketdesirable content on demand utilising new features and fully exploiting new technologies, ta producericher and "hotter" entertainment. Handset sales are then increased through the ability ta support thedelivery af content that subscribers really want thus also creating more network traffic, an ongoing andprofitable revenue stream, from content owner ta subscriber.In order ta generate the profits for mobile operators and portals, end user billing tao will have ta becomean industry standard, initially billing SMS at premium services, then onto EMS and eventually MMS.Akumiitti sees the vision af the future as an exciting advance into total subscriber mobile entertainment.We are committed ta providing the state-of-the-art total software solution ESC and content packageCOSMO, making it possible for mobile operators and service providers ta deliver the money makingcontent ta subscribers today and tomorrow, on a global scale.

Capyright Akumiitti Ltd. 2001 8


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ABOUTAKUMIImAkumiitti specializes in entertainment software solutions for mobile operators, service providers andportals globally, enabling them to target the fast growing market for mobile value-added services.Privately owned by employees, management and international venture capitalist companies, with 20Million EUR financing round was finalized in June 2000. Akumiitti Ltd. was founded in 1993, is based inHelsinki, Finland and employs 110 people, with an additional sales office in Singapore.ESC ENTERTAINMENT SERVICE CENTREEse mobile entertainment software solution enables mobile operators to provide innovativeentertainment value-added services to their subscribers via SMS, Web and WAP.As a market leader we will take advantage of new technologies, however as a commitment to handsetmanufacturers and operators, Ese will be assured to continue to run on all widely accepted networkoperator platforms.COSMO CONTENT STREAM FOR MOBILESeOSMO service product provides a central source of content, management, delivery and updates of mobileentertainment. Assembled from our global content providers, creating professionally made, branded, funto use, international and local flavoured desirable content with mass-market appeal.



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Head OfficeAkumiitti

FinlandTammasaarenkatu 5 BFIN-00180 Helsinki

Telephone: +358 (0)201500500Facsimile: +358 (0)201500 501

Sales OfficeAkumiitti APAC Pte Ltd7500A Beach Road #07-310/311The Plaza, Singapore 199591Republic of SingaporeTelephone: +65 297 0021Facsimile: +65297 3032

Internet: www.akumiitti.comWAP: wap.akumiitti .comEmail: [email protected]

No part of this publication may be copied, distributed, transcribed, or translated without the prior written permission ofAkumiitti. Akumiitti has made every effort to ensure that the information contained in this document is adequate and free oferrors and omissions. If necessary, Akumiitti will explain issues that may not be covered by the documents. Akumiitti's liabilityfor any errors in the documents is limited to the correction of enors and the aforementioned advisory services. Akumiittiwelcomes customer comments as part of process of continual development and improvement of our documentation. Pleasesubmit your comments to the Akumiitti support organization at [email protected]. Any trademarks mentioned in thisdocu ment are properties of their respective owners


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Akumiitti White Paper the Future of Mobile Entertainment