Analyst: Multimedia phones will dominate in 2008

Shipments of multimedia mobile phones will exceed 300 million units – surpassing television purchases – in 2008, according to a research report released today by MultiMedia Intelligence. The report predicted that worldwide unit shipments of multimedia feature-rich mobile phones would bring revenue from these handsets to more than $76 billion.

In the United States, consumers expect certain personalized features and capabilities to come with a phone, much like one would expect a PC to come equipped with software, said Rick Sizemore, chief strategy and business development officer for Multimedia Intelligence. The end result is that 60% of handsets have basic multimedia functionality, which includes an image sensor, MP3 audio support and video playback. By 2011, almost nine of 10 handsets will qualify.

At their fullest extent, multimedia phones include at least one megapixel image capture, MP3 audio, video Playback, Java, USB, Bluetooth, 16-bit screen color, QVGA resolution, WAP and MMS. Music over mobile handsets is the traditional killer application, but video is growing in popularity and availability, said Frank Dickson, MultiMedia’s chief research officer. Sooner rather than later, consumers will demand all this and more in one handset.

“We went from a basic handset to a handset with multimedia features,” Dickson said. “Now we are looking at a handset with a host of applications. It is going to be the nexus of a communications, entertainment and connectivity device.”

Dickson said this consumer demand is augmented by operators’ desire for higher ARPU, achievable through sales of multimedia handsets balanced against controlling handset cost and power consumption. As a result, the mobile phone has become the world’s most ubiquitous entertainment platform.

“It is all about operators trying to increase their ARPU and consumers getting a more touchy-feely, sticky relationship with their operators,” Dickson said. “It is coming from both sides. Users want to be able to personalize their phone and want some form of entertainment. Operators want to be able to enhance their ARPU.”

To achieve this in 2007, integration was the main trend. Silicon providers have since largely integrated baseband and applications processors into single chips, focusing on low-end handsets where cost is an issue. As multimedia handsets proliferate, providers will migrate to higher end handsets and differentiate based on aesthetics over ability.

“Wireless operators are really looking to try and increase the revenue they are getting from each user,” Dickson said. “They are delivering premium content—like music and games and video – to try and enhance their earnings. On the other side, the handset manufacturers are trying to differentiate their products by making handsets sexier. They are trying to not only integrate features, but they are also really focusing on the form of the handset, not just the function now.”

One way to do this is to follow Apple’s lead with the iPhone and make the handset run on an intelligent platform versus just a phone, Dickson noted. In the report, he predicted that the number of handsets with touch screens will approach 200 million by 2011. In terms of connectivity, Bluetooth will be the most ubiquitous connectivity option in handsets, while Wi-Fi networks will also receive a lot of attention going forward, he added.