1

Games and Entertainment ContentGames and Entertainment Contentin iin i--mode Value Chain Strategymode Value Chain Strategy

From Telecom Way of Thinking From Telecom Way of Thinking

to Internet Way of Thinkingto Internet Way of Thinking

March 4th, 2003March 4th, 2003

Takeshi NatsunoTakeshi Natsuno　　NTT DoCoMo, Inc.NTT DoCoMo, Inc.

Games and Entertainment ContentGames and Entertainment Contentin iin i--mode Value Chain Strategymode Value Chain Strategy

From Telecom Way of Thinking From Telecom Way of Thinking

to Internet Way of Thinkingto Internet Way of Thinking

March 4th, 2003March 4th, 2003

Takeshi NatsunoTakeshi Natsuno　　NTT DoCoMo, Inc.NTT DoCoMo, Inc.

2

- 2 -C020116EN79-1/YU481*As of December 2001Source：3G Mobile Newsletter

Success of Japan is bringing new Concept Into Wireless Industry

Notes;All the numbers in Europe and US are based on Handset Distribution rather than active user number. Only DoCoMoand KDDI disclosed contract based active user number.

1,0139641,001

759

322

50245 200 130 130 130 75 93 93 75

330165 160 109 100 75

19557

360225

3,216

0

500

1,000

1,500

2,000

2,500

3,000

3,500

DoCoM

o

Jphone

KDDI

SK

KTF

LG

KG

Sprin

t

Nexte

l

Veriz

on

AT&

T

KPN

Vodafo

ne

O2

Orange

Vodafo

ne

T-M

obil

Mann

E-p

lus

Orange

SFR

Bouygues

Tele

fonic

a

AirTel

TIM

Om

nite

l

- 3 -C020116EN79-1/YU481

4:40

P504iS F504iSN504iS

Real phones sold in Japan nowPowerful Features of the latest 2G phones-JAVA File size; JAR30K + Scratchpad 100K w/HTTP and HTTPS connectivity

-Waiting Mode on screen for JAVA applications (Screen Saver like function)

-iHTML, GIF, JPEG, MIDI (all de-facto standards)

-end to end SSL

-TFT/TFD thousands colored LCD (65k colors)

-28.8Kbps

-Camera (100K to 310K pixel) Embedded

-IrMC (Infrared) embedded (w/ JAVA API)

-300 hours to 400 hours Standby and around 100g

From NEC, Sony Ericsson, Panasonic, Mitsubishi, Fujitsu initially.

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- 4 -C020116EN79-1/YU481

JAVA World on i-mode

- 5 -C020116EN79-1/YU481

NonNon--telecom way of thinkingtelecom way of thinkingKey Words;

Positive Feedback

De-facto Standard

Content Centric Business Model

Consumer Oriented Marketing

Digital Content Market

Value Chain

Eco System

Seamless and Continuous Evolution

4

More than 2,300 Companies offering

Over 3,400 sites

i-mode subscribers

36.9 millionACTIVE USER

Corporate UseIntranet and VPN Packages

already available

More than 61,000 voluntary internet web sites

registered in a search engine.

Positive Feedback created by Content (as of March, 2003)

Proper Business ModelDe facto Standard Technology

Proper Business ModelProper Business ModelDe facto Standard TechnologyDe facto Standard Technology

Positive FeedbackPositive FeedbackPositive Feedback

De facto Standard TechnologyDe facto Standard TechnologyDe facto Standard Technology

Positive FeedbackPositive FeedbackPositive Feedback

De facto Standard TechnologyDe facto Standard TechnologyDe facto Standard Technology

Positive FeedbackPositive FeedbackPositive Feedback

- 7 -C020116EN79-1/YU481

3 Key i-mode Strategies to arouse positive feedback

TechnologyTechnologyTechnology

Service Design & Business Model

Service Design & Service Design & Business ModelBusiness Model

MarketingMarketingMarketing

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- 8 -C020116EN79-1/YU481

3 Key Strategies to arouse positive feedback

Best selection of technology most attractive for content providers, not for telecom operator nor for wireless vendors.

(i.e. HTML, HTTP, GIF, MIDI, JAVA, etc.)

Understandable marketing for “ordinary” subscribers, not for “nerds” or “techy guys”. Content centric Marketing, not technology.

Best set up of business model and service design (including

handset specification) attractive for content providers, not for telecom operators nor for wireless vendors.

(i.e. Small Payment System, User Friendly Portal, etc.)

3 Key i-mode Strategies to arouse positive feedback

- 9 -wallstreet¥Japanese¥Equity Story¥draft 08242001.ppt

Aggregate ARPU -Boosted by i-mode ARPU

＝＝ ARPU generated purely from iARPU generated purely from i--mode x (No. of imode x (No. of i--mode subs / Total cellular subs)mode subs / Total cellular subs)

1) Includes the ¥310 increase resulting from the access charge income from mobile to mobile communication

Higher Higher ii--mode mode ARPUARPU

Introduction of Introduction of Java HandsetsJava Handsets

Contents Contents ExpansionExpansion

Introduction of Introduction of Handsets with Handsets with Color DisplaysColor Displays

8,6207,770

6,2906,4906,940

120880

1,670 1,6901,540

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1997/3 1998/3 1999/3 2000/3 2001/3 2002/9 2003/3(E)2002/3

Aggr

egat

e AR

PU (?

)

i-mode ARPUVoice ARPU

19.1% 78.0%19.1% 78.0%　　　　 　　　　　　　　 　　　　　　 80%80%upup

8,740 8,650 8,4809,270

10,800

12,570

7,9808,160

II--mode ratiomode ratio

6

Positive Feedback with Java (as of March, 2003)

JAVA Subscribers16.3 millionACTIVE USER

JAVA BasedCorporate Application

6,000 IndependentJava Sites on the Internet

JAVA Application600 sites

Why DoCoMo Java (DoJa) is so successful?

Technology ; 30KB Application and 100KB Scratch pad (easy download and http(s) connection to servers expected) Best API sets for Games and Graphics

Marketing ; Application oriented mass-marketing (The word “JAVA” is not important for ordinary users, application is.)

Business Model ; Monthly Subscription (better perception for users, sustainable business for game providers) One time download business model may cause morale hazard (e.g. Korean market)

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- 12 -C020116EN79-1/YU481

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

Average of all 251Series

handsets

Average of Average of all 251all 251SeriesSeries

handsetshandsets

21,695（7.4%）

24,989（16.0%）

27,769（25.8%）

30,182（34.8%）

32,156（39.2%）

33,493（42.5%）

（Packets）

1/01 2/01 3/01 4/01 5/01 6/01 7/01 8/01 9/01 10/01 11/01 12/01 1/02 2/02 3/02 4/02 5/02 6/02 7/02 8/02　9/02 10/02 11/02

Average of all 504 series

handsets

Average of Average of all 504 series all 504 series

handsetshandsets2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

（Packets）

34,883（43.1%）Average of non-i-appli handsets

Average of all i-mode handsetsAverage of i-appli-compatible handsets

Packet usage of PDC i-mode handsets (packets/day/sub) No. of i-mode subscribers (1,000 subs) Numbers in the parenthesis below are % of i-appli-compatible handsets (PDC)

No. of i-appli-compatible handsets (PDC)

503i Series Released

1/2001

503503i Series i Series Released Released

1/20011/2001

4/02 5/02 6/02 7/02 8/02 9/02 10/02 11/02

210 213

226 225Details 226 225 223 227

504iS Series 251iS Series

Released

504504iS Series iS Series 251iS Series251iS Series

ReleasedReleased251i Series

Released

251251i Seriesi Series

ReleasedReleased

504i SeriesReleased

504504i Seriesi SeriesReleasedReleased

（Reference）251iS

（（ReferenceReference））251iS251iS

（Reference）504iS

（（ReferenceReference））504iS504iS

35,568（42.3%）

Packet Usage Boosted by JAVA Handsets

Average Packet Usage of JAVA phone users

Average Packet Usage of NON-JAVA phone users

Average Packet Usage of Enhanced JAVA phone users

- 13 -momentum¥EquityStory¥18 Jan, 2000¥Japanese_Large.ppt

314767

1,596

3,1073,707

4,7505,731

6,9547,769

8,5539,150

9,665

34.2

42.1

47.9 48.746.8 46.4

48.250.2 51.0 51.7

52.7 53.0

2.34

1.942.09 2.16

2.27 2.322.40 2.43 2.46 2.44 2.47 2.49

0

10

20

30

40

50

60

Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02

0

2,000

4,000

6,000

8,000

10,000

12,000

iモード・スタティスティクス（４）

(million Yen)

10 million subs

10 10 million million subssubs

JAVA LaunchJAVA LaunchJAVA Launch

５０４ Launch５０４５０４ LaunchLaunch

The Size of Digital Content Market on i-mode Excluding e-commerce and other payment method provided by third parties.

More than $1 billion digital

content market in 2002!

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Market Size of GAMES in i-mode (1)Content Subscription

0

10

20

30

40

50

A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

1999 2000 2001 2002

0

2

4

6

8

10

Total Content Subscription Game Category

Millio

n

Millio

nContent Subscription

0

10

20

30

40

50

A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

1999 2000 2001 2002

0

2

4

6

8

10

Total Content Subscription Game Category

Millio

n

Millio

n

7.4% of total content subscription is game category.

3.7 million Subscribers.

- 15 -C020116EN79-1/YU481

# of Sites

0

500

1000

1500

2000

2500

3000

3500

4000

J F M A M J J A S O N D

2002

0

50

100

150

200

250

300

350

400

Sites Sites in Game Category Java Sites in Game Category

8.3 % of i-mode official sites is in Game category.

50% of Game Sites provide JAVA games.

Market Size of GAMES in i-mode (2)

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- 16 -C020116EN79-1/YU481

Market Size of GAMES in i-mode (3)

# of Downloads of JAVA Program

0

1

2

3

4

5

6

7

8

M J J A S O N D

JAVA Downloads JAVA Downloads in Game Category

Millio

n

3 million Java Game Downloads per month out of 7 million total Java downloads. (47%)

- 17 -C020116EN79-1/YU481

Market Size of GAMES in i-mode (4)

Content Charges

0

2

4

6

8

10

12

A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

1999 2000 2001 2002

0

400

800

1200

1600

2000

2400

Total Content Revenue Game Category Sites

Millio

n Y

en

Billio

n Y

en

11.4 % of content revenue goes to Game category.

Around $100 million in 2002.

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- 20 -C020116EN79-1/YU481

Content offering

ContentPartners

Handsets

Competition

Competition

Presentation capability

De facto standardtechnology

Sales channel& media

Content

i-modePortal

Operator’sMarketing

Platform

Advertise & PRProduct offering

Add attraction

Guide users

Product offering

Marketing opportunity

Inter-operability

Co-marketing

Portalfunctionality

Technological capability

Eco-system of i-modeNo one can rule the world.